Are you a dentist practicing in the Twin Cities or in other areas of Minnesota? If so, it may interest you to know that the Minnesota Department of Revenue (DOR) recently published guidelines for sales & use tax liabilities in dental practices. Now if you’re like most of our clients you are probably thinking that dental services are not subject to sales or other taxes. That is correct. Any licensed dentist providing general or specialty dentistry services in the state of Minnesota are not subject to tax. However, there are situations when a dental practice may have incurred a sales or use tax liability. Remember, use tax applies to qualifying purchases where Minnesota states sales tax was not paid. In this situation, the purchaser is required to pay use tax to the state. This article provides insight into situations where a use tax situation may exist.
Many of our clients have started offer certain products to clients. The most popular example is the powered toothbrush. They are more effective at cleaning teeth than the traditional toothbrush and are invaluable in the ongoing care of teeth. However, most dentists are unaware that if you sell the product and don’t charge sales tax then you have an issue. In fact, any sales transaction that occurs needs to include sales tax to be paid to the state. If your office sells the aforementioned tooth brush, whitening products or even athletic mouth guards then sales tax needs to be collected. If you have not collected tax on these transactions then you are liable to state for the full tax amount.
These are a staple in any dentist office and necessary to provide care to patients. However, most don’t realize that select medical supplies have a liability depending on how they are used. The purchase of supplies is exempt from any tax as long as they are used directly on the patient as part of the treatment process. Examples include bandages, gauze pads, antiseptics, nonprescription drugs and other items. Conversely, any items that are not used directly on the patient during treatment have a tax liability. Examples include disposable shields, bibs, sleeve covers, head cover and tongue depressors.
To provide clarity on this complex topic, the DOR recently updated their list of taxable and non-taxable items and transactions that most often have a tax liability. Below we have provided an excerpt from that listed, including:
- Cleaning supplies and chemicals
- Copies of medical records
- Dental health educational products
- Dental models
- Dental tools and equipment
- Digital x-ray equipment, sensors and disposable sensor sheaths
- disposable equipment and tools, including single use prophy angles and disposable mirrors
- Face masks
- First-aid products and kits
- Gifts and promotional items
- Impression materials and trays
- Laboratory equipment, supplies and reagents
- Medical forms and records (including retrieval fee)
- Tongue depressors
If your current accounting firm is not discussing these issues with you then you may want to consult a dental accounting specialist. It’s critical to review your practices to ensure no surprises exist. If you think you may have an issue then it’s important to get ahead of the issue.