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Ruling 91-22

Sales and Use Taxes
Sale of Tangible Personal Property


Hospitals contract with Company to have Company provide certified medical record copies to attorneys, insurance companies, peer review organizations, governmental agencies and individuals. Company obtains records from a hospital's files, copies such records, and returns such records to the hospital's files. Company then invoices and receives payment from the requesting parties.

The process of satisfying a request for medical record copies involves several steps, including processing requests, locating and retrieving records, disassembling and reassembling hospital files, copying the records, certifying the records, mailing the copies to customers, and billing and invoicing the customer.


Whether Company's sale of medical record copies is, for purposes of the Sales and Use Taxes Act, a sale of tangible personal property or a sale of services.


Conn. Gen. Stat. §12-412(11) exempts from sales and use taxes the rendering of "[professional, insurance or personal service transactions ... which involve sales [of tangible personal property] as inconsequential elements for which no separate charges are made ...." The test for determining whether inconsequential sales of tangible personal property are being made is "to examine the real object sought by the buyer, i.e., the service per se or the property produced by the service, and to determine if it was the buyer's object to obtain an act done personally by the individual as an economic service involving either the intellectual or manual effort of the individual, or if it was the buyer's object to obtain only the saleable end product of some individual's skill." Columbia Pictures Industries, Inc. v. Tax Commissioner, 176 Conn. 604, 611, 410 A.2d 457 (1979). It is proper to examine "the character of the agreement rather than the phrasing of the contract involved ..."; id. at 607; in order to determine "the true object of the contracts between the parties"; American Totalisator Co. v. Dubno, 210 Conn. 401, 406, 555 A.2d 414 (1989). It is apparent that the true object of Company's customers is to obtain the certified medical record copies, and not to acquire the services involved in making those copies.

The sales tax is measured by the gross receipts of a retailer from the retail sale of tangible personal property. Conn. Gen. Stat. §12-408(1). A "retailer" includes every person engaged in the business of making sales at retail. Conn. Gen. Stat. §12-407(12). Gross receipts means the total amount of the sales price. Conn. Gen. Stat. §12-407(9). Sales price means the total amount for which tangible personal property is sold, and includes the cost of materials used, the labor or service cost, or any other expenses. Conn. Gen. Stat. §12-407(8). The total amount charged by Company for the property transferred constitutes the sales price on which the sales tax is imposed.

Company's sale of medical record copies to certain governmental agencies and to certain non-profit organizations are exempt from sales and use taxes under Conn. Gen. Stat. §12-412(1), (5) and (8). Company should acquire the appropriate exemption certificate from any exempt entity at the time of sale. Company's sales to a peer review organization are not exempt from sales and use taxes unless the PRO issues a valid charitable and religious organizations exemption certificate bearing the number of its exemption permit. Conn. Agencies Reg. §12-426-15.


August 2, 1991