Medical Spa MinnesotaCare Tax

Medical Spa MinnesotaCare Tax

Minnesota has the MinnesotaCare tax which may apply to services provided at a medical spa. The main issue for tax purposes is how to classify the services provided. Consult with a tax professional for your individual situation as this is not tax advice. This is based off Minnesota Department of Revenue guidance.

This revenue advisory elucidates the enforcement of the MinnesotaCare tax in scenarios where services, as specified under Minnesota Statutes, section 155A.03, subdivision 2, are conducted by establishments employing health care professionals in the field of cosmetology.

According to the regulations, patient services offered by duly recognized healthcare providers are subject to taxation under MinnesotaCare policy. The legislature defines these patient services within section 295.50 of Minnesota Statues (subdivision 9b), which comprises nursing and medical service provision alongside an array of diagnostic or therapeutic items or services made available to patients or consumers.

A more comprehensive portrayal of a ‘healthcare provider’ is defined in section 295.50 (subdivision 4) – any individual operating within a state-regulated occupational field pertaining to healthcare whose primary function involves furnishing diagnostic or therapeutic amenities to patients; individuals supplying goods and amenities that meet reimbursement qualifications dictated under medical assistance initiatives; or facilities providing employment for such individuals. Subsequently, every service rendered by these healthcare providers shall be subjected to taxation.

Under Minnesota Statutes, section 155A.08, subdivision 1, a person “who offers cosmetology services for compensation in this state shall be licensed as a salon if not employed by another licensed salon or as an esthetician in connection with medical care in relation to esthiology in the office of a licensed physician.”

Under Minnesota Statutes, section 155A.14, a health care provider is not required to be licensed as a salon.

Minnesota Department of Revenue Position:

1. All patient services provided directly by a person who is regulated as a health care provider under Minnesota Statutes, 295.50, subdivision 4, are subject to the MinnesotaCare tax.
2. When a facility employs health care providers and is not licensed as a salon, all patient services performed by the facility’s employees are subject to the MinnesotaCare tax.
3. When a facility does not employ health care providers, none of the services are taxable.
4. When a licensed salon provides cosmetology services and employs health care providers, the services provided by employees that are not health care providers are not subject to the MinnesotaCare tax unless one of the following conditions applies:
   • the cosmetology service includes an assessment of the patient before, during, or after the service, conducted by a health care provider who is employed by the facility;
   • the service is billed under a medical code;
   • the service is supervised or ordered by a health care provider employed by the facility;
   • the service is covered by a health care provider’s medical malpractice insurance; or
   • the service involves the use of prescription drugs or prescription devices.

Examples:

1. A spa employs a dermatologist. Facials that are ordered by the dermatologist and performed by an esthetician employed by the spa are subject to tax since they are patient services.
2. A plastic surgeon owns and operates a medical spa. The spa is not licensed as a salon. All the services provided by the surgeon or by other employees of the spa are patient services and are subject to tax.
3. A health care provider owns a licensed salon. The health care provider is not employed by the salon and the salon does not employ any other health care providers. Services provided by the salon are not subject to the MinnesotaCare tax.
4. Administration of the following prescription drugs or devices is subject to tax: Botox injections, Collagen injections, Restylane injections, and Sclerotherapy injections. Chemical peels and microdermabrasion facials performed by a nurse are subject to tax.
5. Facials and eyelash tinting performed by an esthetician are not subject to tax if they are not subject to medical oversight.
6. A licensed salon performs facials. The patient is examined by a health care provider who is employed by another facility (none of the other conditions listed above under Department Position D apply). The examination by the provider is subject to the MinnesotaCare tax. The facials are not subject to the MinnesotaCare tax.
7. A fitness center employs a health care provider who advises members on exercise and weight issues. A salon within the fitness center performs cosmetology services. The health care provider is not involved in providing the cosmetology services. The cosmetology services are not subject to tax.