Med Spas & Aesthetics, CPA & Tax Services

Why Med Spas Need a CPA Who Understands Aesthetics

Med spas sit at the intersection of healthcare and retail, and that creates tax complexity most general CPAs are not equipped to handle. You collect sales tax on some services but not others. You carry injectable inventory that must be tracked as cost of goods sold. You pay a supervising physician who may or may not be a W-2 employee. And your membership revenue needs to be recognized on a schedule that matches when services are actually delivered, not when a client’s credit card is charged.

At AG Freideman, we work with med spa and aesthetics practice owners across Dallas, Plano, Frisco, and the entire DFW metro. Al Freideman is a licensed CPA with over 30 years of experience, and he handles every med spa client personally. No junior staff, no hand-offs. When your return is filed, Al reviewed it. When you have a question about sales tax on your new laser treatment, Al answers the phone.

Medical vs. Cosmetic Services: How Texas Sales Tax Applies to Your Med Spa

Texas charges sales tax on cosmetic procedures but exempts medical services prescribed by a licensed physician. The state rate is 6.25%, and most DFW cities add up to 2% in local tax, bringing the combined rate to as high as 8.25%. Getting this classification wrong in either direction costs you real money.

Here is where it gets specific. According to the Texas Comptroller, a Botox injection for chronic migraines prescribed by your medical director is exempt from sales tax. That same Botox injection administered purely for cosmetic wrinkle reduction is taxable. The product is identical. The tax treatment depends entirely on the documented medical purpose.

This split applies across your entire service menu:

• Generally taxable (cosmetic): Aesthetic Botox and filler injections, chemical peels for appearance, laser hair removal, body contouring, microneedling for skin rejuvenation, HydraFacials
• Generally exempt (medical): Botox for diagnosed migraines or hyperhidrosis, laser treatment for medical dermatological conditions, scar revision procedures documented with a medical diagnosis

We set up your point-of-sale categories and QuickBooks chart of accounts so every service is correctly classified from the moment a client checks out. That means your Texas sales tax filings are accurate, and you are not overpaying tax on exempt services or underreporting on taxable ones.

Injectables Inventory: Tracking Cost of Goods Sold the Right Way

Your injectable products (Botox, Juvederm, Sculptra, Kybella, and similar brands) are not operating expenses. They are inventory, and the IRS requires them to be reported as cost of goods sold when administered to clients, not when purchased from your distributor.

This distinction matters because COGS directly reduces your gross profit and affects your tax liability. If you expense $80,000 in injectables the month you buy them but administer them over the next three months, your monthly financials are distorted and your quarterly estimated tax payments will be wrong.

We track your injectable inventory using lot-level or unit-level methods depending on your volume. Each month’s bookkeeping reconciles what was purchased, what was administered, what remains on hand, and what was wasted or expired. Expired product is written off as a loss, not as COGS, and the documentation supports the deduction if the IRS ever asks.

For Dallas-area med spas doing $500,000 or more in annual injectable revenue, getting inventory accounting right can shift your tax liability by thousands of dollars in a single year.

Medical Director Fees: Employee, Contractor, or Management Company?

Texas requires med spas to operate under the supervision of a licensed physician. How you structure and pay for that supervision has significant tax consequences, and the IRS scrutinizes these arrangements closely.

The three most common structures we see among DFW med spa owners are:

• W-2 employment: The physician is a part-time or full-time employee. You pay payroll taxes (employer’s share of FICA at 7.65%), provide benefits, and deduct the salary as a compensation expense.
• 1099 independent contractor: The physician invoices your practice for supervision services. You issue a 1099-NEC at year end. This eliminates your payroll tax obligation on their compensation but only holds up if the arrangement genuinely meets IRS independent contractor criteria.
• Management Services Organization (MSO): A separate entity (often owned by the physician) provides medical oversight. Your med spa pays a management fee. This is common when the physician has ownership interest in the practice or supervises multiple locations.

Each structure carries different risks. The IRS has reclassified 1099 physicians as W-2 employees when the med spa controls their schedule, provides equipment, and dictates procedures. That reclassification triggers back payroll taxes, penalties, and interest. We review your medical director arrangement to confirm it is structured properly and documented in a way that withstands scrutiny.

Membership and Package Revenue: When Does the IRS Say You Earned It?

Many med spas sell monthly memberships or prepaid service packages. A client pays $199 per month for a membership that includes one monthly treatment plus discounts on add-ons. Or a client pays $2,400 upfront for a package of six laser sessions.

Under IRS revenue recognition rules, you do not “earn” that revenue until you deliver the service. The $2,400 package payment is deferred revenue (a liability on your balance sheet) until each session is performed. Only then does one-sixth of the payment move to earned revenue on your income statement.

This matters for two reasons. First, if you report the full $2,400 as income in the month it was received, you will overstate your taxable income for that period and potentially overpay estimated taxes. Second, if a client requests a refund for unused sessions, you need clean records showing exactly how much revenue was earned versus deferred.

We configure your bookkeeping system to automatically split membership and package payments into earned and deferred categories each month, so your financials are always accurate and your tax returns reflect reality.

Med Spa Tax Mistakes We Fix

After working with aesthetics practice owners for years, we see the same costly errors repeated. Here are the most common ones we correct:

• Charging sales tax on every service regardless of medical classification. This means you are collecting and remitting tax you do not owe, which overcharges your clients and creates refund liability if they ever notice.
• Expensing injectable purchases instead of tracking inventory. This inflates your deductions in purchase months and understates them in administration months, creating inaccurate financials and incorrect estimated tax payments.
• Misclassifying the medical director as a 1099 contractor without proper documentation. If the IRS reclassifies them as an employee, you owe back payroll taxes plus penalties that can reach 25% or more of the unpaid amount.
• Recognizing membership revenue when payment is received instead of when services are delivered. This overstates income, inflates your tax bill, and creates accounting headaches when members cancel or request refunds.
• Missing the Texas Franchise Tax filing deadline. Every Texas LLC and corporation must file a franchise tax report and Public Information Report by May 15 each year. Missing it triggers penalties and can jeopardize your entity’s good standing with the Texas Secretary of State.

What Med Spa Accounting Costs with AG Freideman

We publish our pricing because med spa owners deserve to know what they are paying before the first meeting. S-Corp and partnership returns (which most multi-owner med spas file) run $1,000 to $2,000 depending on complexity, K-1 count, and state filings. Monthly bookkeeping with payroll processing starts at $300 to $600 per month. Texas Franchise Tax filings run $250 to $500 annually.

Every engagement includes a free consultation where we review your current setup and identify what needs to change. Call Al directly at (972) 893-3481 or book online at agfreideman.com/meeting/ to get started.