Ohio dentists who use Invisalign invisible braces need to comply with new sales tax procedures. Your practice may need to update tax, accounting and billing procedures to comply with the change. See how your practice might be impacted.
The Ohio Department of Taxation recently changed its position on the sales/use tax treatment of the invisible braces product, Invisalign. This change may have a significant impact on every dentist in Ohio.
Previously, your purchase and use of Invisalign was, as far as your taxes went, a simple sale for resale transaction; you bought the product exempt from sales tax and then resold it to patients who you then charged sales tax. If you didn’t separately break out the material and labor cost on the invoice to patients, then the entire invoice amount would be taxable. Selling Invisalign was no different than selling a toothbrush or a pharmacist selling a bandage.
The Department’s revised position is that not just anyone can use Invisalign – this product requires continued professional judgment, adjustments and skill. As such, the Department now considers Invisalign in the same category as braces: materials consumed by the dentist in the course of performing a non-taxable professional service.
How will this impact you?
Moving Invisalign to this new category impacts its taxation. If your practice purchases Invisalign, you need to change your purchasing and invoicing procedures, to the extent that you are not already in compliance with Ohio’s revised position.
You’ll need to modify your accounting systems so that you don’t charge tax to your patients on the sale of the device. In addition, if you’re not charged sales tax when you purchase Invisalign, you need to self-assess and pay use tax. This change in treatment will require action from dentists wishing to avoid exposure, penalties and interest.
Currently, it is our understanding that Invisalign vendors generally don’t charge sales tax. Therefore, if you use Invisalign and don’t pay sales tax to the vendor at purchase, you’ll need to open a use tax account (if you don’t already have one) and self-assess use tax on Invisalign purchases.
Depending on how your practice previously handled tax on Invisalign products, you’ll need to take one of the approaches outlined below to get yourself compliant with the administrative change.
- No taxes paid by anyone – If you never paid sales tax on the Invisalign devices or charged your patients sales tax on Invisalign, you should file for use tax amnesty (a program that allows you to clear up your use tax liability without paying associated penalties or interest) on your past Invisalign purchases.
- Sales tax charged to patients – If you previously charged your patients sales tax on Invisalign, you can request a refund of the tax paid which you’ll return to your patients. You would then need to file for use tax amnesty on your past Invisalign purchases.
- Sales/use tax paid on purchase – If you didn’t charge your patients sales tax on Invisalign, and either paid sales tax to your vendor or self-assessed and paid use tax, then you’re already complaint with the new system.
Dental Tax Help
The technical tax treatment of your Invisalign purchases and the remedies described above may seem straightforward, but if you find yourself struggling with how to remedy your sales/use tax situation, contact Rea & Associates. Our Dental CPAs is well-versed in tax and can help you with any questions you may have.