Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule explains the application of business and
occupation (B&O), retail sales, and use taxes to the business activities of
dentists, audiologists, dental laboratories, dental technicians, and other
health care providers.
(a)
Examples. Examples found in this rule identify a number of facts
and then state a conclusion. These examples should be used only as a general
guide. The tax results of other situations must be determined after a review of
all facts and circumstances.
(b)
Other rules that may apply. Readers may also want to refer to
other rules for additional information, including those in the following list:
(i) WAC
458-20-102 Reseller
permits;
(ii) WAC
458-20-150 Optometrists,
ophthalmologists, and opticians;
(iii) WAC
458-20-168 Hospitals, nursing
homes, assisted living facilities, adult family homes and similar health care
facilities;
(iv) WAC
458-20-178 Use tax and the use of
tangible personal property; and
(v)
WAC 458-20-18801 Medical substances,
devices, and supplies for humans-Drugs prescribed for human use-Medically
prescribed oxygen-Prosthetic devices-Mobility enhancing equipment-Durable
medical equipment.
(c)
Definitions. For the purposes of this rule the following
definitions apply:
(i)
Audiologists. "Audiologists" diagnose, manage, and treat a
patient's hearing, balance, or related ear problems.
(ii)
Gross income. "Gross
income" means compensation for the rendition of health care services, and
includes any separate charge for drugs, medicines, and other substances
administered or provided to a patient as part of the health care services
delivered to the patient. Gross income also includes any separate charges for
prosthetic devices, including dental prostheses and hearing aids that are
provided as part of the health care services delivered to patients.
(iii)
Health care provider. A
"health care provider" is a person licensed under the provisions of
Title
18 RCW to provide health care
services to humans in the ordinary course of business or practice of a
profession.
(iv)
Prosthetic
device. "Prosthetic device" means a replacement, corrective, or
supportive device, including repair and replacement parts for a prosthetic
device, worn on or in the body to artificially replace a missing portion of the
body, prevent or correct a physical deformity or malfunction, or support a weak
or deformed portion of the body.
RCW
82.08.0283. Dental appliances, devices,
restorations, substitutes, or other dental laboratory products are also
referred to as "dental prostheses" throughout this rule.
(2)
Tax-reporting
information for dentists, audiologists, and other health care providers.
This subsection provides specific tax-reporting information for dentists,
audiologists, and more generalized tax-reporting information for other health
care providers. Dentists who employ dental technicians to produce or fabricate
dental appliances, devices, restorations, substitutes, or other dental
laboratory products should refer to subsection (3) of this rule for additional
information.
(a)
Business and
occupation tax. Dentists, audiologists, and other health care providers
are subject to the service and other activities B&O tax on their gross
income from performing dental and other health care services.
RCW
82.04.290.
(b)
Sales of tangible personal property
. A dentist, audiologist, or other health care provider may make sales
of tangible personal property such as hearing aid batteries, drugs, medicines,
and bandages as a convenience to a buyer apart from any health care services
provided to the buyer. These are sales of tangible personal property only when
the dentist, audiologist, or other health care provider does not supply or
administer the drug, medicine, or other item in the course of delivering health
care services to the buyer. The gross proceeds of these retail sales of
tangible personal property are subject to the retailing B&O tax. In
addition, the dentist, audiologist, or other health care provider must collect
and remit retail sales tax, unless the sale is specifically exempt by law. For
detailed information regarding retail sales tax exemptions available for sales
of items commonly associated with health care services refer to WAC
458-20-18801. Adequate records
must be kept by the dentist, audiologist, or other health care provider to
distinguish items of tangible personal property supplied or administered to
patients as part of health care services from those sold apart from health care
services delivered to the buyer.
Purchases of tangible personal property for resale without
intervening use are not subject to the retail sales tax. A dentist,
audiologist, or other health care provider purchasing tangible personal
property for resale must furnish a reseller permit to the seller to document
the wholesale nature of the sale. For information on reseller permits, see WAC
458-20-102.
(c)
Equipment and supplies used by
dentists, audiologists, and other health care providers. Purchases of
equipment and supplies used by dentists, audiologists, and other health care
providers in performing diagnostic, dental, or other health care services are
purchases at retail and subject to retail sales tax unless specifically exempt
by law. If the seller does not collect retail sales tax, the dentist,
audiologist, or other health care provider must remit the retail sales tax
(commonly referred to as "deferred sales tax") or use tax directly to the
department unless specifically exempt by law. Deferred sales or use tax
liability should be reported on the use tax line of the buyer's excise tax
return. For detailed information regarding the use tax, see WAC
458-20-178.
Dental prostheses are exempt from retail sales and use taxes if
the dental prosthesis meets the definition of "prosthetic device." Exempt items
include, but are not limited to, full and partial dentures, crowns, inlays,
fillings, braces, retainers, collars, wire, screws, bands, splints, night
guards, gold, silver, alloys, acrylic materials, filling material, reline
material, cement, cavity liners, pins, and endo posts.
(d)
Itemization of gross income.
Audiologists who itemize invoices to their patients showing charges for tests
and evaluations separate from charges for sales of hearing aids may separately
report their income under the service and other activities B&O tax
classification and the retailing B&O tax classification, respectively.
Audiologists who do not separately charge for their services and sales of
hearing aids must report their gross income under the service and other
activities B&O tax classification.
(e)
Examples.
(i)
Example 1. Dr. A is a
physician who specializes in the treatment of allergies. Dr. A treats many
patients with injections of allergy extracts (antigens). Dr. A separately
itemizes the charges for the antigen, the administration of the injection, and
the office call in patients' billings. Dr. A is subject to service and other
activities B&O tax on the entire charge for the antigen, administration of
the injection, and office call. Even though Dr. A separately itemizes the
charges for antigens, these are not retail sales because Dr. A administers the
antigens to the patients.
(ii)
Example 2. Dr. B made mail-order purchases of a computer, books,
and magazines for use in Dr. B's dental practice. Dr. B did not pay retail
sales tax to the sellers on these purchases. Therefore, Dr. B must remit to the
department deferred retail sales or use tax on the computer, books, and
magazines.
(3)
Tax-reporting information for
dental laboratories and dental technicians. This subsection provides
tax-reporting information for dental laboratories and dental technicians.
(a)
Producing or fabricating dental
prostheses for sale. The production or fabrication of dental appliances,
devices, restorations, substitutes, or other dental laboratory products by
dental laboratories and dental technicians is a manufacturing activity.
RCW
82.04.120. Thus, dental laboratories and
dental technicians are subject to manufacturing B&O tax on the value of the
dental prostheses they manufacture. The value of products manufactured is
generally the gross proceeds of sales of such manufactured products. For
additional information about the manufacturing B&O tax, see WAC
458-20-136.
(i)
Sales of dental prostheses
manufactured by dental laboratories and dental technicians. Dental
laboratories and dental technicians that make sales within this state of dental
prostheses they have manufactured are subject to either the retailing or
wholesaling B&O tax, as the case may be. In such cases, the dental
laboratory or dental technician must report under the manufacturing B&O tax
classification as well as the wholesaling or retailing B&O tax
classification. However, a multiple activities tax credit (MATC) may be
claimed. For detailed information about the MATC, see WAC
458-20-19301. Dental laboratories
or dental technicians making wholesale sales must obtain a reseller permit from
the buyer to document the wholesale nature of the sale.
As noted in subsection (2)(c) of this rule, sales of dental
prostheses including, but not limited to, full and partial dentures, crowns,
inlays, fillings, braces, and retainers are exempt from retail sales tax if the
dental prosthesis meets the definition of a "prosthetic device."
(ii)
Dental casts, models,
and other articles of tangible personal property manufactured by dental
laboratories and dental technicians for commercial or industrial use.
Dental laboratories and dental technicians may manufacture
dental casts, models, or other articles of tangible personal property that they
use to produce or fabricate dental prostheses. In such cases, the dental
laboratory or dental technician is manufacturing a product for commercial or
industrial use and is subject to the manufacturing B&O tax on the value of
the dental cast, model, or other article of tangible personal property. For
information regarding the value of products, see
RCW
82.04.450 and WAC
458-20-112. As the consumer of
the dental cast, model, or other article of tangible personal property
manufactured for commercial or industrial use, the dental laboratory or dental
technician is also liable for use tax on the value of the dental cast, model,
or other article of tangible personal property, unless the use is specifically
exempt by law.
(b)
In-house manufacturing of dental
prostheses by dentists. As noted in this rule, the production or
fabrication of dental prostheses by dental laboratories and dental technicians
is a manufacturing activity. However, the production or fabrication of dental
prostheses by dentists in the course of providing dental care services to their
patients is not a manufacturing activity under the law and, therefore,
manufacturing B&O tax does not apply to that activity. A dentist may
personally produce or fabricate dental prostheses, or the dentist may have an
employee who is a dental technician produce or fabricate the dental prostheses.
These dental prostheses are considered a tangible representation of
professional services provided to the dentist's patients. Dentists who
manufacture impressions, dental casts, models, or other articles of tangible
personal property that they use to produce or fabricate dental prostheses
should refer to subsection (3)(a)(ii) of this rule for tax reporting
instructions applicable to this activity.
(i)
Example 3. Jane Doe, an employee of Dentist A, fabricates dental
prostheses. Dentist A provides these products to patients in the course of
rendering dental care services. Dentist A is subject to service and other
activities B&O tax on the gross income received for providing dental care
services, including any charge for the dental prostheses even if Dentist A
separately charges patients for the dental prostheses.
(ii)
Example 4. The facts are
the same as in the previous example except that Dentist A also sells to Dentist
B dental prostheses produced by Jane Doe in the course of Jane's employment
with Dentist A. For these sales of dental prostheses to Dentist B, Dentist A is
acting as a dental laboratory and, therefore, is liable for both manufacturing
B&O tax and retailing B&O tax with respect to the manufacture and sale
of dental prostheses to Dentist B. Dentist A may also claim a MATC. See
subsection (3)(a) and (a)(i) of this rule. The sales to Dentist B are exempt
from retail sales tax under
RCW
82.08.0283 if the items qualify as a
"prosthetic device" as defined in subsection (1)(c)(iv) of this rule.
(c)
Equipment and supplies
used by dental laboratories and dental technicians. Purchases of
equipment and supplies by dental laboratories and dental technicians for use in
manufacturing dental prostheses are generally purchases at retail and subject
to retail sales tax unless specifically exempt by law. If the seller does not
collect retail sales tax, the dental laboratory or dental technician must remit
the retail sales tax (commonly referred to as "deferred sales tax") or use tax
directly to the department unless specifically exempt by law. Deferred sales or
use tax should be reported on the use tax line of the buyer's excise tax
return. For detailed information regarding use tax, see WAC
458-20-178.
(i)
Components of dental prostheses
produced for sale. Purchases of supplies that become components of
dental prostheses produced for sale are purchases at wholesale and are not
subject to retail sales tax, if the buyer provides the seller with a reseller
permit to document the wholesale nature of the transaction.
(ii)
Example 5. A dental lab
purchases equipment and supplies including gold, silver, alloys, artificial
teeth, cement, and tools. The purchases of gold, silver, alloys, artificial
teeth, and cement that become components of dental prostheses are wholesale
purchases and are not subject to retail sales tax if the buyer provides the
seller with a reseller permit . The tools are subject to retail sales or use
tax unless they qualify for the manufacturing machinery and equipment sales and
use tax exemptions. Additional information about these exemptions is provided
in subsection (3)(d) of this rule.
(d)
Sales and use tax exemptions for
manufacturing machinery and equipment.
RCW
82.08.02565 and
82.12.02565 provide retail sales
and use tax exemptions for sales to or use by manufacturers of certain
machinery and equipment used directly in a manufacturing operation. These
exemptions are limited to machinery and equipment used to manufacture products
for sale as tangible personal property. Thus, dental laboratories and dental
technicians manufacturing dental prostheses for sale may be eligible for these
exemptions. The exemptions are not available if these products are produced or
fabricated by a dentist or an employee of a dentist and are provided to
patients in the course of delivering dental care services to the patients (as
is the case in Example 3). See WAC
458-20-13601 for detailed
information regarding these exemptions.
Statutory Authority:
RCW
82.32.300,
82.01.060(2),
chapters
82.04,
82.08,
82.12 and
82.32 RCW. 10-06-069, §
458-20-151, filed 2/25/10, effective 3/28/10. Statutory Authority:
RCW
82.32.300 and
82.01.060(2).
04-17-022, § 458-20-151, filed 8/9/04, effective 9/9/04; 02-21-080, §
458-20-151, filed 10/17/02, effective 11/17/02. Statutory Authority:
RCW
82.32.300. 91-15-023, § 458-20-151,
filed 7/11/91, effective 8/11/91; 83-07-032 (Order NET 83-15), §
458-20-151, filed 3/15/83; Order 74-2, § 458-20-151, filed 6/24/74; Order
NET 70-3, § 458-20-151 (Rule 151), filed 5/19/70, effective
7/1/70.