Illinois – Taxability of Transferred Property Provided with a Service


SALT Report 2064 – The Illinois Department of Revenue issued a general information letter regarding the taxability of processing and transferring medical records.  The Taxpayer partners with hospitals, medical facilities, and physicians to process and fulfill medical records requests. Once records are requested, the Taxpayer contacts the medical provider and has the records digitally transferred to a trained specialist using a platform developed by the Taxpayer. The Taxpayer will then provide the records to the requestor in one of two ways:

  • Photocopies of the medical records are shipped directly to the requesting party either by the U.S. Postal Service or a third party delivery company, or
  • The medical records are electronically delivered to the requesting party

The Taxpayer requested guidance regarding the application of tax to the delivery fees if they ship the medical records through the U.S. Postal Service or a third party which provides the customer with a hard copy, or electronically which does not provide a hard copy.

In its response, the Department stated that if a company provides services along with the transfer of tangible personal property, such as the medical records delivered to a customer in a hard copy version, the transaction is generally taxable.  The rate of taxability depends on the service provider’s activities and can be calculated in one of the following four ways:

  • Separately stated selling price of tangible personal property transferred incident to service,
  • 50% of the servicemen’s entire bill,
  • Service Occupation Tax on the servicemen’s cost price if the servicemen are registered de minimis servicemen, or
  • Use Tax on the servicemen’s cost price if the servicemen are de minimis and are not otherwise required to be registered under Section 2a of the Retailers’ Occupation Tax Act

The letter further discusses the manner in which the four methods of determining a serviceman’s liability can be applied to specific sales.

As for the medical records that are transferred electronically, the Department notes that it does not consider the viewing, downloading, or electronic transmission of video, text, or other data over the Internet to be the transfer of tangible personal property. Accordingly, records transferred in this manner are not taxable.

For Further Information:

Illinois Department of Revenue – General Information Letter ST 12-0059-GIL