IRS releases final regulations on 2013 medical device tax
Feb. 22, 2013
Beginning January 1, 2013, a 2.3 percent excise tax was placed on the sale price of certain taxable medical devices under Section 4191 of the Internal Revenue Code. The tax directly affects manufacturers, producers, or importers of any of these taxable medical devices. This is an ongoing, quarterly tax that has specific dates for when payments are due to the Internal Revenue Service.
The IRS and the Treasury Department released final regulations on December 5, 2012 through IRS Notice 2012-77.
Who is responsible for paying this excise tax?
Manufacturers, producers, or importers of any taxable medical devices. The regulations provide more details in Notice 2012-77 of how a manufacturer or importer can determine if a device is included or exempt from this tax.
Can you define what it means to be a “manufacturer, producer, or importer?”
The manufacturer or producer is the person/entity that creates the applicable medical device.
According to the IRS, the importer is the person or entity that brings the device from another country into the United States or “withdraws the device from a customs-bonded warehouse to sell or use within the U.S.”
How will manufacturers or importers report and pay this tax?
The manufacturer or importer will be responsible for filing Form 720, the Quarterly Federal Excise Tax Return, and paying the tax to the IRS.
When does this tax have to be paid to the IRS?
Form 720 is a quarterly tax return, so the first return will be due by April 30, 2013 (for the months of January, February, and March 2013). Refer to the chart provided by the IRS below for the other due dates:
| For the months of | Return due to the IRS by |
|---|---|
| January 1 through March 31 | April 30, 2013 |
| April 1 through June 30 | July 31, 2013 |
| July 1 through September 30 | October 31, 2013 |
| October 1 through December 31 | January 31, 2014 |
Semimonthly deposits must be made for tax liability that exceeds $2,500 for the quarter.
Do individuals have to pay the excise tax if they purchase any device that is considered taxable?
No. Individuals are not responsible for paying this tax to the IRS. This tax is only imposed on manufacturers or importers of these medical devices when they sell the devices to a buyer.
What types of devices are exempt from this tax?
Devices that are usually purchased by the general public at retail for individual use are exempt from this tax. Some examples include eyeglasses, contact lenses and hearing aids. The Department of Health and Human Services will further determine any other devices that may be exempt. For a list of exempt devices, go to IRS Notice 2012-77.
Is there a safe harbor for other devices that are generally purchased by the general public at retail for individual use?
Yes. There is a safe harbor for devices that meet the specific requirements under the Food and Drug Administration, such as certain over-the-counter devices. For more details on what types of devices are eligible for this safe harbor, go to IRS Notice 2012-77.
Where can I find more information?
For more information, please see the IRS website for the IRS Notice 2012-77, and Chapter 5 of IRS Publication 510.
The information in this document is based on preliminary review of the national health care reform legislation and is not intended to impart legal advice. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. The impact of these reforms on individual situations may vary. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. As required by US Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.