Canada’s tax laws can be confusing, leading Canadian dentists to question how GST and HST apply within their practices. In order to calculate taxes properly, it is necessary to first determine whether the province charges GST, HST, or PST, and at what rate. Business owners also need to be aware that the tax rules for medical practioners, including dentists, can differ based on the type of treatment provided. For example, different tax treatments result, depending on whether goods or services are considered tax-exempt, zero-rated, or fully taxable. Dentists and dental clinics may encounter some or all of these challenges. However, you do not have to try to figure everything out on your own. A knowledgeable Canadian tax lawyer can review your situation and explain your responsibilities under existing tax laws. If you have questions about HST dental, consider contacting Jeremy Scott Law by calling (902) 403-7201.
What Is HST?
The harmonized sales tax (HST) is a consumption tax local consumers and businesses pay. Where applicable, HST combines the federal goods and services tax (GST) with a provincial component of the tax. In provinces that do not use HST, a separate provincial sales tax may be applicable. Five Canadian provinces use HST: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island. The rest of Canada’s Provinces and Territories have GST at 5%, plus any separately charged provincial sales tax that may apply. Businesses submit the GST/HST collected directly to the Canada Revenue Agency (CRA), which then subtracts the portion payable to each province from the total tax remitted and forwards that amount on to the appropriate province. The current HST rate is 13% for Ontario and 15% for the other provinces.
How Is HST Collected?
Consumers pay the HST at the point of sale. Businesses collect the tax and remit it to the CRA. Before the HST existed, Canadian sales taxes consisted of the provincial sales tax and the GST assessed and collected separately, which led to confusion and inconsistency because each province implemented its own rate. The HST provides a consistent framework for taxation in Canada. However, because not all provinces adopted the HST, businesses that operate in different provinces charge different tax rates.
Foreign purchasers do not have to pay HST if the goods or services will only be used outside the country. Tourists visiting Canada may have to pay the HST, but they might be eligible for an HST rebate.
Which Businesses Are Required To Register for GST/HST?
Canadian businesses that earn more than $30,000 in a year from taxable supplies, including zero-rated supplies, are required to register for GST/HST. The business operator registers for a GST/HST account through the CRA.
Businesses that make less than $30,000 do not have to register but can do so if they wish. They may choose to do so because they can claim input tax credits on the goods and services they purchase to operate their business.
Do Dentists Charge HST ?
Most dentists and other medical providers in Canada do not charge HST because many of these services are exempt from the relevant taxes. A majority of dental services performed by licensed doctors are classified as “tax exempt supplies.” This classification saves the patient money because they do not have to pay the extra tax.
However, not charging HST can be a drawback for dentists because they may pay GST or HST on other business expenses, such as rent, utilities, and office administration. While HST cannot be charged for services that are exempt from HST, it is considered to be charged on services that are zero-rated, which can allow dentists to claim their input tax credits.
Types of Tax Categories for Dental Products and Services in Canada
Businesses involved in dental care and hoping to claim input tax credits may have questions about which of their services are taxable. The different tax treatment for different dental goods and services can be complicated and necessitates careful bookkeeping to maximize tax savings. An experienced tax lawyer with Jeremy Scott Law can provide tax advice and guidance for HST dental purposes.
While a brief overview is no substitute for a dedicated consultation, in general the relevant tax categories that might apply to a business offering dental services are tax exempt, zero-rated, and fully taxable. Whether HST can be charged depends on how the dental product or service is categorized, as follows:
Tax Exempt Dental Services
Most dental services are classified as HST exempt. These services do not involve collecting or remitting HST. Dentists do not have to register for an HST account if they only provide tax-exempt services. They also do not qualify for HST refunds on their expenses.
Examples of tax-exempt dental services include:
- Diagnostic testing
- Basic dental treatment
- Orthodontic services
- Other dental services for medical or reconstructive purposes
Zero-Rated Dental Services
Some dental services are classified as zero-rated. For these services, dentists and dental clinics do not charge HST to their patients. However, they can recover the HST they paid on expenses associated with these services. Although the input tax credits are claimed after remission, this system does allow dental care operations to retroactively reduce the proportion of their revenue lost to taxes.
Examples of zero-rated dental services include:
- Orthodontic appliance rental or sales
- Laboratory work for bridges, dentures, crowns, or dental implants
- Other laboratory services
Dentists can claim input tax credits on expenses that are directly or indirectly related to the sale of these zero-rated goods or services. Dentists can maximize their tax savings by keeping detailed records of these services and billing procedures. They can claim a percentage of the HST they pay on these expenses, but will need to show lab billings proportionate to their total clinic billings.
Fully Taxable Dental Services
Zero-rated goods and services are considered “taxable” but at a rate of 0%. However, there are also fully taxable goods and services, which can reach up to the 13% or 15% HST rate for the given province. Dental services that are fully taxable are those procedures that are elective and not for medical or reconstructive purposes.
Examples of fully taxable dental goods and services include:
- Cosmetic dentistry
- Teeth whitening
- Electric toothbrush sales
- Sales of products that are not related to dental medical treatment
With these types of goods and services, dentists register for a CRA account when their gross revenues for these services exceed $30,000 annually. Dentists and dental clinics can claim input tax credits on the direct supplies and related expenses incurred to provide the taxable services.
Coding of Dental Services
In recent years, the Canadian Dental Association (CDA) has discussed adopting the ADA’s Systematized Nomenclature of Dentistry (SNODENT). Currently, however, the CDA maintains a list of dental codes using a five-digit system similar to SNODENT; updates to this list are published annually.
Each Provincial dental regulatory board creates its own list of dental codes, but they are generally consistent enough for dentists, insurance companies and other stakeholders to be able to talk in a consistent language. It is important that Dental Practices properly code procedures in their billing systems to ensure that GST/HST is properly applied on customer billings.
Contact Jeremy Scott Law for Help with HST Dental Questions
If you have any questions concerning HST dental or the tax treatment for the various dental goods or services you are providing, consider contacting Jeremy Scott Law by calling (902) 403-7201. An experienced tax lawyer can review your particular situation, recommend systems to put in place to aid with clearly delineating different goods and services, and prepare your tax documents. We offer a confidential consultation to discuss your unique situation.