Texas – Medical Device Excise Tax

SALT Report 1939 – The Texas Comptroller issued guidance regarding the new federal excise tax on medical devices that becomes effective January 1, 2013. The tax is 2.3% of the total sales price of certain devices and will be imposed on device manufacturers, producers and importers, not on their customers.  However, a seller may pass the tax along to their customer if they separately state the charge on the invoice or receipt. The separate charge should be labeled “Federal Excise Tax” or something similar.

If the seller chooses to pass the tax on to their customer, the seller cannot label it as a “tax reimbursement” or “fee” imposed on the purchaser.  Texas Tax Code requires that any money represented as and collected by a seller as a “tax” or “fee” be remitted to the state.  Therefore, if the seller labels the reimbursement as a tax or fee imposed on the purchaser, the Comptroller’s office will consider the charge as a tax collected in error, which must be refunded to the customer or remitted to the state.

To determine whether the excise tax passed on to a customer is taxable, the Comptroller provides the following guidance:

  • If sales tax is due on a medical device when it is sold, then the excise tax reimbursement charge included with the billing is considered part of the sales price and is taxable, and
  • If a medical device is exempt from sales tax, the medical device tax reimbursement charge is exempt from sales tax

For Further Information:

Texas Taxes – Tax Policy News November 2012

Health Care and Education Reconciliation Act of 2010 (Health Care Act), P.L. 111-152

Rule 3.284 – Drugs, Medicines, Medical Equipment, and Devices