Professional Courtesy: Crouching Taxes, Hidden Sellers by Dr. Thomas Giacobbi

Dentaltown Magazine

by Thomas Giacobbi, DDS, FAGD, editorial director, Dentaltown magazine


It’s not often that you can discuss both of the Dakotas in the same column, but I found a way.

The case of Quill Corp. v. North Dakota went all the way to the U.S. Supreme Court in 1992. The outcome affirmed that a remote company had to collect sales tax only from customers who lived in states where it had a physical presence. This was fuel for the e-commerce boom; avoiding sales taxes was a great way to save money.

In June 2018, the Supreme Court ruled on South Dakota v. Wayfair Inc., which led to an avalanche of sales tax collection in nearly every state. The decision essentially allowed states to collect taxes on remote sales regardless of the seller having a physical presence. As with many state-based issues, the triggering level of activity varies by state; it can be a certain number of transactions or a total volume of business.

Why does this matter to you? Many dentists purchase supplies from a myriad of out-of-state and online vendors.

Rest assured, most vendors have been on top of this issue, and a simple check of a recent invoice will confirm whether sales tax was collected on the transaction. This is a good time to be sure your vendor is collecting the appropriate taxes. If not, you’re often required to remit the taxes directly to your state. You may already be familiar with the term “use tax,” the tax you’re required to pay if your purchase would normally be taxed but the seller didn’t collect tax. This can apply to online purchases as well as items purchased from Craigslist or from vendors that don’t have a physical presence in your state. Discuss this issue with your local CPA, who knows your business and should be able to validate your compliance.

Amazon was proactive when it came to collecting sales tax; it started collecting for all sales-tax states on April 1, 2017. But things get a bit murky for third-party sellers in the marketplace: As of May, Amazon was collecting tax on behalf of marketplace sellers in only 12 states. This number will likely grow. Remember, most professional dental products listed on Amazon Business are sold through the marketplace.

What does this mean for you? You should pay attention to the sales tax issue I mentioned previously, of course, and you also need to learn more about the seller. Just because you purchase something on Amazon doesn’t mean you’ve purchased it from Amazon. This is important because you might come across products that you thought were available only from certain distributors. If the product is from a gray-market seller, you open yourself to liability if it fails to perform as it should.

If luxury clothing and accessories can be counterfeit, why not dental products? This is a reality, and with today’s printing technology you’d be hard-pressed to recognize the difference in packaging between legitimate and fake. If you can’t identify the reseller on the manufacturers list of approved resellers, then there is a good chance you are buying gray-market goods.

Manufacturers are as excited about having products sold through unauthorized companies as you are about your patients performing do-it-yourself dentistry.

The practice of purchasing supplies at a deep discount is very attractive: After all, the box of bonding agent doesn’t have feelings, right? However, that product often has local reps who rely on legitimate sales for their income. And if a product doesn’t perform well because of shelf life or poor storage conditions before arriving at your office, your patient will suffer the frustrations.

In summary: Pay your taxes, and if you choose to buy dental supplies on Amazon, know whom you’re buying from. Share your experiences in the comments field of this article online! Or email tom@dentaltown.com.

 

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