The two-year moratorium suspending the medical device excise tax expired at the end of 2017. — NOTE: H.R. 195 enacted January 22, 2018, extends the moratorium on the medical device excise tax contained in Code section 4191(c) for two years (through December 31, 2019), for sales after December 31, 2017.
Thus, absent congressional action, the first semi-monthly deposit of the 2.3% excise tax on sales of taxable medical devices by manufacturers and importers will be due January 29, 2018, and the first return for the medical device excise tax—filed on Form 720, Quarterly Federal Excise Tax Return—will be due April 30, 2018.
Section 4191 imposes a medical device excise tax on the sale, use, or lease of a "taxable medical device" by its manufacturer or importer at a rate of 2.3% of the price for which each device was sold. Certain adjustments to the sale price are allowed, and in some situations, a constructive sale price may be used to determine the tax base. In addition, export sales are generally not subject to the tax, subject to certain registration requirements.
The definition of a “taxable medical device” is any device listed with the Food and Drug Administration (FDA) under section 510(j) of the Federal Food, Drug, and Cosmetic Act (P.L. 75-717, as amended) and 21 C.F.R. Part 807, pursuant to FDA requirements. There are exemptions provided for eyeglasses, contact lenses, and hearing aids, and devices of a type generally purchased by the general public at retail for individual use (the “retail exemption”).
A provision in legislation enacted in December 2015 imposed a two-year moratorium on application of the medical device excise tax. The excise tax, thus, did not apply to sales of taxable medical devices between January 1, 2016, and December 31, 2017. Manufacturers and importers of devices sold during this period were not required to make semi-monthly deposits of the excise tax or to file Forms 720 relating to those sales.
With expiration of the moratorium, the medical device excise tax is now again imposed on certain sales, uses, and leases of taxable medical devices by manufacturers and importers. Affected companies will need to begin making semi-monthly deposits of tax and filing excise tax returns.
For more information, contact a tax professional with KPMG’s Excise Tax Practice group:
Deborah Gordon | +1 (202) 533 5965 | firstname.lastname@example.org
Taylor Cortright | +1 (202) 533 6188 | email@example.com
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