Iowa's Use Tax

As the state investigates way to raise money during this economical crisis Dentists and dental laboratories are being targeted for tax audits. It has been well known that the lab should not be charging tax on anything sold that will be affixed in the patient's mouth. But anything that is bought from a vendor that does not directly go into the patient’s mouth but is used in the fabrication of that appliance should be paying sales tax on that item especially items brought in from another state. Such as brushes or burs for polishing or shaping, investment, or gypsum. The laboratory should have proof of paid sales tax.

Several have been audited already, the verbiage from Iowa’s State Revenue is listed below:

Iowa Use Tax

How does the sales or use tax apply to dental laboratories?

Dental laboratories, even those maintained by a dentist at his or her place of business, may purchase materials used in fabrication exempt from tax as property sold for use in processing. The exemption only applies to those materials which actually become part of the finished item. Materials that do not become a part of the finished product are subject to sales or use tax.

Dental laboratories that sell equipment, instruments, furniture, fixtures, or dental supplies must collect and remit sales tax on those sales.

What kind of records should be kept?

Records such as purchase and sales invoices, bills of lading, books of all receipts and sales, cash register receipts, exemption certificates, and other pertinent papers and documents are required to be kept for a minimum of three years and be available for inspection during business hours.