My company retrieves and delivers copies of individual patients' confidential medical records to requestors on behalf of medical facilities — is that record-retrieval fee subject to New York sales tax?

Plain-English summary

One Source Document Management contracts with medical facilities and insurers to handle requests for patients'/claimants' medical and insurance records — when a facility gets a records request, it's contractually obligated to refer the requestor to One Source instead. Field Associates scan and forward the request to One Source's main office, which verifies proper authorization before processing. Once approved, One Source produces the requested records electronically or on paper and delivers them directly to the requestor. Each request concerns only one patient/claimant. One Source never retains, compiles, or resells any records — it systematically deletes all files after delivery (or after non-payment), and each new request (even from the same requestor for the same records) triggers the whole process, and a fresh charge, again.

The Department held that these record-retrieval fees are not subject to sales tax. The information-service tax under Tax Law §1105(c)(1) has a built-in exclusion for information that is "personal or individual in nature" and not substantially incorporated into reports given to others — and that's exactly what's happening here: One Source is retrieving specifically identified confidential records belonging to one particular individual, at that individual's (or their authorized representative's) request, and never repackaging or reselling that information to anyone else. The Department also confirmed this isn't a taxable "protective and detective service" under §1105(c)(8), since One Source is simply retrieving records it's specifically authorized to retrieve — not investigating or detecting anything.

The Department drew a sharp line to a different, taxable scenario: selling general or statistical information (not tied to one identified individual) compiled from medical files, or selling information drawn from publicly available records, would be a taxable information service. This case is different because the records are specific to one identified person and never resold. One wrinkle that does stay taxable: separately stated charges for making additional copies of records are receipts from a sale of tangible personal property, so those remain subject to sales tax even though the base retrieval fee is not.

What this means for you

Medical records retrieval and release-of-information companies

Your core service fee — retrieving one individual's own specifically identified confidential records and delivering them to an authorized requestor — is not taxable in New York, as long as you don't retain, resell, or compile that information into reports for other customers. But watch your billing structure: if you charge separately for extra copies of the same records, that copy charge is a taxable sale of tangible personal property, even though your underlying retrieval fee isn't.

Insurers, law firms, and other record requestors

Don't assume every records-retrieval invoice from a vendor is tax-exempt — check whether any line item is billed as an "additional copies" charge, since that piece is taxable even when the primary retrieval fee is not.

Accountants and tax professionals

This opinion sits in a well-established line of prior opinions on medical-record retrieval (SMART Business Advisory, Release of Information Solutions, Weitz & Luxenberg, Immediate Medical Records) and is useful for distinguishing "personal/individual" information services (untaxed) from statistical/aggregate or publicly-available information services (taxed under §1105(c)(1), per Hooper Holmes v Wetzler and State Farm Mutual).

Common questions

Q: We retrieve records for one specific patient at a time and never keep copies — is our fee taxable?
A: Generally no, per this opinion, as long as the records are specifically identified to one individual, you don't retain or resell the information, and you don't incorporate it into reports for other customers.

Q: What if we also sell aggregated or statistical data drawn from medical files, not tied to a specific patient?
A: That's a different, taxable scenario. The Department distinguishes selling general/statistical information (or information from publicly available records) from retrieving one identified individual's own records — the former is a taxable information service.

Q: We charge extra for additional copies of the same records — is that taxable?
A: Yes. Separately stated charges for making additional copies of records are receipts from the sale of tangible personal property and are subject to sales tax, even though the underlying retrieval fee is not.

Q: Does this make us a "detective service" since we verify authorization and locate records?
A: No — the Department specifically held this isn't a protective or detective service under §1105(c)(8), because the company is furnished with the information and authorization needed to locate records it's specifically permitted to retrieve, rather than performing investigative work.

Q: Can any records company rely on this exact opinion?
A: No. An advisory opinion binds the Department only as to the taxpayer who requested it and the facts described — including the strict deletion policy and the fact that records are never resold or compiled for others.

Citations and references

Statutes and regulations:

• Tax Law §1105(a) (tax on tangible personal property)
• Tax Law §1105(c)(1) (information services, with "personal or individual" exclusion)
• Tax Law §1105(c)(8) (protective and detective services)

Cited opinions and cases:

• SMART Business Advisory and Consulting, LLC, TSB-A-08(52)S
• Release of Information Solutions, Inc., TSB-A-07(10)S
• Weitz & Luxenberg, P.C., TSB-A-06(7)S
• Immediate Medical Records, Inc., TSB-A-92(7)S
• Matter of Hooper Holmes v Wetzler, 152 AD2d 871 (public-database information taxable)
• State Farm Mutual Automobile Insurance Co., TSB-A-04(29)S

Source

• Landing page: NY Sales Tax Advisory Opinions, 2009
• Original opinion: TSB-A-09(12)S

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(12)S
Sales Tax
March 2, 2009

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S080530A

On May 30, 2008, the Department of Taxation and Finance received a Petition for Advisory
Opinion from One Source Document Management, Inc., 2 Old Dock Road, Yaphank, NY 11980.
The issue raised by Petitioner is whether its charges for the services of providing medical
records are subject to New York State and local sales and use taxes.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner, a New York corporation, is engaged in the business of collecting and furnishing
confidential healthcare information.
Petitioner enters into agreements with various medical facilities and insurers. These
agreements require Petitioner to respond to all requests to the medical facility and insurer for
medical and insurance records, data and information relating to particular patients and/or claimants
that are made by or for patients/claimants, insurance companies, physicians, other health care
providers, payers, attorneys, and others. Pursuant to such agreements, when the medical
facilities/insurers receive requests for records they are obligated to refer the requestor(s) to
Petitioner.
Petitioner employs Field Associates to respond to requests for medical/insurance records.
The Field Associates digitally scan a copy of any requests for medical/insurance records that the
requestor has submitted to the medical facility and insurer and electronically transmit the requests to
Petitioner’s main office located in Yaphank, New York where the requests are reviewed to ascertain
that proper documentation has been submitted before processing any request.
Once a request has been approved, the Field Associates produce either an electronic file or a
paper copy of the records for the requestor, depending on the preference of the requestor. These
activities occur in either Petitioner’s main office or at the medical facility/insurer’s site. The
medical/insurance records are then furnished directly to the requestor either by electronically
transmitting the digital records or by mailing a printed copy of the records.
Billing is done by the main office and bills are mailed to the requestor. The amount charged
to the requestor varies depending on factors such as the requesting party’s status, quantity of
medical/insurance records requested and the type of records being requested. For example, State
law generally limits the amount that may be charged for medical records supplied to a patient, while
the amount that can be charged to insurance companies typically is not limited.
All medical/insurance records that are collected, scanned, digitized, transmitted and/or
printed by Petitioner are confidential and protected under the Health Insurance Portability and

-2TSB-A-09(12)S
Sales Tax
March 2, 2009
Accountability Act (HIPAA). Each request for medical/insurance records relates to only one
patient/claimant. The confidentiality and privacy laws, and the patient’s/claimant’s retention of all
property rights to the medical/insurance records, preclude Petitioner from compiling any of the
medical/insurance records.
Applicable law also prohibits Petitioner from altering the
medical/insurance records in any way. Each request for medical/insurance records and each
response by Petitioner is unique and must be held in strict confidence.
Petitioner does not retain any medical/insurance records that it has collected, scanned,
digitized, transmitted or printed. Petitioner regularly and systematically deletes all electronic files
and destroys all paper copies immediately after furnishing the medical/insurance records to the
requestor(s), or if requested records are not furnished because of non-payment, Petitioner
automatically deletes all electronic files and all documents relating to the request after the specific
number of days determined by the medical facility/insurer client.
Petitioner is prohibited from disclosing any medical/insurance records except pursuant to a
specific, authorized request.
Petitioner makes no further use of and receives no further benefit from the
medical/insurance records beyond the requestor’s payment for the single request made. If the same
medical/insurance records are subsequently requested by another requestor, Petitioner would need
to again go through the entire process of obtaining and furnishing such medical/insurance records
and fully charging the requestor for such services. Even if the request for medical/insurance records
were from the same requestor that had made the initial request for such records, the same process
and charge, as set forth above, would apply to the subsequent request.
Petitioner states that its document deletion policy virtually eliminates the risk of
unauthorized disclosures or other violations of applicable laws. This protects Petitioner from the
huge exposure for liability that otherwise could result from storing and retaining the
medical/insurance records.
Applicable law and regulations
Section 1105 of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby imposed and
there shall be paid a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
*

*

*

(c) The receipts from every sale, except for resale, of the following services:

-3TSB-A-09(12)S
Sales Tax
March 2, 2009
(1) The furnishing of information by printed, mimeographed or multigraphed matter
or by duplicating written or printed matter in any other manner, including the services of
collecting, compiling or analyzing information of any kind or nature and furnishing reports
thereof to other persons, but excluding the furnishing of information which is personal or
individual in nature and which is not or may not be substantially incorporated in reports
furnished to other persons, . . .
*

*

*

(8) Protective and detective services, including, but not limited to, all services
provided by or through alarm or protective systems of every nature, including, but not
limited to, protection against burglary, theft, fire, water damage or any malfunction of
industrial processes or any other malfunction of or damage to property or injury to persons,
detective agencies, armored car services and guard, patrol and watchman services of every
nature other than the performance of such services by a port watchman licensed by the
waterfront commission of New York harbor, whether or not tangible personal property is
transferred in conjunction therewith.
Opinion
To the extent that Petitioner is retrieving and providing specifically identified confidential
records on behalf of the custodian of such records to an individual (or the authorized requestor on
behalf of such individual), which records contain confidential information pertaining to the
individual, Petitioner’s services are not services subject to sales tax under section 1105(c)(1) of the
Tax Law. See SMART Business Advisory and Consulting, LLC Adv Op Comm T & F, December
15, 2008, TSB-A-08(52)S; Release of Information Solutions, Inc., Adv Op Comm T & F, April 5,
2007, TSB-A-07(10)S; Weitz & Luxenberg, P.C., Adv Op Comm T & F, March 3, 2006, TSB-A06(7)S; Immediate Medical Records, Inc., Adv Op Comm T & F, January 31, 1992, TSB-A-92(7)S.
Petitioner can only furnish the requested records upon presentation of the appropriate authorization
forms signed by the individual whose records are being sought, or by the individual's representative.
Similarly, it would appear that the administrative fee charged by the custodian of the individual's
records, or charged by Petitioner on behalf of the custodian, for retrieval of such documents which
are deposited, filed or maintained by the custodian, whether or not including a certification thereof,
constitutes neither the sale of tangible personal property taxable under section 1105(a) of the Tax
Law nor the sale of a service taxable under section 1105(c) of the Tax Law.
Petitioner is providing to the requestor specifically identified records containing confidential
information pertaining to the requestor (if an individual) or the individual represented by the
requestor. The fees paid to Petitioner as described in this Opinion, are not for the purchase of
property or services subject to sales tax under section 1105. See Smart Business Advisory and
Consulting, LLC supra, and Weitz & Luxenberg, P.C., supra.
Although the sale of general information, which does not identify specific individuals,
transcribed from confidential files of medical practitioners, or the sale of analyses of statistical or

-4TSB-A-09(12)S
Sales Tax
March 2, 2009
generic (not requestor-specific) information gleaned from such files might be considered the sale of
a taxable information service under section 1105(c)(1) of the Tax Law, obtaining such statistical
database information is clearly distinguishable from the service of obtaining exact copies of an
identified individual’s confidential records. Likewise, the sale of information derived from records
that are generally available to the public is distinguishable from the present case. The sale of such
public database information would be taxable under section 1105(c)(1) of the Tax Law. See Matter
of Hooper Holmes v Wetzler, 152 AD2d 871, lv den, 75 NY2d 706; State Farm Mutual Automobile
Insurance Co., Adv Op Comm T & F, December 28, 2004, TSB-A-04(29)S. Petitioner is retrieving
copies of individual confidential records for the requestor that specifically pertain to the requestor
(if an individual) or the individual represented by the requestor. Petitioner is not obtaining or
providing information that is generally available to the public. Moreover, under the facts as
presented, the records disclosed are not maintained or retained for later sale and the records may not
be and are not otherwise sold or provided by Petitioner to any other persons. A charge to the
requestor for merely obtaining copies of confidential medical records or other confidential records
from a medical practitioner or other custodian and for providing those records to the requestor is not
subject to sales tax.
It is noted that Petitioner’s service of retrieving copies of specific, individual records from
medical practitioners and other sources and providing such copies to requestors does not rise to the
level of a protective or detective service as described in section 1105(c)(8) of the Tax Law.
Petitioner is furnished with all information needed to locate the particular records as well as the
appropriate legal authorizations needed to retrieve such records. Petitioner is precluded from
seeking records or providing records which it is not specifically authorized to retrieve or provide.
Therefore, Petitioner is not performing detective activities. See Weitz and Luxenburg, LLC, supra.
However, any separately stated or additional charges by Petitioner for making additional
copies of records constitute receipts from the sale of tangible personal property subject to sales tax
under section 1105(a) of the Tax Law.

DATED: March 2, 2009

NOTE:

/s/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the person
or entity fully and accurately describes all relevant facts. An Advisory
Opinion is based on the law, regulations, and Department policies in effect as
of the date the Opinion is issued or for the specific time period at issue in the
Opinion.