2021 Texas Legislature Amends Texas Tax Code To Define Medical And Dental Billing Service And Address Texas Comptroller Policy

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The Texas Legislature in April passed H.B. 1445, which adopted amendments to the Texas sales tax law regarding medical and dental billing. Governor Greg Abbott on April 30, 2021 signed the bill, which aims to clarify the state law that has been in force since 1987.

The new legislation contains a revision to Section 151.0039(b) of the Texas Tax Code to specifically exclude, as a potential taxable insurance service, (i) “medical or dental billing services” which are (ii) “performed before the original submission of” either a (1) “medical or dental insurance claim related to health or dental insurance coverage,” or (2) “a claim related to health or dental coverage made to a medical assistance program funded by the federal government, a state government, or both.”

In addition, the term “medical or dental billing service” is now specifically defined in the Texas Tax Code under Section 151.0039(c), as a service “assigning codes for the preparation of a medical or dental claim, verifying medical or dental insurance eligibility, preparing a medical or dental claim form for filing, and filing a medical or dental claim.”

This new statute therefore overrules a previous Texas Comptroller Letter 201911003L, which would have abruptly caused such pre-claim medical billing services to be subject Texas sales tax. Comptroller Glenn Hegar postponed this policy to give the Texas Legislature time to react. H.B. 1445 takes effect January 1, 2022.

The new Texas statute therefore now specifically defines medical billing services when it was previously undefined, providing much needed certainty on the treatment of a critical part of healthcare delivery. Representatives of virtually all Texas medical and dental associations actively supported this bill.

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