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Medical Device Excise Tax Takes Effect January, 2013

  • Dec 28, 2012 | Gail Cole

The Medical Device Excise Tax (MDET), which was passed as part of the 2010 Affordable Care Act, takes effect January 1, 2013. From that point forward, medical device manufacturers and importers will be required to pay a 2.3% excise tax on sales of certain medical devices. It is essentially a manufacturers excise tax.

Pursuant to relevant IRS code,

"There is hereby imposed on the sale of any taxable medical device by the manufacturer, producer, or importer a tax equal to 2.3 percent of the price for which so sold."

Taxable medical device is defined here as "any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans." (See Internal Revenue Code Section 4191).

As with most sales, use, and excise taxes, certain items qualify for an exemption from the tax. Items exempted from the medical device excise tax include:

  • Eyeglasses;
  • Contact lenses;
  • Hearing aids; and
  • "[A]ny other medical device determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use."

Form 720 will be used to report the new medical device excise tax. It must be filed quarterly:

  • First quarter returns, for the months January, February, and March, are due April 30.
  • Second quarter returns, for the months April, May, and June, are due July 31.
  • Third quarter returns, for the months July, August, and September, are due October 31.
  • Fourth quarter returns, for the months October, November, and December, are due January 31.

In addition, semi-monthly deposits will be required for manufacturers and importers with a medical device excise tax liability of more than $2,500 for the quarter. The first deposits will be due January 29, 2013. Additional information regarding these deposit is available on Form 720 and IRS Publication 510, Chapter 12.

The IRS lists the interim rules, which will be in effect until further notice. Additional interim guidance regarding MDET is available at Notice 2012-77.

Information regarding "final regulations that provide guidance on the excise tax imposed on the sale of certain medical devices … [that] affect manufacturers, importers, and producers of taxable medical devices" is available at Internal Revenue Bulletin 2012-52, T.D. 9604. The IRS reserves the right to issue "additional published guidance on these issues in the future."

Want to automate your sales tax management, including filing, exemptions and calculations? Find out more.

photo credit: R Scott Photography via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.