WESTMINSTER — A tax that many Colorado cities don’t even bother to impose could lay waste to one community’s five independently owned veterinary clinics.
The clinic owners say the city of Westminster, without warning, tacked a 3.85 percent sales tax onto all prescription medication and supplements dispensed by local veterinarians.
The vets say they only caught wind of the city’s move when Andrew Berman, owner of Adams County Animal Hospital, was slapped with a $100,000 bill for three years of uncollected sales and use taxes.
Berman said he had no idea he had to charge a tax on prescription medication and vaccinations for dogs, cats and other animals until he got the results of a city audit of his books that covered the past three years.
Berman said what he owes may break his business and does not bode well for other veterinarians in the city come audit time.
“The economic impact on this hospital and on others could be devastating,” Berman said. “We all could wind up owing the city hundreds of thousands.”
Berman and the other veterinarians say the city is ignoring a revision made to the city’s tax code in 1993, which fully exempts prescription drugs for animals.
Arrowhead Animal Hospital owner Don Pfretzschner said he was one of 11 business owners who met to rewrite the tax code, which was aimed at helping small businesses. “Eight points came out of those meetings; one was to make prescription drugs for animals tax-exempt,” Pfretzschner said.
The veterinarians say the city never told them that in 2007 it amended the municipal code to exempt only prescription drugs for humans.
All veterinary hospitals and clinics dispense a combination of prescriptions for medications manufactured for humans but used for animals and drugs made specifically for animals, officials say.
“Why wouldn’t they just come out and tell us they made a change?” said veterinarian George Stroberg of Animal Central, who was audited three years ago by the city without a problem.
“I would have done it and started changing,” Stroberg said. “I mean not paying taxes, that’s just suicide.”
Berman is fighting his audit results. The Westminster veterinarians are also considering taking the city to court, claiming Westminster is trying to help its struggling bottom line by imposing the tax, which could cost them customers.
“What’s to stop a client from deciding he doesn’t want to pay extra and going across the street to a clinic in Arvada that doesn’t have this tax?” Stroberg said.
Westminster officials say, however, the change made to the tax code in 2007 was minor.
“Drugs used for animals do not qualify for exemptions,” said Barb Dolan, the city’s sales-tax manager. “During the course of an audit, we view the records and make sure everything has been done in accordance to the code. It’s just something done with every individual audit.”
The problem for veterinarians, however, is that many struggling cities are scouring every corner for new tax revenue and are finding that people’s pets are a good source, said Boulder veterinarian Susan Patton, who fought a similar battle over prescription taxes in her city.
Boulder auditors discovered in 2005 that pet clinics there were not charging sales taxes on prescriptions for animals and threatened vets with huge bills, Patton said. She helped negotiate a settlement where the clinics paid the city roughly $10,000 each.
“If you are looking for money to fund a library, this is how you do it,” said Patton, who says another problem is that sales taxes on pet prescriptions are not uniformly applied.
The home-rule cities that impose a sales tax on nonhuman prescriptions include Boulder, Commerce City, Denver, Northglenn, Pueblo, Westminster, Thornton and Englewood.
Those that don’t include Arvada, Colorado Springs, Lakewood, Littleton, Fort Collins and Wheat Ridge.
Use taxes, by contrast, are almost uniformly applied, Patton said. Those taxes are collected on all nondrug supplies and remitted to the city.
“Unfortunately, the education is not out there to inform vets what is exempt and nonexempt,” Patton said. “And it’s sad because then the cities come in with these nasty audits and it destroys the trust between the city and the vets.”
Patton said the sales tax on prescriptions dispensed by her clinics in Boulder and Lafayette probably won’t bother most clients.
But those with low incomes could go to another city for help with their pet or skip needed medications altogether.
“People can’t afford certain things when they are taxed and strapped,” Patton said.
Monte Whaley: 720-929-0907 or mwhaley@denverpost.com
