Sales Tax: Do Veterinarians Need to Pay It?

Veterinarians offer products and services that save lives. One of the things a veterinarian may least expect is paying sales tax for products or services.

As a veterinarian, it’s essential to know how to pay sales tax and when to pay it.

Here is what you should know about sales tax if you’re a veterinarian.

What is Sales Tax?

Sales tax is a tax that the government charges for the sale of goods and services. Sales tax works in two ways:

Companies will charge sales tax if it has a nexus. For sales tax, a business has a nexus if:

• It has employees working in a state.
• It has locations within a state.
• It has property, which includes intangible property, within a state.

It is possible to pay multiple forms of sales tax for veterinary services. The standard sales taxes that you may pay include: 

• County taxes
• Municipal taxes
• Use taxes (a sales tax for out-of-state purchases occurring before you use a product)

Do Veterinarians Need to Pay Sales Tax?

You may pay multiple sales taxes as a veterinarian, which depends on the services you offer. For veterinarians focusing on companion animal services, 

• Ancillary services - boarding (non-medical), grooming 
• Companion animal script 
• Durable medical equipment
• Food animal script 
• Non-script products
• Veterinary Medical Services

Veterinarians will need to pay sales tax for ancillary services in these states:

• Arkansas
• Hawaii
• Indiana
• Minnesota
• New York
• Rhode Island
• South Dakota
• West Virginia 
• Wisconsin

Veterinarians will need to pay sales tax for ancillary services in these states, with tax exemptions:

• Connecticut: If you provide these as part of professional veterinary and pet obedience services, you won’t pay sales tax. 
• Iowa: Iowa requires sales tax for grooming services, but not for boarding.
• Kansas: Kansas requires sales tax for grooming. 
• New Mexico: All aspects of veterinary income are taxable in New Mexico as gross receipts tax.
• Texas: Texas requires sales tax for grooming if it’s for cosmetic purposes. Veterinarians in Texas won’t pay sales tax for grooming if it’s part of medical treatment.

Veterinarians must pay sales tax for companion animal scripts in Illinois and Kentucky.

Veterinarians will need to pay sales tax for durable medical equipment (DME) in these states:

• Alabama
• Georgia
• Illinois 
• Kansas 
• Minnesota
• Mississippi
• Nebraska
• New Mexico
• Ohio
• South Carolina
• Washington

The following states charge sales tax for durable medical equipment but are exempt when sold on a prescription:

• Arizona 
• Arkansas 
• California 
• Colorado 
• Florida 
• Hawaii 
• Idaho 
• Indiana 
• Iowa 
• Kansas
• Kentucky
• Louisiana
• Maryland
• Massachusetts
• Michigan
• North Carolina
• Oklahoma
• South Dakota
• Texas
• Utah
• West Virginia

Illinois charges sales tax for food animal script.

The following states charge sales tax for non-script products:

• Alabama
• Arizona
• Arkansas
• California
• Colorado
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine 
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• Nevada
• New Mexico
• North Dakota
• Ohio
• Oklahoma
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Utah
• Washington
• West Virginia
• Wisconsin
• Wyoming

The following states charge sales tax for veterinary medical services:

• Hawaii
• Kentucky
• New York
• South Dakota

In some states, veterinarians pay a use tax, which is another sales tax:

• In Alabama, veterinarians pay a use tax on drugs administered in clinics.
• In Connecticut, veterinarians pay a use tax on consumables used in practice. 
• In Florida, veterinarians pay a use tax on taxable items and services used in practice. 
• In Illinois, DVMs pay a use tax on the cost of items transferred to customers as a medical service.
• In Indiana, free microchips are subject to use tax. 
• In Iowa, veterinarians pay a use tax on drugs used in clinics.   
• In Kentucky, veterinarians pay sales and use tax due on the purchase price.
• In Maine, veterinarians pay use tax on drugs used in clinics.
• In Michigan, veterinarians pay use tax on drugs used in clinics.
• In Tennessee, veterinarians pay use tax, which you can’t pass on to a client.

The state of Colorado has specific sales tax requirements: 

• There’s no state tax on prescriptions. 
• Some municipalities charge sales tax on prescriptions.

The state of Indiana has sales tax requirements for specific items:

• Collar tags
• Microchips
• Pet food (sold for use by healthy animals)
• Pet identification cards
• Pet supplies (sold for use by healthy animals)
• Scanners

The state of New Jersey has specific veterinarian tax requirements

• Nontangible items, like injectables, are taxable to veterinary businesses.
• Tangible items not accounted for separately and are part of a professional service (such as bandages or sutures) are taxable to veterinary companies, not to the customer.
• Tangible items that a customer can physically take possession of are taxable to the customer.

The state of Nevada requires that veterinarians collect sales tax on retail price, which you itemize on invoices. 

The state of Ohio has two sales tax requirements for veterinarians:

1. Veterinarians must pay sales tax when purchasing from a supplier. 
2. Veterinarians must also pay sales tax for over-the-counter medicines.

How to Calculate Sales Tax as a Vet

If you must charge sales tax for your veterinarian product or service, you’ll need to know how to calculate sales tax. 

You’ll calculate sales tax by following three steps: 

1. Determining whether you must charge sales tax (within the above lists)
2. Finding the tax rate for your state 
3. Multiplying your product or service price by your state tax rate

First, if you must charge sales tax or pay a sales tax, you’ll need to know the sales tax rate. Depending on your state, this could range from 4% to 7%. 

You may have to pay other taxes, such as a county tax, that increase the sales tax percentage you’ll pay. You’ll add this to the state sales tax for a total amount, as a percentage, for the third step.

Once you have the percentage of your sales tax rate totaled, you’ll multiply the cost (of a product or service you offer) by the sales tax rate. The number that you’ll see is the sales tax you’ll pay to suppliers.

Some states don’t charge sales tax on items sold:

• Alaska
• Delaware
• Montana 
• New Hampshire
• Oregon

Work with the Professionals

Sales tax for veterinarians comprises several factors, and it is essential to avoid making costly tax mistakes. Work with the professionals at 1-800Accountant for your sales tax needs. Our accountants specialize in a wide variety of industries, including veterinarian practices.