An ultrasonic dental handpiece system with rotary coupling comprising a dental handpiece and a dental handpiece tip wherein the system incorporates a swivel mechanism and dynamic fluid interface for the dental handpiece and dental handpiece tip to rotate freely relative to the dental handpiece cable thereby decoupling the handpiece from a torsion load applied to it by the handpiece cable and internal tubing and wires. The ultrasonic dental handpiece with rotary coupling generally includes a handpiece to which a piezo assembly and secondary coil are housed and a cable assembly including a primary coil and handpiece cable wherein the handpiece cable provides a supply of electrical energy and cooling lavage. The primary and secondary coils form a transformer wherein the secondary coil is inductively coupled to the primary coil with the secondary coil in electrical communication with the piezo assembly. A method of using a handpiece is also disclosed.