Cosmetic Surgery Procedures

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Receipts from the sales of cosmetic surgery services become subject to sales and use tax on 01/01/2023. According to the provisions of KRS 139.010(5) “'cosmetic surgery services' means modifications to all areas of the head, neck, and body to enhance appearance through surgical and medical techniques." The term does not include “reconstruction of facial and body defects due to birth disorders, trauma, burns, or disease."

Are the treatments considered medically necessary and covered under general insurance benefits excluded from taxable “cosmetic surgery services?"

Yes, treatments and procedures deemed medically necessary to treat, correct, or cure facial and body defects due to birth disorders, trauma, burns, or disease and not performed primarily for convenience or cosmetic enhancement reasons are excluded from the taxable services.

What types of charges on an invoice for cosmetic surgery services are subject to sales and use tax?

Under the definition of gross receipts in KRS 139.010(16), separately stated charges by the provider of cosmetic surgery services are all taxable as costs of the retailer or services necessary to complete the sale. Examples of taxable charges when billed by the provider of cosmetic surgery services include charges for the surgery, the hospital or other facility usage, the anesthesiology services, the pathology testing, etc. However, in cases where there are split billings, with one surgery that is medically necessary and the other cosmetic, segregated billings that clearly delineate the medically necessary procedures and related costs are non-taxable and excluded from cosmetic surgery services.

How are charges by other medical providers such as anesthesiologists, pathologists, etc. treated for tax purposes when billed separately from charges billed by the provider of cosmetic surgery services?

Charges for treatment costs associated with cosmetic surgery services that are billed and collected separately by third party medical providers are not included in the gross receipts of the cosmetic surgery services provider and are not subject to sales and use tax.

What are some examples of cosmetic surgery services?

Examples of cosmetic surgery services include body contouring (cosmetic skin removal); Botox injections; breast augmentation; buttock enhancement and lifts; chemical peels; dermal fillers (lips, cheeks); facelifts; fat reduction/body sculpting procedures; hair transplantation; liposuction; microneedling (collagen induction therapy); microblading of eyebrows; neck lifts; rhinoplasty; tummy tucks; and tattoo removal.

Are cosmetic teeth whitening services subject to sales and use tax?

Yes, this procedure falls within the meaning of “cosmetic surgery services."

Are separately stated charges to patients for prescription drugs used in the performance of cosmetic surgery services subject to sales and use tax?

No, the retail sale of prescription drugs is exempt under the provisions of KRS 139.472. The imposition of sales and use tax on the provision of cosmetic surgery services does not alter this existing statutory drug exemption.

KRS 139.202 excludes gross receipts from the newly taxable services if the receipts are based upon fixed-fee, lump-sum contracts executed on or before 02/25/2022. If a hospital has a fixed-fee, lump-sum contract with a medical provider for the performance of these procedures in place before 02/25/2022, are subsequent payments the hospital receives from patients for related cosmetic surgery services excluded from being subject to sales and use tax?

The sales of cosmetic surgery services provided by a hospital to a patient are not in fulfillment of a lump-sum, fixed-fee contract, or fixed price sales contract and therefore the sales are subject to sales and use tax. In addition, a price or cost schedule published for certain selective cosmetic surgical services by the hospital does not make otherwise taxable cosmetic surgery services to a patient eligible for the exclusion under KRS 139.202.

What items may a cosmetic surgery service provider purchase exempt from sales and use tax as purchases for resale?

Items to be administered to the patient or that will remain with the patient following treatment are eligible to be included on a resale certificate at the time of purchase. Items may include non-exempt drugs, surgical sutures, materials for injection into patients, or other similar items administered to the patient in the course of providing cosmetic surgery services. The cosmetic surgery service provider should issue the Resale Certificate (Form 51A105) or the Streamlined Sales and Use Tax Certificate (Form 51A26) for the eligible purchases made for resale.

However, a cosmetic surgery service provider's purchases of equipment, surgical tools, or any items consumed or used when providing the cosmetic surgery services are taxable retail sales transactions not eligible for exemption as purchases for resale.

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Sales and Excise Taxes

Cosmetic Surgery Procedures