Taxes are another area that can be very daunting when first starting a chiropractic office or medical practice. There are a variety of different taxes that apply and your local SCORE mentor can help you with the taxes that apply to your area. The following taxes are the ones that I had to be aware of for Florida.
Sales (& Use) Tax
If we sell anything that a patient didn’t need for “medical reasons”, then we collect sales tax on it. As a rule, we don’t just sell products to the public without a medical reason.
Use tax is another hair puller though. If we buy 10 ice packs online, we sell 8 to patients for medical reasons (document in their file), but keep 2 to use in the office, what is our tax liability? Since we bought them online we werent taxed. The 8 patients arent taxed on their ice packs because they needed them for medical reasons. However, the two ice packs we “used” in practice are liable for Use tax that we must report and pay ourselves.
One more example, and the reason you need to register for to collect sales tax in the first place. Imagine we bought those 10 ice packs from a local store and that store charged our business sales tax. We could simply mark up the price, but since we are registered to collect sales tax, we have a reseller certificate. This allows us to forgo paying sales tax on items that we are going to resell, such as the ice packs that go to patients. Now we can give patients a fair discount for medical reasons.
Quick Note: You will also be liable to pay sales tax on your commercial and equipment leases although it should be collected by your landlord or lease owner. This can be a significant expense you may forget to plan for.
Tangible Personal Property Tax
Some states charge this on items like cars (I’m glad Florida doesn’t). Basically, once a year I report the value of every piece of everything in our office except the walls. This includes leasehold improvements, computers, phones, tables, medical equipment, even pens! After I calculate the approximate value of all of those items you pay a certain percentage of the value as tax. Fortunately there is an exemption in Florida so our business was liable for very little and most startup’s should also be liable for only a small amount.
You must sign up in Florida to pay unemployment tax. This is one of the quarterly reporting forms and equals about 2.7% of your employees salary (The rate adjusts up or down with your risk). Beware missing forms. I thought we had submitted this one and two months after the due date we recieve a notice that we had not submitted our paperwork. Our tax liability was $0 but we were still fined for the two months they took to respond. QuickBooks Pro will help you plan for this liability as you pay your employees and yourself and will also help you file the paperwork when it comes time.
Social Security, Medicare, Payroll Taxes
Payroll taxes are complex and change frequently. You can have your CPA do it, but if you pay a small monthly fee you can add the service to QuickBooks Pro. The time savings in calculations and paperwork that is automatically generated and submitted online is worth every penny.
Business Tax Reciept (Occupational License)
A fee the local county collects depending on your business type and trade. Generally not that expensive (ours are about $15 per doctor, once per year)
Other City Taxes & Permit
If you open up and plan to practice within the city limits you may be subjected to additonal licensing, inspections, and taxes. Contact your SCORE Mentor or local tax office for more details.
Taxes are definitely difficult to wrap your head around. Your CPA and SCORE mentor can walk you through the thicket. Once you’ve run around the circles a few times it becomes easy.
Do you feel that your taxes are fair for small business?