What is the Medical Device Excise ?

Let me start my blog off by stating that I personally love tracking politics. Presidential election years are my favorite, with all the debates, mudslinging, scandals and whatnot that comes with the elections. It's pretty much like watching your favorite reality tv show. Unfortunately, when you turn off this show you have to deal with real life repercussions from the decisions that are made. Now we all know that there is a whole lot going on in Washington, D.C. nowadays. There's the Fiscal Cliff rapidly approaching, the Affordable Care Act will be arriving in the near future, heck there's even people worried that the world is coming to an end (darn Mayan prophecy!). What I want to focus on is something that was part of the Affordable Care Act, that being the Medical Device Excise Tax.

Now this probably isn't something on your radar, but before you freak out you need to know that this isn't a tax that you'll see on your end of year personal tax form. And this certainly isn't something that you heard about during the Presidential Debates. In a nutshell the Medical Device Excise tax is a tax on medical device products, payable to the U.S. government by the medical device manufacturer or the medical device importer. Not very specific, I know, but I'm going to try to hit some highlights, but if you want to see what the IRS says go to: (http://www.irs.gov/irb/2010-52_IRB/ar13.html).

Highlights:

So when is this tax going into effect? The tax is going to be imposed starting January 1st, 2012 on certain medical devices. What certain medical devices you ask? This is where it is a bit more difficult to understand. The IRS (it is a tax so it is under their jurisdiction, not the FDA's) points the medical industry to 21 CFR Part 807, Subsection 510(j) (http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfcfr/CFRSearch.cfm?CFRPart=807&showFR=1). There really is not much clarification from this subsection but the FDA and IRS have agreed that some medical devices purchasable by the general public are exempt (eyeglasses & hearing aids), as well as some durable medical devices such as prosthetics, orthotics, or purchasable devices that fall under Medicare Part B. The very definition is hard to understand at this point in time but clarification should be coming sooner rather than later since this was just passed into law on December 5th (http://www.irs.gov/uac/Newsroom/Medical-Device-Excise-Tax).

How much is this tax going to be? Currently the tax will be 2.3% of the sale price of the medical device (http://www.irs.gov/uac/Newsroom/Medical-Device-Excise-Tax). The taxes will be payable starting January 29th, 2013 and will carry on from there. Additionally, a form must be filled out and submitted (Form 720: http://www.irs.gov/uac/Form-720,-Quarterly-Federal-Excise-Tax-Return).

So what does this mean for us, the customer's of the medical devices??? It's too early to tell but just be prepared for higher costs for your medical devices.

- MJB