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FAQ: Which dental services are tax-exempt?

3/22/2012

Professional services, including dentistry services, are currently exempt from Indiana sales tax. The sales of dental prosthetic devices are also specifically exempted from sales tax.

However, if you sell retail items such as toothbrushes or whiting gel to your patients you need to collect and remit sales tax. You are required to register as a retail merchant by submitting a Business Tax Application (BT-1), on the Indiana Department of Revenue’s website.  

Your practice may also be liable for use tax on purchases.  Use tax is a substitute for sales tax.  Every purchase of tangible personal property is subject to sales or use tax unless it is specifically excluded.  If Indiana sales tax is not collected by your vendor, then it is your responsibility to calculate and remit this to the state.  Common triggers of use tax are purchases made over the internet and from out of state vendors.  

Sales and use tax applies to:

  • All office furniture, equipment & supplies
  • Drugs not requiring a prescription, and used on the patient
  • Instruments & equipment
  • Supplies consumed in professional use, and
  • X-ray, diagnostic equipment used in the practice of dentistry

For practices registered as a retail merchant, both sales and use tax are remitted either on Form ST-103 or on-line through INtax.  If you are not registered, use tax may be submitted with your annual income tax return.  

All Indiana practices are subject to these requirements.  As a registered business the state has the authority to audit your compliance.  Penalties and interest can be assessed if the proper taxes are not remitted. 

Source: Angela L. Zirkelbach, a certified public accountant with Blue & Company, an Indianapolis-based accounting firm.

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