Payment of sales/use tax on consumables

In addition to understanding when to collect Washington's retail sales tax, veterinarians must also understand when they must pay retail sales tax, use tax, or deferred sales tax. The terms "sales tax," "use tax," and "deferred sales tax" are frequently used interchangeably. Although the rates are the same, the application of each tax differs according to the circumstances of sale. Veterinarians making purchases for use as a consumer without payment of Washington's retail sales tax must know when to report and pay use tax or deferred sales tax. (See the "Definitions" chapter for a definition of these terms.)

Sales tax

Veterinarians are considered the consumer of any tangible personal property used or consumed by them in the course of performing veterinary services. These purchases are retail in nature and retail sales tax should be paid to the vendor. Such purchases include, among others, purchases of most medicines, bandages, splints, and other supplies primarily for use by veterinarians in performing their veterinary services.

Use tax

Typically, a business may purchase items by telephone, via the internet, or mail order from out-of-state companies that do not have a sufficient presence in Washington to require them to collect retail sales tax, or the businessperson may purchase items in a state that does not have a retail sales tax. Such items are subject to the use tax. A credit against the use tax is allowed for any retail sales tax paid to another jurisdiction.

Thus, veterinarians are subject to use tax on all purchases of equipment, consumables, and any other articles of tangible personal property used or consumed in the course of providing veterinarian services that were purchased in such a way that retail sales tax was not paid. This includes office furniture, magazine subscriptions, and other items not directly related to providing veterinarian services, but nonetheless used by the business.

The use tax rate is the same as the retail sales tax rate that applies at the location where the items are first put to use. Use tax is based on the value of the item, which is determined by the purchase price, this includes all charges for shipping and handeling.

Veterinarians and others who provide services to live animals are required to pay use tax on any samples that they acquire or give away unless retail sales tax or use tax has been previously paid on these samples.

Sales tax and use tax exemption

Purchases by veterinarians of USDA or FDA approved animal pharmaceuticals that will be administered to animals that are raised by farmers for the purpose of producing for sale an agricultural product are exempt from retail sales tax and use tax. The veterinarian must provide the vendor with a completed exemption certificate (pdf).

Resale purchases

Purchases of tangible personal property by veterinarians primarily for resale in the regular course of business and without intervening use by the veterinarian, are wholesale purchases and are not subject to the retail sales tax. The veterinarian must provide the vendor with a reseller permit, so the vendor can document the sales tax exempt nature of the purchase.

Purchases for dual use

Veterinarians make bulk purchases of many products, such as bandages and medicines. Some of the product will be used or consumed in the course of providing veterinarian services and the balance will be sold directly to the customer. Typically, the veterinarian does not know what portion of the product will be used as a consumable and what portion will be resold. Thus, the veterinarian is often unsure whether to pay retail sales tax on the purchase or provide a reseller permit to the vendor, and how to reconcile the proper taxability.

When a veterinarian both consumes and resells a product and is not able to determine at the time of purchase whether the product will be consumed or resold, the veterinarian should determine the primary use of the product.

If the veterinarian primarily consumes the product in question, the veterinarian should not give a reseller permit to the vendor and should pay retail sales tax on the total purchase. If the veterinarian primarily resells the product, the veterinarian may issue a reseller permit for the entire purchase.

Deferred sales tax liability

When the veterinarian gives a reseller permit for all purchases and thereafter consumes some of the product purchased, the veterinarian must set up the value of the article used in his or her books and records and remit to the Department of Revenue the applicable deferred sales tax. Deferred sales tax is the tax the veterinarian would have paid on the product had it not been purchased using a reseller permit. The deferred sales tax liability should be reported under the Use Tax classification on the veterinarian's excise tax return. The sales tax reported will be the rate that applies to the location where the veterinarian took possession of the goods.

Tax paid at source deduction

When the veterinarian has not given a reseller permit, but has paid sales tax on a purchased product, and subsequently resells some of the product, the veterinarian must collect the retail sales tax from the customer. When reporting these sales on the tax return, the veterinarian can then take a deduction for the amount that the veterinarian paid for the product.

The term "primarily" means greater than fifty percent for tax purposes. However, for ease of recordkeeping, the principles discussed in this section can apply to all products that might have dual use. Thus, for example, a veterinarian may decide to pay retail sales tax on all purchases for dual use, and take a tax paid at source deduction for those that are resold. Alternatively, the veterinarian may decide to give a reseller permit to vendors for all products purchased for dual use and pay deferred sales tax on those used or consumed.