Document Number
90-224
Tax Type
Retail Sales and Use Tax
Description
Medical record copies
Topic
Taxability of Persons and Transactions
Date Issued
12-13-1990
December 13, 1990

Dear **************

This will reply to your letter of April 19, 1990, in which you seek a ruling on the application of Virginia sales and use tax on copies of medical records done on behalf of a hospital for requesting third parties.

FACTS

* *************** * (the Taxpayer) contracts directly with a hospital to copy medical records in response to requests by third parties. The Taxpayer places a copier at the hospital, where its employees copy and mail the copies to the requesting party. The Taxpayer then bills the third party for the copying charge and shipping charge.

The Taxpayer requests a ruling on: 1) whether the tax is applicable to the sale of copies of medical records; 2) what amount is taxable; 3) whether the tax applies to copies sent to parties outside of Virginia; and 4) whether the tax applies to copies made outside of Virginia and sent to requesting parties inside the state.

RULING

I will separately address below each of the issues raised by the Taxpayer:

Sale vs. Service

Copies of the medical records sold to third parties are deemed to be a taxable sale of tangible personal property as opposed to a nontaxable service. Virginia Regulation (VR) 630-10-97.1(B) (2) provides that:
  • In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined . . . . If the object of the transaction is to secure the property which it produces, then the entire charge, including services provided, will be taxable.

Obviously, there must be some service involved in the selling of copies of medical records, but the true object of the transaction is the tangible copy of the record. Therefore, the tax is applicable to the sale of photocopies of medical records.

Sales Price

The tax is based upon the "sales price" of an item. "Sales price" is defined in Va. Code § 58.1-602 as the total amount for which tangible personal property or taxable services are sold, including any services in connection with the sale. However, separately stated delivery and installation charges are excluded from the tax as provided in VR 630-10-107.

Interstate Commerce

The tax does not apply to sales of tangible personal property in interstate commerce. Thus, copying done in Virginia for sale to parties outside the state will not be taxable provided the copies are delivered to the out-of-state parties by one of the means set forth in VR 630-10-51.

Use Tax

Virginia imposes a use tax upon the use, consumption or storage of tangible personal property in this state. Typically, persons who purchase tangible personal property from dealers outside Virginia who are not registered for the collection of the Virginia sales and use tax are required to remit the use tax based on the cost price of the item. Like the sales tax, separately stated delivery and transportation charges are excluded from the computation of the use tax.

If, however, the dealer is registered in Virginia, it is required to collect and pay the tax on all tangible personal property sold or delivered for use or consumption in this state. If an out-of-state dealer is not subject to jurisdiction in this state, the Department does encourage it to register and collect the use tax as a service to its Virginia customers.

Thus, if the Taxpayer is registered as a dealer, it will be required to collect and remit the tax on copying performed outside the state and sold to a Virginia customer. If the Taxpayer is not required to register as a dealer, any Virginia customer who purchases photocopies from the Taxpayer must report the use tax on a Consumer's Use Tax Return, Form ST-7.

In the event the Taxpayer decides to engage in business in this state, I have enclosed a Combined Registration Application, Form P-1 for use by the Taxpayer to register as a dealer. I have also enclosed copies of the Virginia Retail Sales and Use Tax Regulations and the dealer's sales tax return and worksheet.

Should you have any further questions, please contact the Department.

Sincerely


W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46