18
THE DENTAL ARCH thedentalarch.com
Sales and use taxes can be complicated and confusing, especially when each state has their own set of rules. Although dentists typically provide exempt services, they may be required to pay sales or use tax for items they purchase or charge sales tax on certain items they may sell. Sales tax is a tax on items of tangible personal property a dentist may sell, while use tax is typically the tax you pay on items you may purchase. Consumers use tax is complementary to the sales tax. In other words, one or the other can be applicable, but both taxes are never applied to the same transaction. In Missouri, since 1959, use tax has been imposed on the storage, use, or consumption of tangible personal property. Unless an item is specifically exempted by statute, dentists must pay consumers use tax on purchases of tangible personal property stored, used or consumed in a state, unless tax was paid to the seller. Consumers often pay sales tax to the seller when they make a purchase, and the seller remits the tax to the government. However, not all sellers are obligated to collect tax from you. For example, an out-of-state seller that you purchase from may not have any nexus or connection to your state. Therefore, they may not be required to collect tax in your state. This happens many times with online purchases. If you make purchases online or from a seller not required to collect sales and use tax for your state, the burden may be on you, as the consumer, to pay any tax that may be due. The tax rate and taxability of an item is determined according to the state your business is located or where you take possession of the goods purchased. If you choose to pick up or take possession of your purchase in a different state, the tax rate and taxability will be determined by that states law. Sales and use tax rules are different in each state. Tax rates vary by state and each state differs in what products are considered taxable and what products are non-taxable. For example, Illinois and Missouri tax products related to the practice of dentistry differently. Illinois Sales and Use Tax In Illinois, the professional services rendered by dentists are not taxable. However, when a dentist bills for tangible personal property separate from their services, those charges will typically be taxable, though at different rates. Some items are taxable at the full rate of tax of 6.25 percent plus local tax, while others are taxable at a reduced rate of tax. Drugs and medical appliances are items taxed at the reduced rate. If the transfer to the patient is separate (separately stated on the invoice) from rendering services as a dentist, it is taxable to the patient at the appropriate rate. For example, mouthwash, toothpaste, and dental floss sold to patients are taxable at the full rate of tax. Dental prosthetics and orthodontic braces, which are considered medical appliances, are taxable at the reduced rate. If the transfer is not separate from rendering services as a dentist, it is taxable upon the dentists purchase. Examples of property sold to patient apart from rendering services as a dentist that are taxable at the full rate in Illinois are listed below: Other items that are fully taxable in Illinois include, but are not limited to the following:
Consumer Use Tax - The "Tax" That Can Bite Dentists Unaware
Robert V. Willeford, Jr., CPA, Esq. and Claire E. Rogers
Many dentists are aware that dental services are generally exempt from sales tax. However, when dentists sell tangible personal property to their customers, this can be taxable on the sale to the patient and/or insurance company. But what about consumers use tax? What is it and how does it impact my dental practice?
Previous Page