Oct. 15, 2015 – A law firm is not subject to state tax on hard photocopies of medical records purchased on behalf of a client, the state’s Tax Appeals Commission has ruled.

In 2013, the Wisconsin Department of Revenue (DOR) sent a notice to Milwaukee-based Canon & Dunphy S.C., assessing more than $18,000 in tax and interest for a three-year period, in part from photocopies of medical records the firm purchased.

By the time the case reached the Tax Appeals Commission (Commission), the parties disputed a tax amount of $6,500. 

The parties agreed that under Wis. Stat. section 77.52(1), a five percent tax does not apply to purchases involving electronic copies of medical records from health care providers, or copies obtained by email or fax.   

But the DOR argued that purchases of medical records in hard copy are taxable, because the paper is tangible personal property and photocopying is a taxable service.

In Cannon & Dunphy, S.C. v. Wisconsin Department of Revenue, No. 13-S-221, the Tax Appeals Commission disagreed, noting that the medical records are intertwined with nontaxable medical services and prior cases look at the “object of the transaction.”

“The patients in this case, through the [law firm] as their authorized agent, did not seek out the healthcare providers to make copies for them,” the Commission noted.

“The patients sought out the health care providers for medical care and treatment and related required duties of providing them with a record of those services.”

The DOR noted that copying and providing medical records does not compare to other retail activities within hospitals or clinics, such as gift shops or pharmacy sales.

“Medical care services are generally nontaxable professional services under the Administrative Code,” the Commission Chair Lorna Hemp Boll wrote.

“We find the true objective of a patient’s request for the production of medical records, in whatever form provided, is to obtain medical information. The transaction primarily involves the professional services of providing medical care and the required production of the information relating to that care; these are not taxable services.”