Overview
The Texas Comptroller of Public Accounts has ruled that charges for designated doctor exams ordered by the Texas Department of Insurance, Division of Workers’ Compensation (DWC) are considered taxable insurance services.
Purpose of Designated Doctor Exams
The DWC orders these exams to evaluate an injured employee’s medical condition and resolve disputes regarding workers’ compensation insurance benefits tied to a work-related injury or illness.
These exams:
- Are not medical treatments
- Do not establish a physician-patient relationship
- Are performed solely to determine the appropriate level of workers’ compensation benefits
Classification as Taxable Services
These exams are considered activities conducted to:
- Handle claims
- Investigate claims
- Adjust claims
- Pay claims or losses
Such activities meet the definition of insurance claims adjustment or claims processing under Tex. Admin. Code § 3.355(a)(8).
As a result, charges for these exams are subject to Texas sales and use tax.
Responsibility for Collecting Sales Tax
- Designated doctors are responsible for collecting and remitting sales and use tax on charges to workers’ compensation insurance carriers for these exams.
- Doctors may accept an exemption certificate instead of collecting tax on exams for certain exempt governmental entities as described in Tex. Tax Code Ann. § 151.309. These include:
- Self-insured political subdivisions
- Religious organizations
- Educational organizations
- Public service organizations described by Tex. Tax Code Ann. § 151.310
Need Assistance?
Facing a sales tax audit in Texas?
Contact our attorney for a consultation.
Frequently Asked Questions
Why are designated doctor exams considered taxable in Texas?
Designated doctor exams ordered by the Texas Division of Workers’ Compensation (DWC) are classified as insurance services because they are conducted to handle, investigate, adjust, or pay claims. Under Texas law, such services are subject to sales and use tax.
Do designated doctor exams involve medical treatment?
No, these exams are not medical treatments. They are strictly evaluative and do not create a physician-patient relationship. Their sole purpose is to assess eligibility and appropriate benefits for workers’ compensation claims.
Who is responsible for collecting the sales tax on these exams?
The designated doctor is responsible for collecting and remitting the appropriate sales and use tax to the Texas Comptroller when billing workers’ compensation insurance carriers.
Can designated doctors avoid collecting tax from certain clients?
Yes, if the client is a qualified exempt entity, such as a self-insured political subdivision, religious or educational organization, or certain public service organizations, the doctor may accept a valid exemption certificate instead of collecting sales tax.
What should I do if I’m audited for sales tax on designated doctor exams?
If you’re facing a sales tax audit related to these exams, it’s advisable to consult a qualified attorney who understands Texas tax law and can guide you through compliance and defense strategies.