As businesses providing services, as well as selling and purchasing tangible goods, veterinary practices must be aware of the rules surrounding sales and use taxes—but did you know that the laws for sales and use taxes vary from state to state? RBT CPAs serves veterinary practices across multiple states including New York, New Jersey, California, Virginia, Wisconsin, and Colorado, to name a few. Not only do sales and use tax regulations vary between states, but the rules also apply differently to different kinds of transactions taking place at veterinary practices. In this article, we want to highlight the importance of knowing the sales and use tax laws as they apply to veterinarians in your state specifically.
What are sales and use taxes?
Sales tax is a tax imposed on the sale of taxable goods and services. Sales taxes are charged to the end consumer, and the responsibility for collecting the sales tax belongs to the seller. Use tax is a tax imposed on the use, storage or consumption of taxable goods or services for which sales tax was not charged at the point of sale. The rate of the use tax is generally equal to the rate of the local/state sales tax. Veterinary practices are responsible for collecting and reporting sales and use taxes correctly, via state-specific sales and use tax returns.
When are sales and use taxes applied?
Depending on the state where you practice, different tax rules apply to various financial transactions. Certain services and goods are considered nontaxable, while others are taxable.
Let’s take a look at some of the regulations in New York State as an example.
Non-Taxable Sales in NYS
- Receipts from services related to the health care of an animal, which includes diagnosing, treating, operating, or prescribing for any animal disease, pain, injury, deformity or dental or physical condition, or the subcutaneous insertion of a microchip intended to be used to identify an animal.
- Hospitalization of an animal for which no separate boarding charge is made.
- Grooming and clipping if performed as a necessary part of the practice of veterinary medicine to diagnose, treat, operate, or prescribe for any animal disease, pain, injury, deformity, or physical condition.
- Receipts from the sale of tangible personal property designed for use in some manner relating to domestic animals or poultry are exempt from sales tax when sold by a veterinarian.
- Sales of otherwise taxable tangible personal property to certain tax-exempt purchasers such as farmers, government entities, and other organizations (provided the proper exemption certificate has been supplied).
Taxable Sales in NYS
- Sales of non-veterinary services such as boarding, grooming, and clipping are subject to sales tax unless provided as a necessary part of a veterinary service.
- The receipts from the sale of pet cremation and burial services are nonveterinary services and accordingly are subject to sales tax as a service to tangible personal property, whether performed by a veterinarian or another person.
- Purchases by a veterinarian of tangible personal property designed for use in some manner relating to domestic animals or poultry are subject to sales tax. They may not be purchased exempt from sales tax as a purchase for resale.
- e., medical equipment & supplies, office equipment & supplies, boarding equipment & supplies, and various other costs (cleaning supplies, disinfectants, equipment repair, collars and leashes, litter, carriers, clippers, flea spray/ointment, for example)
- Purchases by a veterinarian of tangible personal property not designed for use in some manner relating to domestic animals or poultry are subject to sales tax. However, if an item is to be resold, as such, it may be purchased by the veterinarian exempt from sales tax. The veterinarian should give the supplier a properly completed Form ST-120, Resale Certificate.
- e. mugs, calendars, and t-shirts that feature various breeds of cats and dogs
- Sales of animals (except guide, hearing, and service dogs when the dog is sold for use by a person to compensate for impairment to the person’s sight, hearing or movement).
Why is it important to know sales and use tax laws?
Knowing and adhering to your state’s sales and use tax laws protects your practice in the case of a sales tax audit. If your practice is audited, you will be liable for any errors.
What steps can you take to ensure compliance?
- Familiarize yourself with the sales and use tax laws for veterinarians in your state.
- Ensure you are registered as a sales tax vendor before collecting sales tax.
- Make sure your practice’s software is set up to charge sales taxes according to your state’s regulations.
- Review your vendor bills as they are received. If you purchase a taxable good or service and are not charged sales tax, make sure to report it in your sales and use tax return, as subject to use tax.
- File accurate and timely sales and use tax returns.
- Keep detailed records of all sales and purchases for the required period(s) specified by your state. Upon request by your state’s Tax Department, records must be made available.
As you can see, the rules surrounding sales and use taxes are very particular—and vary depending on where you practice. Set your practice up for success by knowing and complying with your state’s sales tax laws. For guidance on sales and use tax regulations in your state, please don’t hesitate to reach out to RBT CPAs. Our experts are here to support all of your practice’s accounting, tax, audit, and advisory needs. Give us a call to learn more.
