Should a NYC med spa track services separately from product sales?
Absolutely. Lumping Botox injections, laser treatments, and retail skincare into one revenue account makes it nearly impossible to understand what’s actually making money and what’s not. Services and product sales need separate tracking for two reasons: sales tax and margins.
Sales tax treatment is different. In New York City, retail product sales like skincare serums, moisturizers, and cosmeceuticals are taxable at 8.875%. Medical services performed under physician supervision, such as Botox and injectable treatments, are generally exempt from sales tax. Purely cosmetic or aesthetic services that fall outside the medical umbrella can land in a gray area. When everything runs through one revenue account, figuring out what was taxable and what wasn’t becomes a guessing game at filing time. Separate revenue accounts make the taxable versus non-taxable split clear from the start.
Margins are dramatically different between the two sides of the business. Injectable services carry high labor and product costs but also command premium pricing. Laser treatments have significant equipment depreciation but lower per-session supply costs. Retail skincare has a known wholesale-to-retail markup. Each of these has a distinct cost structure, and you need to see gross margin by category to know where your profit actually comes from. A med spa doing $40,000 a month in revenue could be thriving on services but losing money on retail, or the opposite, and you would never know without the separation.
The practical setup is straightforward. Create separate income accounts in your chart of accounts for each major category. At minimum you want injectable services, laser and aesthetic services, and retail product sales. If you want more detail, break injectables into Botox, dermal fillers, and so on. Map each type of transaction from your POS or booking system to the correct account. This is something Bronx bookkeepers familiar with the beauty and wellness space handle during initial setup so reporting works correctly from day one.
On the cost side, track cost of goods sold separately as well. The products you inject into clients are a direct cost of the service, not the same as inventory purchased for retail shelves. Keeping these costs in separate COGS accounts means your gross profit by revenue type is real, not blended.
This level of visibility matters when you’re making decisions about what to invest in. Should you add another laser? Expand your retail display? Hire another injector? The answers live in your margins by category. It also matters if you ever need financing or want to bring on a partner, because lenders and investors want to see clean financials with clear revenue streams.
If your books currently have everything in one bucket, a salon and spa bookkeeper can restructure your chart of accounts and reclassify historical transactions so you get useful comparative data going forward. The sooner you separate services from product sales, the sooner you stop flying blind on both taxes and profitability.
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