Washington – Guidance Regarding the Federal Tax on Medical Devices

SALT Report 1888 – The Washington Department of Revenue issued guidance regarding the federal excise tax that will be imposed on certain medical devices sold after December 31, 2012.  The Medical Device Excise Tax (MDET) is part of the Health Care and Education Reconciliation Act of 2010 and will be imposed on medical devices sold by the manufacturer, producer, or importer.

The MDET will affect Washington taxes as follows:

The federal excise tax will be considered part of the selling price when the tax is passed on to the buyer. Therefore, if the medical device is subject to sales tax and the federal excise tax is passed on to the buyer, the total charge is subject to retail sales tax.

Separately itemizing the tax on a sales receipt or a contract will not make the charge deductible from the business and occupation tax or the retail sales tax. Therefore, the itemized charge for the federal tax will be considered part of the selling price or the sales price.

If the sale of the medical device is subject to retail sales tax and the Medical Device Excise tax is passed on to the buyer, then retail sales tax applies to the total charge, including the amount passed on to the buyer.

The notices states that sales of medical devices are generally subject to retail sales tax unless a specific exemption applies. The state’s Hospital Industry Guide provides a ldetailed ist of the types of medical items that are exempt from sales tax.

For Further Information:

Washington Department of Revenue – Special Notice