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In a December 2003 survey, 41 states (plus Puerto Rico) responded to our request for information on taxes charged for veterinary sales and services. Some states responded with yes/no answers while others sent comprehensive tax law packets. The regulations and exemptions on sales tax, also called excise and retail tax, vary greatly from state to state and, in some cases, even within a state. Because of the complex rules regarding these taxes, this report provides only a general overview of sales and service taxes as they affect veterinary practices.
Most states did not send separate information on service animals or food animals vs. companion animals; therefore, this report deals mainly with taxes levied on products and services for companion animals.
Note that this information has been updated as taxes were enacted since the survey, or more information became available.
Eight states reported that there were no taxes of any kind charged on animal products or services.
Use tax
Nearly all states reported one form or another of a use tax charged to veterinarians. Common taxable items would be drugs, medications, syringes, and miscellaneous medical supplies (consumables) used by veterinarians in rendering professional services. The supplier collects taxes on these items at the time of purchase. Rules vary among the states as to whether any of the taxes can be passed along to consumers.
Prescription drugs and vaccines
In 23 states, prescription drugs, vaccines, and medicated products are tax-exempt to both the veterinarian and the client when administered in a clinic or by a veterinarian while providing a medical service. Several states had rules similar to those of Kentucky, which allows drugs and health care items to be sold tax-exempt if dispensed by a veterinarian during a consultation and noted on the client record. Refills likewise charted would also be tax-exempt. A few states, however, did require clients to pay the tax if they took the prescriptions out of the clinic.
Nineteen states tax prescription drugs and medications the same as any other retail sale. In some states, the consumer ultimately pays the tax. Other states consider the veterinarian to be the consumer who pays the taxes on prescriptions and medications. In Wisconsin, for instance, the veterinarian must pay sales tax to the supplier for not only prescription drugs, but also for all over-the-counter drugs or products labeled "medicated". They are not allowed to pass the tax along to clients even though the client would pay sales tax on those same "medicated" ittems if purchased at a retail or pet supply store.
Of the states providing specific information regarding taxes on service animals or food animal prescriptions and products, most excluded these classes from any taxes. Only three states indicated that there were no tax exemptions for these animals.
Non-prescription and OTC drugs or products
Thirty-three stated reported that non-prescription products purchased through a veterinary clinic are considered retail purchases and sales tax must be charged and remitted to the state.
Taxes on veterinary services
Currently only three states — Hawaii, New Mexico and South Dakota, collect tax on veterinary medical services, including routine exams and vaccinations. Eight states collect taxes on ancillary services such as grooming or boarding. In Iowa, grooming services are taxed, while boarding is not.
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