As a medical professional, you may not think that Ohio’s sales and use tax laws impact your practice. However, sales and use tax can sneak up in manners you may not have considered.
As professional services providers, doctors and dentists are not required to collect Ohio sales tax on sales of services. That does not mean, however, that medical practices are exempt from sales and use tax. Consider a dentist that sells products to patients such as mouthwash and whiteners. In this instance, the dentist is considered a retailer of tangible personal property and is required to collect and remit sales tax on sales of such products. Some dentists are unaware that Ohio reconsidered its treatment of clear tray aligners such as Invisalign® and now consider the dentist as the taxable consumer of such purchases.
And while most Ohio taxpayers are familiar with sales tax, few understand Ohio use tax and how it applies. For the medical professional, failure to understand Ohio use tax can cause significant financial risk to your practice.
What is Ohio Use Tax and Why Might I Owe it?
Ohio use tax is complementary to Ohio sales tax. Generally, use tax is owed when no Ohio sales tax was charged on a taxable transaction. Tax is due on taxable “use” within Ohio by the consumer of what was purchased. Ohio offered a tax amnesty program intended to encourage voluntary compliance with use tax laws. Now that the program has ended, Ohio is out in force auditing taxpayers that do not have a use tax account.
For the medical professional, Ohio’s use tax has many implications. For example, dentists sometimes do not realize that purchases of dental prosthetics fall outside the general exemption for medical prosthetics. Practically speaking, this means a dentist is the consumer of crowns, braces, brackets, and implants. If these products were purchased from an out-of-state laboratory where no sales tax was charged, the dentist is required to accrue and remit Ohio use tax on the purchase price. For a general medical practice, purchases of office-use medical equipment and medical supplies are also subject to tax. For a medical practice that frequently orders such products from out-of-state suppliers, a significant Ohio use tax liability could exist. Finally, veterinarians are subject to the same provisions with the added twist that Ohio only exempts prescription medicine for human use.
What about purchases not unique to the medical profession? Consider the following list of purchases that are subject to use tax if Ohio sales tax was not paid:
- fax machines
- office supplies
- cleaning supplies
Also, the following are examples of service purchases subject to use tax if sales tax has not been paid to the vendor:
- installation and repair of taxable tangible personal property
- temporary employment
- automatic data processing
- maintenance contracts
- employment placement
If your practice has purchased such goods or services without the payment of Ohio sales tax, use tax may be due and owing.
What Can I Do if I Suspect I Might Have an Outstanding Sales or Use Tax Liability?
Your CSH professional can help you review purchases to determine if your practice is in compliance with the laws. If a liability is found, you may be able to participate in a state voluntary disclosure program that will limit your exposure and liability. This program encourages proactive compliance with the law in return for mitigation of penalties and a limited look-back period. Your CSH professional can also help establish a program for effective sales and use tax compliance on a go-forward basis. In short, a comprehensive review of your practice’s sales and use tax compliance can help ensure the financial health of your practice.