The mobile veterinary service industry has seen a surge in popularity in recent years, largely due to the convenience it offers clients and the flexibility it provides for veterinary professionals. This flexibility includes the ability for businesses to extend their services to clients outside of their home state. However, when operating in other states, mobile veterinary businesses need to keep certain tax considerations in mind. Let’s talk about some of the legal factors and requirements that may come into play when you do business across state lines—and how they can impact your tax obligations.

What is nexus?

Firstly, you’ll need to determine if your business is establishing nexus in another state. Nexus, in regard to taxation, refers to a level of connection between a business and a particular state that allows that state to impose tax obligations on the business. When you perform mobile veterinary services in a different state, nexus may be triggered, meaning you are subject to the tax laws of that state. The rules of nexus vary from state to state, so it’s important to know the specific rules for the states you are operating in.

What triggers nexus?

Keeping in mind that the rules of nexus vary by state, several circumstances can trigger nexus, including situations in which:

1. A business has a physical presence in the state, such as an office, store, or warehouse.
2. A business has employees in the state.
3. A business reaches a certain level of economic activity in the state, such as a specific sales revenue or number of transactions (thresholds for revenue and transactions vary by state).

Potential tax obligations when you create nexus

Depending on the state in which you are doing business, when nexus is created, you could be required to:

1. Register for sales tax and meet sales tax filing requirements for that state—this requires registering with the state’s tax authority, collecting sales tax on taxable sales to customers within the state, and remitting sales tax to the state.
2. Register for payroll taxes and meet payroll tax filing requirements for that state.
3. Meet business income or franchise tax filing requirements for that state.

Need guidance?

It’s important for mobile veterinary businesses to research and know the nexus rules for the states in which they provide services, and to maintain compliance with the necessary tax registration and filing requirements. Keeping track of differing nexus rules can be confusing, especially considering that states often update or change their criteria for determining nexus. The veterinary accounting professionals at RBT CPAs are here to help you understand nexus laws, determine whether you are creating nexus in another state, and ensure that you are fulfilling any necessary tax requirements. Let us take care of your accounting and compliance while you focus on taking care of your patients both in and out of your home state. Give us a call today to learn more—and find out how we can be Remarkably Better Together.

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.

In recent years, many veterinary practices have shifted to using cloud-based Practice Information Management System (PIMS) programs. The overall response by veterinary staff to the new software has been positive. Staff members appear to be adjusting to programs quickly once trained—and noticing improved operations within the practice. That said, some challenges have emerged with the financial reporting generated by these new systems. It’s important to be aware of the benefits of cloud-based PIMS programs, the impact of new systems on financial reporting, and the actions you can take to combat financial reporting issues.

Benefits of Cloud-based PIMS Software

Cloud-based veterinary PIMS software offers several benefits including:

• Improved accessibility and staff collaboration on both the hospital and administrative side
• Staff training and support
• Streamlined workflow
• Cost-savings, as less hardware is required
• Automatic updates
• Integration capabilities with other software and programs
• Improved overall efficiency & patient care

Financial Reporting Issues

While cloud-based PIMS systems seem to be a success from the operational standpoint, a number of practices in recent years have struggled with the financial reporting generated from the new systems. Cloud-based systems enable staff to change invoices and data in real-time, which can affect previously reported numbers. This can leave bookkeepers, office managers, practice managers, and accountants constantly chasing ever-changing numbers. Many of the new cloud-based PIMS lack proper cutoffs when it comes to financial reporting.

Running different reports for the same figure (i.e. gross sales) for the same exact time period may generate completely different numbers on one report vs. another (i.e. gross sales on a summary report do not match gross sales on an invoice by revenue type report)—so which one is right?

It is important to understand what is being included and/or excluded from each report:

• Is one report net of discounts and the other not?
• Does one report include sales tax and the other not?
• Is one report based upon “closed” invoices only and the other based on both “open” and “closed”?
• Is one report set to show cash basis numbers and another accrual basis?
• Were the reports run at different times? Numbers can subsequently change in the new cloud-based PIMS systems and not correlate to other reports if not run at the exact same time.

How To Combat Financial Reporting Issues

There are several ways to manage and prevent these kinds of discrepancies in your financial reporting:

• Schedule a meeting with your veterinary PIMS software representative
  • Ask questions about discrepancies: you’ll want to understand exactly what specifications the reports are based upon and why the numbers on reports are different. Accurate reports will provide you with a true picture of your practice’s performance.
• SCHEDULE YOUR REPORTS
  • Many systems allow you to schedule reports to run at a specific time, date, day, month-end, etc.
  • Scheduling all necessary reports for the same time will help you avoid the issue of numbers subsequently changing—and the need to chase numbers when trying to do your financial reporting.
• Make sure you use reports run on the same parameters, i.e. accrual basis, closed invoices only, gross or net of discounts, etc.
• Train your staff
  • Ensuring that your invoices are closed and included in the financial reporting of the month earned will help you analyze and manage your practice’s performance.
  • Make sure your staff closes any open invoices by month-end to avoid timing differences from month to month.

Gone seem to be the days when veterinary PIMS systems cut off at the proper times and reports would never change. Now, it is important to figure out ways to extract the data you need before it’s too late to get it. For additional guidance on your practice’s financial reporting—and for all of your other accounting, tax, audit, and advisory needs—please don’t hesitate to reach out to our experts at RBT CPAs. Give us a call and find out how we can be Remarkably Better Together.