Recently the Wisconsin Department of Revenue, in its eagerness to recover lost funding from the federal government, has initiated more aggressive sales tax audits to determine if businesses are properly paying sales and use tax to the state. Is your practice in compliance in this area? Here are some items to watch for.
Purchases by dentists that are subject to sales tax include the following:
- Dental equipment such as dental chairs, drills and bits, x-ray machines, and film, etc.
- Dental or surgical instruments
- Supplies consumed in providing the dental service such as tongue depressors, bandages, cleaning paste, mouthwash, dental floss, cotton, or gauze
- Items given to customers such as gum, toys, or toothbrushes
- Office equipment and supplies, such as computers, wall charts, appointment cards, and dental reminder cards
Purchases of items from out-of-state suppliers who do not charge you sales tax are taxable in the state of Wisconsin, since you are the ultimate consumer of the supply. Please make sure that the person in your office who orders supplies pays close attention to the sales tax being charged by various supply houses. For the most part, suppliers in Wisconsin will be charging you sales tax on your in-state purchases.
Purchases by dentists that are exempt from sales tax include the following:
- Nitrous oxide, oxygen, and anesthetics
- Bone regeneration materials
- Gold, silver, alloys, cement, and bonding agents used to fill teeth (whether permanent or temporary)
- Crowns, bridges, dentures, inlays, or other similar items which the dentist installs in the human patient’s mouth
- Bands, brackets, wire, space maintainers, positioners, and other items installed in a patient’s mouth to prevent or correct a physical deformity or to support a weak or deformed portion of the body (including braces and other corrective and supporting devices, such as teeth, mouth, and jaw braces and supports)
- Purchases made by dentists are exempt from sales tax if the purchase qualifies as a medicine or as a device designed and constructed for a particular patient
When your practice sells items to patients that could commonly be purchased at a department store or pharmacy, such as toothbrushes, toothpaste, and other related items, your practice should be charging the patients sales tax. (This excludes any prescribed items.)
Charges to customers for dental services are not subject to Wisconsin sales tax.
If you determine that sales tax was not charged on your purchases or sales of goods to patients, you should remit sales and use tax to the Wisconsin Department of Revenue. By failing to remit the sales and use tax, the Department of Revenue, upon audit, will assess the tax on these purchases and sales along with the interest at 12% or 18% per year. Late filing fees and a 25% negligence penalty could also be imposed.
For more about sales and use tax rules and issues that may impact your practice, join us for our 2012 Sales & Use Tax Update workshops to be held throughout January and February. Join us to learn:
- How to limit your sales and use tax liability exposure
- When to charge your customers sales tax and when to self-assess use tax
- Best practices in structuring transactions to reduce tax obligations
- How to handle overpayments and refund opportunities
We’ll begin by covering general sales and use tax issues affecting most businesses. The second hour of this two-hour workshop will address specific issues impacting the health care industry.
To learn more, or to discuss the rules that impact your business, contact your account director or any member of our State and Local Tax Team at 800-236-2246.
David Wagner, CHBC, is a Practice Management Consultant with Schenck’s Health Service team. He specializes in assisting dental practices in the areas of practice management, retirement plan implementation, practice analysis, and tax planning.