Over the past few years we have seen an increased focus by the North Carolina Department of Revenue (NCDOR) on dentists for the audit of sales and use tax compliance. With this in mind, we want to work with our Practice owners to educate and proactively prevent the massive impact these audits can cause.
Sales tax is what we all expect to pay when we purchase items in our day-to-day lives. As a Practice owner, it is necessary to charge sales tax on certain items like electric toothbrushes. As a general rule of thumb, we tell our dental clients: If it leaves in the patient’s mouth, the items and services are NOT subject to sales tax. With this being said, everything else that does not leave in the patient’s mouth may be subject to the tax. If you are unclear which items this applies to, our team will work with you to review your product offerings and determine which items sales tax should be added to.
When looking at use tax, this is what applies when you purchase items from a vendor and they do not charge you tax. If you receive invoices for supplies and equipment or office supplies, your Practice is responsible for reporting this information. In addition, you must pay the sales tax the vendor did not charge. For example, this could be when Practice owners purchase items from out of state suppliers, online vendors, or small retailers.
While it can be time consuming and difficult, compliance with both parts of the tax is necessary. For this reason, one of our main goals is to implement procedures to ease the compliance process for our clients.
Each month you should total the number of items sold by your Practice that were subject to sales tax and forward to your accountant. Remember, review your Practice Management software reports as this information may already be shown.
For use tax, we recommend you include your office manager or a trusted member of staff in this process. This staff member must review all invoices from your vendors to verify if sales tax was charged. If not, those invoices should be set aside for payment of Use Tax. This information needs to be shared with your accountant on a regular basis.
To learn more about how we can support your Practice in this process, contact us!