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Ohio Medical Transcription Services: Automatic Data Processing or Professional Service?

The Merriam-Webster dictionary defines “transcription” as “the act or process of making a written, printed or typed copy of words that have been spoken.” The Ohio Department of Taxation considers this service taxable as “automatic data processing.”

The courts have also held that transcription services are taxable. In Columbus Oncology Associates, LLC v Testa, BTA Case No. 2014-3986, it was concluded that “…the medical transcription services purchased herein do not constitute “personal or professional services.” Upon receipt of the dictated notes or information for transcription, the transcriptionist does not study, alter, analyze, interpret or adjust the material.”

In Dayton Physicians, LLC v Testa, Appellate Case No. 26881, the Court of Appeals affirmed the Board of Tax Appeals decision that the medical transcription services were taxable as automatic data processing services. The court stated that “…the sole act of medical transcription is not an “act performed by a person pursuant to a professional license, certificate or other legal authority.” Many transcriptionists just need to be accurate at typing and the spelling of medical terms.” They determined that “the lone act of medical transcription is not exempt from tax as a professional service; rather it is “processing of others data…”

In both cases, the transcriptionists were not licensed or approved in a certified program in medical transcription. The Court of Appeals stated in the Dayton Physicians case that “…it is possible to establish that a medical transcriptionist provides a professional service if the transcriptionist is providing services pursuant to the skills obtained in an approved certificate program.” The tax courts lead us to believe that taxpayers would have a stronger argument that transcription services are exempt as personal and professional services if the medical transcriptionists are certified through an approved program.

In contrast, court reporting services are considered personal and professional services and not subject to sales tax. The difference is that the court reporter is recording the words as spoken, and not taking the information from notes, tapes, etc.

From an Ohio audit perspective, it is important to understand who is providing your business with transcription services and examine all pertinent contracts. This service currently could pose an audit risk for your business, and you would want to make sure you can present an argument that your service provider is providing a professional service.

Have questions about this or other tax-related issues? Contact Mark Thomas at 330-668-1100.

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