Now that the Supreme Court has upheld, at least in part, the Affordable Care Act, one of the additional taxes set to take effect in 2013 is the so-called Medical Device Excise Tax. Beginning in 2013, Section 4191 imposes a 2.3% excise tax on the “sale” of certain medical devices intended for humans. Although many view the tax as a retail sales tax, at the last moment, Congress changed the application of the tax from a retail sales or excise tax to a manufacturer’s excise tax. Thus, the tax can apply even to certain transfers or uses of a device in situations that one might not normally think of as constituting a sale.
As of the date of this alert, only proposed regulations have been issued implementing Section 4191, although final regulations are expected shortly. In order to help resolve uncertainty as to what types or categories of devices are subject to the tax, the proposed regulations provide that a taxable medical device is a device that is listed as a device with the FDA under Section 510(j) of the Federal Food, Drug, and Cosmetic Act and 21 CFR part 807, pursuant to FDA requirements. In other words, a medical device that has a three-letter FDA product code and is intended for humans will generally be subject to the tax.
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