CO 235 denial code

Claim adjustment reason code 235. Often reported as CO 235 or PR 235.

Sales tax

Unofficial reference. This is our own plain-English explanation, not the official code text. Payer rules differ. Verify with the payer and the official X12 code list. AlphaPrefix is not affiliated with X12, CMS or any payer. Data last updated Nov 11, 2026.

What 235 means

The adjustment represents sales tax on the claim, which the payer handled separately from the service charge.

Some items, often equipment or supplies, carry sales tax. This code shows how the payer treated the tax portion of the bill.

Whether tax is payable depends on the state and the payer. Check the group code to see who the payer thinks owes it.

Group codes seen with 235

On a remittance, 235 comes after a group code. These are the ones it is most often reported with:

• CO 235 (Contractual Obligation): The provider's side of the ledger. The reduction comes from the payer contract or a rule the provider has to follow, and the patient normally cannot be billed for it.
• PR 235 (Patient Responsibility): The amount is assigned to the patient. Deductibles, coinsurance and copays are the everyday examples. Whether you can collect it still depends on your contract and the patient's plan.

The payer chooses the group code for each adjustment, so the same reason code can appear with another group code on your remittance. Read the two together. More about group codes.

Common causes

• Durable medical equipment or supplies were billed with sales tax added.
• The payer does not include sales tax in its allowed amount.
• The tax was billed on a separate line or code.

What to do next

1. Check whether sales tax applies to the item in your state.
2. Confirm the payer's policy on paying sales tax before rebilling it.
3. Look at the group code before moving the tax amount to the patient.

Related codes

• 45 (reason code) Charge exceeds the allowed amount
• 212 (reason code) Administrative surcharge not covered