Multi-State – Medical Device Excise Tax Final Regulations

SALT Report 1980 – The Department of Treasury released the final regulations for the excise tax that will be imposed on the sale of certain medical devices.  The Medical Device Excise Tax was enacted by the Health Care and Education Reconciliation Act of 2010 in conjunction with the Patient Protection and Affordable Care Act.  These regulations are effective December 7, 2012 and apply to sales of taxable medical devices after December 31, 2012.

The final regulations affect manufacturers, importers, and producers of taxable medical devices   The final regulations include, but are not limited to, the following:

Taxable Medical Devices

A taxable medical device is defined as “any device, as defined in section 201(h) of the Federal Food, Drug & Cosmetic Act that is intended for humans.

Biologic Devices

Devices that are not listed with the FDA such as biologics that are listed in 21 CFR part 607, are not taxable medical devices.

Devices That Have Medical and Non-Medical Uses

The final regulation does not limit the definition of a taxable medical device to a device that is intended exclusively for medical purposes. Whether or not a device is a taxable medical device depends on whether it is a device defined in section 201(h) of the FFDCA.  Further, although section 4191 provides a number of exemptions, the statute does not provide an exemption based on whether a given end user intends to use a particular device for a medical purpose or a non-medical purpose.

Software Upgrades

Software and software updates that are not required to be separately listed with the FDA do not fall within the definition of a taxable medical device and are not subject to the tax.

The Retail Exemption

The term taxable medical device does not include eyeglasses, contact lenses, hearing aids, and any other medical device that is purchased by the general public at retail for individual use.

Tax Free Sales

The final regulations provide for two types of tax free sales:  sales of products that are for export and sales of medical devices sold for further manufacture.

Deposit Requirements

The regulation requires manufacturers to make semi-monthly deposits during the period in which the tax liability occurs. This requirement applies to anyone whose expected tax liability is greater than $2,500 per quarter. The first MDET deposit is due January 29, 2012 and must be at least 95% of the net tax.

For Further Information:

Department of the Treasury – Medical Device Excise Tax Final Regulations