Is Your Dental Practice Paying Proper Sales Tax?

Nov 20, 2014

sales tax auditAs a provider of personal services, a dentist’s services are exempt from sales tax. However, if your practice sells to patients items such as mouthwash, whiteners and toothbrushes, sales tax must be collected on these items.

In addition, dentists can be consumers of tangible personal property and services as well. Your practice is responsible for paying sales tax on purchases of supplies and equipment, including items that are consumed when rendering your services. For example, crowns, braces, brackets and implants. If the vendor you purchased these items from did not charge sales tax, you must pay use tax to the Ohio Department of Taxation. One of the most common trends we see are orders from out-of-state dental labs or equipment companies which are not properly charging sales tax.

The opposite of a sales tax is a use tax which is imposed when you purchase a taxable item, but don’t pay sales tax on it. As a result of the rapidly rising deficits, state taxing authorities are looking closely at dental practices for unpaid use tax for items purchased from vendors that have not charged sales tax.

Experience has shown us that many dental practices have no idea that they are at risk of exposure to this tax. If you have never filed sales or use tax returns, the state can audit your practice all the way back to the date it started business. The magnitude of unpaid sales and use taxes, plus interest and penalties, could be enormous. If you haven’t addressed sales and use tax in your practice, now is the time to do so!

Visit our website, or contact our dental accounting team if you have questions about these taxes (419) 891-1040.

Categories: Healthcare & Dentistry