Tax Court Win Means Dentists Can Qualify for HST Refunds

A latest tax court docket victory for the Davis Dentistry Skilled Company case has paved the best way for dentists and orthodontists to qualify for HST refunds. This doesn’t imply everybody will probably be getting cheques from CRA, however these workplaces which have a major orthodontic part and/or an in-house lab/CEREC/E4D could possibly get some a reimbursement.

There’s all the time been numerous confusion with HST and dentistry. Frequent questions dentists ask are ought to I register for an HST account, do I cost my sufferers, and do I get again the HST I paid? The reply is dependent upon the dental companies you’re offering.

Dental companies usually fall into one in every of these HST classes:

1. HST Exempt
2. Taxable

• a. Absolutely taxable (13%)
• b. Zero rated (0%)

HST EXEMPT:
Generally, the overwhelming majority of dental companies are thought of HST exempt. This implies no must register for HST account, no must cost HST to sufferers and no HST refunds may be claimed on bills.

Instance of exempt companies embody diagnostic and radiology, cleanings, fillings, periodontics and endodontics, extractions and different companies that are for medical or reconstructive functions.

TAXABLE:
Dental workplaces that provide a major quantity (over $30,000 per yr) of sure sorts of dental companies would fall into the taxable class. Throughout the “taxable” class, HST might apply at a charge of 13% or a charge of 0% (“zero-rated”).

FULLY TAXABLE:
Examples of taxable companies embody “beauty dentistry” that are elective and never for medical and/or reconstructive functions, tooth whitening and electrical toothbrush gross sales. The place gross revenues from these kinds of companies exceed $30,000 in a yr, you would want cost 13% HST to your sufferers and it’s also possible to declare a refund on HST paid on bills incurred to supply these taxable companies.

ZERO-RATED:
On this class, you don’t cost HST to sufferers, however you’ll be able to get better the HST paid on bills associated to these zero-rated companies. Examples of zero-rated companies embody orthodontic home equipment and lab work for synthetic tooth crown/bridges/dentures/implants.

Zero-rated companies have all the time been essentially the most contentious with CRA. The first purpose being, companies underneath this class lead to no HST being charged and picked up, however HST refunds being
offered (i.e., CRA will get $0 however has to refund you cash). The rivalry dates again to 1998 when an administrative settlement amongst CRA, dentists and orthodontists was created setting out guidelines and tips for HST and dental workplaces. This was unchanged till 2004 when CRA offered an interpretation replace making it extra cumbersome to assert again HST on zero-rated companies. Lastly, in 2017, CRA went to court docket with Dr. Brian Hurd Dentistry Skilled Company and gained. The choice at the moment was that dentists and orthodontists wouldn’t qualify for HST refunds. The reasoning was you can not separate the orthodontic equipment which was zero-rated from the orthodontic service which was HST exempt and subsequently they each ought to be thought of one HST exempt service and no refund may be claimed on HST exempt companies.

The 2021 tax court docket case of Davis Dentistry Skilled Company produced a drastically totally different determination. On this determination, the choose states the tax legal guidelines particularly lists orthodontic home equipment as zero-rated and orthodontic companies as HST exempt. In consequence, there isn’t any want to find out whether or not they need to be separated or a single provide of companies as was the case in 2017 determination involving Dr. Brian Hurd Dentistry Skilled Company. As a substitute, it was the federal government’s intent and written in legislation that orthodontic home equipment are zero rated and subsequently eligible for the HST refund.

Transferring ahead, dentists and orthodontists ought to proceed to use for HST refunds the place they supply ortho and/or in-house lab work. In case you are contemplating shopping for a CEREC/E4D, register for an HST account previous to the acquisition. There’s no assure that CRA will comply with pay the HST refund, however this case actually can be utilized to help your declare.

This text was ready by David Chong Yen*, CPA, CA, CFP, Louise Wong*, CPA, CA, TEP, Basil Nicastri*, CPA, CA and Eugene Chu, CPA, CA of DCY Skilled Company Chartered Skilled Accountants who’re tax specialists* and have been advising dentists for many years. Extra data may be obtained by telephone (416) 510-8888, fax (416) 510-2699, or e-mail [email protected] / [email protected] / [email protected] / [email protected] . Go to our web site at www.dcy.ca. This text is meant to current tax saving and planning concepts and isn’t meant to exchange skilled recommendation