Dental Care Providers

The gross revenue you receive for providing patient services is taxable. This includes total amounts received in money or other compensation for providing dental, medical, surgical, diagnostic, therapeutic, preventative, restorative, or cosmetic services.

Gross revenue received for any of the following is also subject to tax:

• Prosthetic devices, medical supplies, and drugs or gases included with, or used to provide, patient services
• MinnesotaCare Provider Tax charges collected
• Payments from sources that retain a fee
• Discounted services provided to individuals who provide goods or services in return

Gross revenue does not include any:

• Refunds paid to patients or insurers
• Retail sales of products subject to Sales Tax, such as:
  • Athletic sport mouth guards
  • Medical record copies and retrieval fees
  • Non-prescription mouthwash and toothpaste
  • Tooth bleaching agents and trays (including whitening strips) for the patient to use at home
  • Toothbrushes

Amounts received for prosthetic devices, medical supplies, and drugs or gases that are included with, or used to provide, patient services are taxable.

Those items may include, but are not limited to:

Prosthetic Devices

• Acrylic, including tints
• Artificial teeth
• Clasp and bar wire
• Crowns and bridges
• Denture reline materials
• Implants
• Dentures, complete and partial
• Occlusal mouth guards
• Porcelain

Medical Supplies

• Adhesives
• Antiseptics
• Cements
• Cotton applicators
• Dental oral hygiene products (such as floss, mouthwash, and prophy paste)
• Gauze and bandages
• Needles and syringes

Drugs and Gases

• Anesthetics
• Antibiotics
• Fluoride
• Nitrous Oxide
• Oxygen
• Pain medication
• Sedation drugs

Examples

Here are examples of how Provider Tax may apply:

You crown a patient’s tooth. You charge the patient for services performed to crown the tooth and for the cost of the crown included with the services. The total amount received, including the cost of the crown, is taxable.

You administer an anesthetic to a patient while providing dental services. You charge the patient for the services, including the cost of the anesthetic and other medical supplies used to provide the service. The total amount received for the service, including the cost of the anesthetic and the supplies, is taxable.

You may pass the cost of the Provider Tax to patients or third-party payers, such as insurance companies.

Any Provider Tax charges included in payments received from patients or third-party payers are taxable.

For example, you charge $1,000 for dental services and add the current Provider Tax rate of 1.8% (or $18 in this case) to the patient’s bill. If collected, the full $1,018 is subject to tax.

Any amounts received from sources that keep a fee before paying you are taxable. The total amount is subject to tax, before any fees or commissions are withheld.

Common entities that may retain a fee before remitting payment include:

• Billing services
• Collection agencies
• Credit card processing vendors
• Patient financing companies

Any fees retained by these entities must be included in gross revenue.

For example, a collection agency collects $100 from a patient for dental services provided. The agency keeps $30 as a commission and sends you the remaining $70. The full $100 is taxable.

Providing free or discounted services to individuals who provide goods or services in return are taxable.

Common examples include providing services to:

• Employees and their families as part of the employee’s compensation package
• Other professionals through professional discount agreements

Determining the taxable amount in these cases depends on how you are reimbursed for the service. For more information, go to Free and Discounted Patient Services.

Note: If you provide discounted services to individuals who do not provide any goods or services in return, the taxable amount is the actual amount received. If the service is provided free of charge, there is no tax due on the service.

Certain payments from government sources are exempt from Provider Tax. Common examples include payments from:

• Minnesota Department of Veterans Affairs
• Federal, state, and local government agencies for services provided to prison inmates
• U.S. Indian Health Service

Note: Payments from the following sources are not exempt:

• U.S. Department of Veterans Affairs
• Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA)
• Medical Assistance (MA)
• MinnesotaCare Insurance
• Project Hero

Payments from Federal Employees Health Benefit Act (FEHBA )and TRICARE are exempt from Provider Tax. Go to the FEHBA and TRICARE websites for more information on these programs. 

These specific items are not exempt:

• Enrollee deductibles, coinsurance, and copayments are not exempt.
• Payments you receive through Federal Employees Dental and Vision Insurance Program (FEDVIP). Some insurers that administer FEHBA health care plans also administer FEDVIP plans.

You may deduct the cost of legend drug and gas purchases from Provider Tax. To qualify as exempt, the legend drug or gas purchases must be all of the following:

• Labeled with either “Caution: Federal law prohibits dispensing without prescription” or “Rx only”
• Classified by the U.S. Food and Drug Administration as a drug, and not a device
• Purchased from a drug wholesaler that is subject to the MinnesotaCare Wholesale Drug Distributor Tax on the sale

Note: To determine if a wholesaler is subject to tax, check your invoice for a MinnesotaCare tax charge or contact the wholesaler for verification. 

Charges to Include in Exemption

Certain charges included with the purchase price of a legend drug or gas can be used to calculate the Legend Drug Exemption. Examples of common charges include:

• Shipping, delivery, and hazardous material charges
• MinnesotaCare tax charges
• Tank rental charges

For example, you purchase medical grade oxygen for use when providing dental services. The purchase invoice from the wholesaler lists the oxygen price of $75, a hazardous material fee of $15, and a delivery charge of $10. You later receive a separate invoice for a tank rental fee of $50.

Both invoices list a charge for MinnesotaCare tax. You can use the full $150 and the MinnesotaCare tax charges listed on both invoices to calculate the exemption.

Calculate the Exemption

There are two ways to calculate the Legend Drug Exemption. If you cannot use Method 1, you must use Method 2.

• Method 1: You may claim the actual cost of the drugs reduced by any reimbursements you receive for the drugs from exempt sources such as Medicare. To use this method, you must be able to determine the portion of exempt revenue attributable to legend drug reimbursements and have records verifying the actual drug costs and exempt reimbursement amounts.
• Method 2: If you cannot determine the actual drug costs and exempt reimbursement amounts, you must calculate the Legend Drug Exemption using our Legend Drug Exemption Calculator.