The following
example (pdf)
identifies a number of facts and then states a conclusion. This example should
be used only as a general guide. The tax status of other situations must be determined
after a review of all the facts and circumstances.
A dog owner brings her dog to a veterinarian for professional services. The dog has multiple wounds
and a broken leg. The veterinarian sets the broken bone and uses a cast and other appropriate therapeutic
medicines on the dog in the course of treatment. The veterinarian also applies some salve to
the wounds and gives the remainder of the salve to the dog's owner for application over the next few
days. The veterinarian segregates the charges for the veterinary services, including the cast materials,
and the medicines. The charge for the salve is also separately stated on the billing invoice. The
customer also purchases flea powder, dog food, and toothpaste for the dog.
The gross income for the veterinary services is subject to the Service and Other Activities B&O tax
classification. This includes the charges for the cast materials and the medicines. The charge for the
salve is considered a retail sale, which is subject to the Retailing B&O and retail sales taxes. The
charges for the flea powder, dog food, and toothpaste are also taxable in this manner. If the veterinarian
had previously paid sales or use tax on the salve, he or she is allowed to take a deduction for tax
paid at source.
Category | Amount | Classification |
| Veterinarian | $4,350 | Service & Other Activities |
| Cast materials | $400 | Service & Other Activities |
| Vet-administered medicine | $50 | Service & Other Activities |
| Salve | $40 | Retailing |
| Flea control | $15 | Retailing |
| Dog food | $10 | Retailing |
| Toothpaste | $5 | Retailing |
The taxes are reported as follows:
Revenue | Amount |
| Service & Other Activities B&O tax | $4,800 |
| Retailing B&O tax | $70 |
| Retail Sales tax | $70 |
| Litter tax | $70* |
Deductions
None
* Litter tax is due on food for pet consumption and nondrug store sundry items.