Legislative Affairs Feature - March 2010
Tex Med. 2010;106(3):51.
By Ken Ortolon
Physicians who purchased certain medical or office equipment during the past five years via the Internet or catalogs may owe back sales and use taxes, and Texas Comptroller of Public Accounts Susan Combs wants them to pay up.
The comptroller's office is offering a one-time waiver of penalties and interest on unpaid sales and use taxes to physicians who voluntarily pay back taxes by April 1. The offer applies only to physicians who do not have a Texas Sales and Use Tax permit and those whom the comptroller's office has not previously contacted.
The comptroller made the offer in letters sent to physicians and other health care professionals in February. Agency spokesperson R.J. DeSilva described them as "routine informational" letters intended to let taxpayers "know about taxes they may have missed."
The comptroller's office has no idea how many dollars in unpaid taxes physicians may owe.
Where's the Money?
The waiver from penalties and interest on unpaid sales and use taxes applies to taxable transactions between Dec. 1, 2005, and Jan. 31, 2010.
"Although most of the drugs and medical supplies or equipment that are sold or dispensed to patients in your medical practice are exempt from sales and use tax … sales tax is payable on the sale of non-exempt items," Herminia Nanez, manager of the comptroller's Business Activity Research Team, wrote in the letter. "Use tax is also payable on the purchase of non-exempt items such as certain medical equipment and supplies, computer hardware and software, office equipment and supplies, furniture and other items, if sales tax was not collected and remitted by the seller at the time of purchase. This might occur, for example, in purchases made via mail-order catalogs, telephone, the Internet, or while visiting another state or country, " she wrote.
The letter asks physicians to review their records to see if they owe sales and use taxes. Those who do must prepare a spreadsheet listing each of the taxable transactions reported for the period Dec. 1, 2005, to Jan. 31, 2010. The letter contains an example of the information required. To qualify for the waiver, you must submit the spreadsheet on a disk or CD-ROM with a copy of the letter and payment by April 1.
Mr. DeSilva says the effort targeting physicians and other health care professionals is part of the comptroller's voluntary disclosure program.
He adds that physicians who do not sell taxable items in their practice or who have not purchased equipment from out of state are not affected.
Physicians who do not receive a letter from the comptroller can take advantage of the offer by completing a spreadsheet for the sales and use tax they determine is due for the past four years. Send the spreadsheet and payment to the comptroller's office at PO Box 13003, Austin, TX 78711, or to 1700 N. Congress Ave, Room 300, Austin, TX 78701.
Also, the comptroller asks physicians who determine that they have no sales and use tax to pay for the past four years to send a written statement to that effect.
"Our goal is that the physicians do reply to our letter," said Diana Lord with the comptroller's Business Activity Research Team. "Since our mailout is geared to being informative and voluntary reporting, we will not pursue with further action if no reply is received. However, please keep in mind it is always possible that the physician will be audited by a local field audit office."
Ms. Lord said a local field office would not automatically audit physicians who do not reply, but they need to be aware that the local offices do conduct use tax audits.
If a physician does not reply to the letter and is audited, penalties and interest could apply to any unpaid tax, Mr. DeSilva says.
Officials with TMA Practice Consulting say physicians do not routinely apply for sales and use tax permits because few sell taxable items. One exception, they say, is dermatologists. Many dermatologists sell cosmetic items that are taxable.
Physicians may apply for a sales and use tax permit on the comptroller's Web site .
Call (800) 688-6829 or (512) 305-9899 if you have any questions.
Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at Ken Ortolon .
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