I was recently asked by a fellow tax professional whether medical services in general were exempt from sales, use or equivalent taxes in jurisdictions that have an active taxing scheme in place.  I thought I would share my research on the matter just in case the topic presents itself to others in the future.

Medical services can exist more often than not divers as services provided by a state board licensed professional in the medical industry, including dentistry, that improve the physical and/or mental well-being of a patient.  While most states exempt medical services, there are a few that choose to tax them under certain circumstances.

  • Hawaii : the state imposes a general excise tax on gross income derived from most service businesses.  (Haw Rev Stat Sec. 237-13(6); HAC No. 18-237-i; HAC No. eighteen-237-13-06.05(b).) More specifically, Hawaii imposes its excise tax on services provided by doctors and other health intendance professionals- including dentists.  (Haw Rev Stat Sec. 237-13(6).) Taxable gross income derived from these services includes amounts received from both patients and health insurance companies. Health care professionals may collect this revenue enhancement from their patients at their discretion.  (Tax Facts 98-1, Hawaii DOT, April 1998.)
  • Michigan : services, other than a few enumerated offerings, are generally exempt from sales and use tax in Michigan.  (Sec. 205.51(1)(b), M.C.L.; Sec. 205.52, Thousand.C.L.) Medical services are non listed among the specific enumerated offerings subject to sales and utilize tax.  Effective April one, 2014, there is an exception to this general rule, nonetheless, that subjects medical services to use tax when they are provided by Medicaid managed care organizations.  (Sec. 205.93f, G.C.L.)
  • New United mexican states : the land imposes a gross receipts tax on all services, including medical services, performed in the state unless a specific exemption applies.  (three.2.1.18(A) NMAC.) Exemptions are available under the following circumstances:
    • Medical services provided past administrators of the Federal Military machine's TRICARE program are exempt from tax.  (NM Stat Ann Sec. 7-9-77.1.)
    • Medical services provided on behalf of the Indian Health Service of the U.S. Section of Wellness and Human Services are exempt from tax.  (NM Stat Ann Sec. 7-ix-77.ane.)
    • Medical services, including lab work and habitation health services, paid for past the U.S. Regime on behalf of Medicare beneficiaries under Championship eighteen of the Social Security Human activity are not field of study to tax.  (NM Stat Ann Sec. 7-9-77.1.)
    • Payments received from a managed wellness intendance provider, health care insurer for commercial services, or a third-party claims administrator are exempt from tax if the charges are separately stated and related to medical services provided within the telescopic of the exercise of the professional providing the service.  (iii.2.241.12 NMAC; three.2.241.13 NMAC; iii.2.241.9 NMAC; NM Stat Ann Sec. 7-9-93.)
  • Ohio : services are generally exempt from sales and apply tax in Ohio unless they are specifically identified in the police every bit taxable.  Medical services are not identified in the law as taxable. (Sec. 5739.01(B), Ohio R.C.) Medical services are discipline to tax, withal, under the following circumstance:
    • All transactions by which wellness intendance services are paid for, reimbursed, provided, delivered, arranged for, or otherwise made bachelor past a Medicaid health insuring corporation pursuant to the corporation'south contract with the state are subject to tax. (Ohio Rev. Lawmaking Ann. § 5739.01(B)(xi).)

The remaining 41 taxing jurisdictions in the United states of america generally exempt medical services from tax.

If y'all have any thoughts or concerns on the forgoing, please experience free to contact me at 855-995-6789 or jdumler@salestaxhelp.com.

James R. Dumler, CPA

James R. Dumler, CPA

James graduated with honors with a Available'southward caste in Concern Management with a concentration in accounting, and has completed the California Board of Equalization'south training program. James currently specializes in California and multi-state sales and use tax matters including, but not limited to the hospitality, medical, high-tech, eCommerce, and auto industries. James is the founder and manager of McClellan Davis' vehicle, vessel and shipping exemption program. Electronic mail James

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