California – Medi-Cal Managed Plans and Services Subject to Sales Tax

SALT Report 2629 – Recently enacted legislation in California provides that sales of Medi-Cal managed care plans and services are subject to sales tax from July 1, 2013 through July 1, 2016, provided certain conditions are met.   Specifically, Senate Bill 78 provides that sales tax is imposed on all sellers of Medi-Cal health care services at retail and Medi-Cal managed care plans at a rate of 3.9375% of the gross receipts derived from these sales.

The new legislation also requires anyone who sells these services or plans to register with the California State Board of Equalization and report and pay any taxes due directly to the BOE.  Additionally, all sellers are required to file an application with the BOE stating that they are actively engaged in the retail sale of Medi-Cal health care plans or services.  Once the application is received the BOE will issue a permit or permits to each applicant.

These provisions are contingent upon the following:

  • Federal financial participation under Title XIX of the federal Social Security Act, including any necessary federal approvals
  • If there is a final judicial determination made by any state or federal court that is not appealed in any action by any party, or a final determination by the administrator of the federal Centers for Medicare and Medicaid Services that disallows, defers, or alters the implementation of these provisions, these provisions will not take effect
  • If there is a delay based upon a challenge under federal law these provisions will be repealed

For Further Information

 California State Legislature – Senate Bill 78, Laws 2013