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Tax Law

Something to Keep an Eye On: Texas Comptroller Says Web-Based Services for Eye Doctors Is Taxable Data Processing

The Texas Comptroller of Public Accounts issued a private letter ruling concluding that several services provided to optometrists and ophthalmologists were subject to sales tax as data processing.  Specifically, the Comptroller determined that the taxpayer’s web-based software system, which doctors use to manage patient relationships, schedule appointments, refill prescriptions, and communicate about treatment, is a taxable data-processing service.  The taxpayer’s software “captures and sends data” to and from the taxpayer’s servers and, according to the Comptroller, constitutes “data processing,” which is defined to include “data entry, data retrieval, data search . . . and other computerized data and information storage or manipulation.”

The Comptroller reached the same conclusions with respect to the taxpayer’s software that allows patients to order contact lenses, and allows doctors to manage their social media accounts and business-directory entries.  Lastly, the Comptroller determined that the taxpayer’s service of providing marketing consultants to help acquire and retain patients is also taxable because it is provided with taxable data processing services and not separately stated.

Texas Private Letter Ruling No. 202003061L (Mar. 3, 2020) (released Aug. 2020)