LUTZ BUSINESS INSIGHTS
Sales & Use Tax for Medical & Dental Practices – FAQs
MALI THRAMER, STAFF ACCOUNTANT
Sales and use tax can be a challenging world to navigate. Rules vary from state to state, and legislation can change annually, making the regulations difficult to keep up with. However, compliance with current legislation is vital, as mistakes can result in hefty fines and penalties. Medical and dental practices mainly provide medical services, so, understandably, sales tax may not be top of mind. But what if they sell medication? What about products purchased with the intent to sell to customers? We’ve listed some of the most frequently asked questions regarding sales and use tax for medical & dental practices so you can know what your practice is required to file.
1. Are medical & dental services taxable?No. Medical & dental services are not subject to sales tax.
2. Are medications & other products I sell to my patients subject to sales tax?Maybe. Sales of over-the-counter medications, hygiene products, vitamins/supplements, toothbrushes, at-home teeth whitening kits, etc., are taxable. You must collect sales tax from your patients when you sell these types of products. Sales of prescription medications, durable medical equipment, home medical supplies, mobility-enhancing equipment, oxygen & oxygen equipment, and prosthetic devices are generally exempt from sales tax.
3. Are sales of medical records taxable?Yes. Sales tax must be collected on sales of medical records unless an exemption applies. There is an exemption for medical records sold to patients and exempt governmental agencies.
4. What is use tax?Use tax is due when taxable goods or services are purchased, and the vendor did not charge sales tax. Generally, this occurs when items are purchased from out-of-state vendors online or through catalogs. However, local vendors don’t always charge sales tax correctly, so it’s important to review your purchases from all vendors to ensure that you paid all the necessary sales tax.
5. What types of purchases require payment of sales/use tax?Medical/dental equipment and tools, furniture, computers, office supplies, medical/dental supplies, lab equipment and supplies, etc., are all subject to tax. Certain services, installing and repairing tangible property, building cleaning and pest control services, are also subject to tax. If a vendor does not charge sales tax on these types of purchases, then use tax is due.
6. What types of products can I purchase tax-free?Products you will resell to customers can be purchased tax-free (see examples in #2 above). Additionally, no tax is due on purchases of medications dispensed under a prescription, even when used by the physician or dentist while providing their services. Physicians & dentists can also purchase most types of prosthetic devices tax-free. Examples include eyeglasses, hearing aids, implanted devices, braces, dentures, dental filling materials, etc. Please see the following guides for further information. Nebraska Sales and Use Tax for Physicians Nebraska Sales and Use Tax for Dentists, Orthodontists, and Oral Surgeons Lutz is happy to help your healthcare organization with its sales and use tax reporting. Please contact us if you have any questions. Disclaimer – This information is relevant to medical & dental practices in the State of Nebraska. If your business has locations outside of Nebraska, it is important to review the sales & use tax rules specific to those states.
ABOUT THE AUTHOR
MALI THRAMER + STAFF ACCOUNTANT
Mali Thramer is a Staff Accountant at Lutz. She began her career in 2020. She is responsible for assisting clients with tax-related issues, from pursuing tax incentives to managing state tax audits.
AREAS OF FOCUS
- State & Local Tax
- Sales & Use Tax
- Sales Tax Audit
- Tax Incentives
- BSBA in Accounting, University of Nebraska, Omaha, NE
- Lutz Gives Back, Committee Member
- Sales & Use Tax for Medical & Dental Practices
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