Sales and Use Directive SD-98-5
Tax: Sales & Use Tax
Statute: G.S. 90-151.1, G.S. 105-164.4, G.S. 105-164.13(13c), G.S. 105-164.22, .23, and .24, and G.S. 105-164.28
Issued By: Sales and Use Tax Division
Date:October 29, 1998
Revised: December 6, 2013
This Directive clarifies the application of sales and use tax to sales and purchases by chiropractors of nutritional supplements and other items and the proper use by chiropractors of the Certificate of Resale, Form E-590. If you have questions about this Directive, you may call the Office Services Division, Taxpayer Assistance Section of the North Carolina Department of Revenue, at (919) 733-3661. You may also write to the Division at P.O. Box 25000, Raleigh, N.C. 27602.
Effective January 1, 2014, G.S. 105-164.13(13c) is repealed. Sales of nutritional supplements sold by a chiropractic physician at a chiropractic office to a patient as part of a patient’s plan of treatment are subject to the 4.75% general State and applicable local and transit rates of sales and use tax. The 1997 General Assembly enacted Senate Bill 374 as Chapter 369 of the Session Laws. Entitled "An Act To Exempt From Sales and Use Tax Nutritional Supplements Sold by Chiropractors," the act made the following changes in the General Statutes effective October 1, 1997:
- G.S. 90-151.1 was enacted as follows: "A chiropractic physician may sell nutritional supplements at a chiropractic office to a patient as part of the patient's plan of treatment but may not otherwise sell nutritional supplements at a chiropractic office. A chiropractic physician who sells nutritional supplements to a patient must keep a record of the sale that complies with G.S. 105-164.24, except that the record may not disclose the name of the patient."
- G.S. 105-164.13(13c) was enacted to provide an exemption from sales and use tax for "Nutritional supplements sold by a chiropractic physician at a chiropractic office to a patient as part of the patient's plan of treatment, as authorized by G.S. 90-151.1."
A chiropractor may sell nutritional supplements at the chiropractor's office as part of a patient's plan of treatment and may use nutritional supplements in treating patients at the office. A chiropractor who sells nutritional supplements is a retailer and must obtain a Merchants Certificate of Registration from the Department for a fee of $15.00. The Certificate of Registration bears the retailer's sales and use tax account ID number.
A chiropractor who purchases nutritional supplements that will be resold should give a Certificate of Resale, Form E-590, to the supplier. The Certificate of Resale is the authorization for the supplier to not charge the chiropractor any tax on the sale. The Certificate of Resale must show the chiropractor's sales and use tax account ID number. When a chiropractor issues a Certificate of Resale for a purchase of nutritional supplements, the chiropractor assumes liability for any sales tax that is due on the chiropractor's subsequent sale of the supplements. If the chiropractor's sale of the supplements meets the conditions provided in G.S. 105-164.13(13c), the sale is exempt.
A chiropractor who uses nutritional supplements in treating patients instead of selling the supplements is liable for sales or use tax on the supplements. When the tax is payable depends on whether the chiropractor both sells and uses nutritional supplements. A chiropractor who both sells and uses nutritional supplements should purchase all supplements with a Certificate of Resale and then submit use tax to the Department on the supplements used instead of sold. A chiropractor who uses nutritional supplements but does not sell them should pay sales tax to the supplier on supplements purchased from a North Carolina retailer or from an out-of-State retailer registered to collect North Carolina sales tax and should pay use tax directly to the Department on supplements purchased from an out-of-State retailer who is not registered to collect North Carolina sales tax.
The sale of an item by a chiropractor is taxable unless the law exempts the sale from tax. Sales of other items such as pillows, videos, and books are subject to the tax. Orthopedic appliances designed to be worn by the purchaser or user, such as cervical neck collars and spinal braces, are statutorily exempt from tax. Section .3301 of the Sales and Use Tax Administrative Rules and Section 13 of the Sales and Use Tax Technical Bulletins provide additional information on orthopedic appliances.
A chiropractor is responsible for remitting use tax to the Department on taxable tangible personal property purchased for use in North Carolina from an out-of-State retailer who is not registered to collect North Carolina sales tax. Examples of taxable property are computers, office and janitorial supplies, and other office equipment and fixtures.
A chiropractor must keep records of receipts from both taxable and nontaxable sales, purchases, and other information required to determine the amount of tax due. These records must be kept in a manner that can easily and conveniently be reviewed by the Secretary of Revenue or the Secretary's agent. The records must be kept for three years and must be available for review during all reasonable hours of the day. If documentation is not available to support an exempt sale, the chiropractor will be liable for sales tax on the sale.