CARC 235 Active

PR-235: Sales Tax Not Reimbursable

TL;DR

The patient owes the sales tax amount. Bill the patient directly for the tax on their supplies or equipment.

Action

Collect from Patient

Who Pays

Patient

Appeal

Patient Impact

Direct Financial

Disclaimer

This content is for informational purposes only and does not constitute professional billing advice. Always verify information against your payer contracts and current coding guidelines. Consult a certified billing specialist for specific claim issues.

What Does PR-235 Mean?

PR-235 means the sales tax is the patient's direct financial responsibility. The payer does not cover sales tax, and the amount is shifted to the patient as a non-covered out-of-pocket expense.

CARC 235 is straightforward: the payer identified sales tax charges on the claim and is denying reimbursement for that portion. Most payers do not reimburse sales tax because it is not considered a healthcare service charge. This typically comes up on claims for medical supplies, durable medical equipment (DME), and pharmacy items where sales tax may be applicable under state law.

The issue usually stems from the provider's billing system automatically adding sales tax to the line item charges without distinguishing between what the payer will and will not reimburse. In some states, medical supplies are tax-exempt, and the tax should not have been charged at all. In other states, sales tax is legitimate but the payer simply does not cover it.

CARC 235 can appear with CO (provider absorbs the tax as a write-off) or PR (the patient is responsible for paying the tax directly). The resolution depends on which group code is used and whether the tax was correctly applied in the first place.

Common Causes

Cause	Frequency
Sales tax on non-covered supplies shifted to patient The payer does not cover sales tax, so the tax portion on supplies or DME is passed to the patient as a direct out-of-pocket responsibility	Most Common
State requires patient to pay applicable sales tax In states where certain medical supplies are subject to sales tax, the payer shifts the tax liability to the patient rather than including it in the reimbursement	Common

How to Resolve

Remove sales tax from the claim charges if included in error, or write off (CO) or bill the patient (PR) for the legitimate tax amount.

Verify tax amount Confirm the sales tax amount is correct based on your state's applicable tax rate for the items provided.
Bill the patient Send the patient a statement for the sales tax amount, clearly labeled as a non-covered charge. Provide itemized detail showing the tax calculation.

Do Not Appeal This Code

This adjustment is correct per the patient's benefit plan. The amount is the patient's financial responsibility.

Common RARC Pairings

The RARC code tells you exactly what triggered the PR-235:

RARC	Description
N130	Remainder of charges are the patient's responsibility.
N657	Sales tax is not a covered charge.

How to Prevent PR-235

Inform patients at the time of service that sales tax on supplies may not be covered by insurance
Provide clear, itemized billing that separates sales tax from service charges
Collect sales tax from patients at the point of sale when possible

General Prevention

Inform patients at the time of service that sales tax on certain supplies may not be covered by their insurance
Provide clear itemized billing that separates sales tax from service charges
Document the patient's financial responsibility for sales tax in advance when possible

Also Filed As

The same CARC 235 may appear with different Group Codes:

CO-235

Related Denial Codes

PR-45 — Charge Exceeds Fee Schedule / Maximum Allowable PR-1 — Deductible Amount PR-2 — Coinsurance Amount PR-3 — Co-payment Amount PR-16 — Missing Information or Billing Error

Sources

https://www.mdclarity.com/denial-code/235
https://x12.org/codes/claim-adjustment-reason-codes
Codes maintained by X12. Visit x12.org for official definitions.