By Sarah Pai and Jed Morrison

On October 6, 2026, Texas Comptroller Don Huffines announced an executive order promising to end the imposition of sales tax on electronic medical records systems, patient portals, and other healthcare technology used to maintain, access, and share medical records. The Comptroller concluded that these services should not be treated as taxable information services or taxable data processing services under Texas tax law. For hospitals, health systems, physician groups, and clinics, the announcement promises meaningful cost savings.

Background: How Healthcare Technology Became Taxable

Texas imposes sales tax on a defined list of taxable services, which includes “data processing services” and “information services.” If read literally, the definition of data processing would cover all electronic entry, storage, retrieval, manipulation, and transmission of data. Prior Comptroller policy statements did just that, sweeping in a wide range of clinical and administrative technology in the healthcare sector. As a result, vendors of electronic health record (EHR) and electronic medical record (EMR) platforms, patient portals, health information exchange tools, and related hosted services routinely charge Texas sales tax on their subscription and hosting fees. Because these systems are not optional for providers — they are effectively mandated by federal interoperability and recordkeeping requirements — the tax has functioned as a recurring cost of regulatory compliance.

The Comptroller’s executive order pledges to publish proposed amendments to Comptroller Rule 3.342 (34 Tex. Admin. Code § 3.342) to exclude EHR systems, EMR systems, patient portals, and other healthcare technology systems used to maintain, access, or share medical records from the definitions of both information services and data processing services.

What This Means for Healthcare Providers

Reduced cost of care technology. Once implemented, providers should see the sales tax line item disappear from invoices for qualifying EHR, EMR, and patient portal services. For large health systems with enterprise platform contracts, the annual savings may be substantial.

Potential refund opportunities. It is unclear whether the Comptroller’s policy announcement will be applied prospectively only or retrospectively. If the Comptroller indicates that the new interpretation has always been the correct interpretation of the statute, providers that paid Texas sales tax on qualifying healthcare records technology may be able to recover those amounts in some circumstances. Providers should move deliberately— the limitations period continues to run on the oldest periods while the rulemaking proceeds.

Implementation risk remains. The change is not yet final. Until the amended Rule 3.342 is adopted, questions will remain about the precise boundaries of the exclusion — for example, how bundled charges, revenue cycle management, billing and coding modules, analytics add-ons, and mixed-use platforms will be treated. Contracts that bundle taxable and non-taxable components in a single undifferentiated fee may present particular difficulty.

Recommended Next Steps

• Review vendor contracts and invoices. Identify EHR, EMR, patient portal, and related hosted technology agreements, and determine whether Texas sales tax is being charged and on what components.
• Quantify exposure and refund potential. Assemble sales tax paid on these services for all open periods within the four-year limitations window, and evaluate whether to pursue refunds directly or through vendors.
• Preserve the oldest periods. Consider whether a protective refund claim is appropriate so that older periods are not lost while the rulemaking is pending.
• Monitor the Rule 3.342 rulemaking. Watch for publication of the proposed amendment in the Texas Register and evaluate whether to submit comments — particularly on bundling, mixed-use platforms, and the effective date.
• Address bundling prospectively. Where feasible, negotiate contract and invoicing terms that separately state charges for exempt records-related functionality.
• Consult tax counsel. Refund procedures, vendor assignment mechanics, and documentation requirements are technical, and positions taken now may affect audits later.

How We Can Help

Jackson Walker’s Healthcare and Tax practice groups regularly advise hospitals, health systems, physician groups, and other providers on Texas sales and use tax matters, including refund claims, audit defense, vendor contract review, and participation in Comptroller rulemaking proceedings. If you would like to discuss how this development affects your organization, please contact your Jackson Walker relationship attorney or any member of our Healthcare or Tax practice groups.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For more information, please contact a member of the Tax and Healthcare & Life Sciences practices.

Meet Sarah

Sarah Pai advises clients on a wide range of tax matters, including enforcement, compliance, litigation, and policy. She is recognized for her clear, practical guidance on complex tax issues and her expertise at the intersection of law and government policy. Previously, as Senior Counsel for Tax Compliance at the Texas Comptroller of Public Accounts, Sarah provided legal guidance across multiple divisions, served as a liaison on major tax litigation, and played a key role in developing and implementing administrative regulations.

Meet Jed

Edgar “Jed” C. Morrison, Jr., has practiced healthcare law for more than 40 years. He served as Republican counsel to the U.S. House Budget Committee and as counsel to the Healthcare Financing Administration in Washington, D.C. In 1994, he became a founding member of Jackson Walker’s Healthcare Law section. Jed is one of the original class of board-certified health lawyers in Texas. He exclusively represents healthcare providers and other industry participants on regulatory and transactional matters, helping them structure their operations to compete effectively while complying with state and federal healthcare laws. Jed holds the Martindale-Hubbell AV Preeminent Rating and is a Past Chair of the State Bar of Texas Health Law Section.