As the medical device industry braces for the impacts of the Medical Device Tax, we’ve covered the topic at length as we try to understand all the effects the new tax will have on the medical device industry. Stone Carlie is a firm that focuses on business consulting and wealth advising. Recently a blog was posted on their website that brings understanding to a new facet of the tax in an easy to follow question and answer format.
Directly from Stone Carlie’s blog, Q&A’s on New Medical Device Excise Tax, the following questions and answers will shed further light on how the new tax will impact our industry:
- Which medical devices are taxable?
Devices listed under Section 201 (h) of the FD&C Act are presumably taxable, unless the device qualifies for manufacturing/export exemptions (devices used by the purchaser for further manufacture or export) or retail exemptions.
- What other medical devices qualify for the retail exemption?
The retail exemption safe harbor includes devices in the U.S. Food and Drug Administration (FDA)’s online In Vitro Diagnostics Over the Counter (OTC) database, devices that the FDA describes as “OTC” and a number of devices that qualify as durable medical equipment, prosthetics, orthotics or supplies for which payment is available on a purchase basis under the Medicare Part B payment rule.
- What price is the tax measured against?
The tax applies to the wholesale cost of the device. Under constructive pricing rules, a manufacturer may adjust the retail price down to the wholesale price and then apply the tax. There are further adjustments required for packaging, transportation, rebates and discounts.
- When are tax deposits and tax returns due?
Manufacturers and importers of taxable medical devices are generally required to make semi-monthly deposits of tax. The excise tax should be reported on Form 720, Quarterly Federal Excise Tax Return and payment is due with the return.
- Who ultimately bears the tax burden?
Manufactures can either “absorb” the tax or add the tax to sales invoices as a line item, similar to sales tax. If you decide to do the latter, consider if any contractual restrictions may apply. Also, keep in mind that competitors may not choose do this which will give them a cost advantage.
Take a look at the blog along with the answers and resources posted on Stone Carlie’s website. Do you have any pending questions regarding the medical device tax? Feel free to share your thoughts on the tax and any questions you may have in the comment section below.
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