Sales & Use Tax
The Board of Equalization has undergone restructuring, as such, sales and use tax is now handled by the California Department of Tax and Fee Administration (CDTFA). COA is providing the following general information to make our members aware of their possible tax responsibilities. Note: This is not intended to be legal advice. You should always consult a tax professional to determine your specific tax liability.
A doctor of optometry or dispensing optician must pay sales tax for dispensing, i.e. selling to a patient ophthalmic materials pursuant to a prescription based on the amount of that purchase, since the OD or dispensing optician is considered the “consumer” of these materials. Further, sales tax is not to be collected from the patient if those materials were provided as part of the optometrist’s prescription. Examples of those ophthalmic materials for which an OD will need to pay sales tax to its supplier but not collect sales tax from the patient are: eyeglasses, frames, and lenses used in the performance of the OD’s professional services in the diagnosis, treatment or correction of a condition of the human eye.
On the other hand, if the doctor of optometry sells plano lenses, noncorrective sunglasses, vitamins, contact lens solutions, etc., that are not prescribed as part of the OD’s professional services in the diagnosis, treatment or correction of a condition of the human eye, then sales tax based on the purchase price of the item need to be paid to CDTFA by the doctor or dispensing optician; generally, the OD or optician would collect the sales tax from the purchaser at the time of sale.
A doctor of optometry will need a seller’s permit, issued by CDTFA, when reselling a taxable item such as the aforementioned. A licensed optometrist does not need a seller’s permit if he or she is only selling ophthalmic materials furnished in the performance of his or her professional service (See: Rev & Tax Code Section 6018 and 18 CCR 1592). Anything else you sell in a doctor of optometry’s office, including sunglasses without a prescription, contact lens solution, or dietary supplements, requires a seller’s permit. CDTFA asks that you display a copy of the permit in a public location.
If you don’t have a seller’s permit and receive at least $100,000 in gross receipts from business operations, you may need to register with CDTFA to report your use tax liability, as you are classified as a “Qualified Purchaser.” Find out if you are required to register by reading the criteria listed on CDTFA’s website. If you meet the criteria on this form, complete and mail it to your local CDTFA field office to get registered. Once registered, your account will be set up so that you can file your returns electronically (Rev & Tax Code Section 6225).
It may be in your best interest to keep all instrument and equipment receipts. CDTFA might ask to see the invoice on any equipment (no matter how old) to determine if the price of the equipment included the proper sales tax.
Further, you may be subject to a CDTFA audit, and as such, you should keep business records for the period being audited until the audit is complete. In general, it is possible to be audited in three-year intervals, at the time you close out your permit, or in connection with an audit on another permit you hold. Audits may also be initiated as a result of information received from outside sources.
It is the requirement of CDTFA that you keep sales and use tax records for four years unless the CDTFA gives written authorization for earlier destruction. This applies to all records that pertain to transactions involving sales or use tax liability.
For frequently asked questions for sales and use tax, please visit: https://www.cdtfa.ca.gov/taxes-and-fees/faqseller.htm