Illinois Sales Tax for Veterinarians

As an Illinois veterinarian, you will be interested in the following as it applies to sales tax liability you may have. One of our veterinarian clients asked about whether they must collect sales tax from their customers and remit the funds to the state for items sold to their clients or used in the treatment of their animal patients.

Illinois treats veterinarians as being primarily engaged in rendering service to their clients. Thus they fall under the rules as it applies to “servicemen.”  In general, you do not have to charge and collect Illinois sales tax when you are providing product as a by-product of the service provided. Examples of such non-taxable products that may be used during the visit include vaccines, flea and tick products, shampoos, bandages, ointments, splints and sutures. Examples of products that may be sold free of retail sales tax include medicines such as heartgard, drugs and other products having a medicinal purpose as part of the continuing care for the animal.  Good records should be maintained detailing the items prescribed to the animal.

It is important to understand that, even though the end sale of the product may be free of the retailer’s occupation tax charged to your client (fancy word – otherwise known as sales tax), you must still pay any sales or use tax to the vendor from which you purchased these items. The reason is that Illinois provides veterinarians several ways for handling sales tax on these sales. One is by separately billing your client for these items and collecting sales tax. The other method applies if the cost of the items transferred as a result of the service is less than 35% of your total gross receipts from service. If this ratio applies, you are deemed a “de minimis” serviceman and you can pay the sales or use tax when you purchase the product from your vendor.

The area that is a risk to most veterinarians is when they buy their products from out of state, and that vendor does not charge you Illinois sales tax. If this is the case, Illinois expects you to self-assess the sales tax. When this happens it is considered “use tax” and the funds must be paid to Illinois on  regular basis.

The other area that could present a problem is not charging full sales tax on items sold to the general public that are not directly related to the service performed at the time of the visit. In these cases, regular sales tax (Retailers’ Occupation Tax) must be collected from your client and submitted to the state.  Examples of such products include non-prescription medicines and foods, grooming supplies, toys and training equipment.

If you have any questions regarding sales tax as it applies to Illinois veterinarians, please contact me.

Steve Trojan, CPA is owner of SMT & Associates, Inc. (www.smt-associates.com), a Crystal Lake IL based tax and accounting firm, and Complete Payroll Inc, (www.completepayrollinc.com) a payroll processing firm. He specializes in tax and accounting issues affecting veterinarians and other small business owners.

SMT & Associates, Inc. serves towns and cities throughout northern Illinois including Algonquin, Barrington, Cary, Crystal Lake, Huntley, Lake in the Hills, McHenry, and Woodstock. We serve McHenry County, Lake County, Kane County.