Effective July 1, Dental Lab Sales of Dental Prostheses to Dentists are Subject to Sales Tax

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Since 1955, the State of Michigan has exempted various prosthetic devices from sales and use tax. In 1985, the Treasury issued Letter Ruling 1985-20 addressing sales of a specific type of dental prosthetic (dental ceramics), essentially including these dental prosthetics with other exempt devices. When Letter Ruling 1985-20 was issued, the sales and use tax acts exempted “any … apparatus, device, or equipment used to replace or substitute for a part of the human body …”

With the passage 100c of 2004 Michigan Public Acts 172 and 173, the sales and use tax acts directed that dental prosthetics were excluded from the statutory exemption under the definition of “prosthetic device.” These acts defined a “prosthetic device” as “a replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, dispensed under a prescription, including repair or replacement parts for that device, worn on or in the body …” Since Letter Ruling 1985-20 was still in effect, the 2004 Michigan Public Acts did not change how prosthetic devices were taxed.

In June 2017, the Michigan Department of Treasury announced that it had revoked Letter Ruling 1985-20 effective July 1, 2017. For transactions before this date, dental labs do not need to collect sales tax on custom dental products.However, the Treasury now considers the dentist the end user, as they use the material in the services they provide to their patients.After July 1, dental lab sales of dental prostheses to dentists are subject to sales tax based on the sales price of the prosthetic. 

Because these transactions will now be treated as a sale at retail, dental labs may claim the industrial processing exemption for property used in manufacturing its products, if the property used to make such dental products qualifies for the industrial processing exemption.

Please contact your Yeo & Yeo professional if you have questions.

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