What is the Medical Device Excise Tax?
Enacted by the Health Care and Education Reconciliation Act of 2010 in conjunction with the Patient Protection and Affordable Care Act, a medical device excise tax of 2.3% was imposed on the sale of certain medical devices, affecting manufacturers, importers, and producers of these devices.
The tax does not apply to sales of eyeglasses, contact lenses, and hearing aids. The new tax also does not apply to the sale of any other devices that are typically purchased by the general public at retail for individual use (the retail exemption). However, if your device is listed with the FDA under 21 CFR part 807, including Humanitarian Use Devices, then this tax applies to you.
Wasn’t the Medical Device Excise Tax Repealed?
Historical efforts to repeal the medical device excise tax have failed. Rather, on Dec. 18, 2015, the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) was signed into law and included a two-year moratorium on the medical device excise tax. Because of the moratorium, the MDET did not apply to sales of taxable medical devices beginning on Jan. 1, 2016, and ending on Dec. 31, 2017. The moratorium was slated to expire on Dec. 31, 2017.
Because further legislative action was not undertaken, as of Jan. 1, 2018, the moratorium has expired, and the medical device excise tax now applies to sales of taxable medical devices. Taxpayers (aka medical device manufacturers) will be required to deposit semimonthly tax payments to the IRS. Taxpayers must also report sales of taxable medical devices made during the first quarter of 2018 on Form 720, Quarterly Federal Excise Tax Return, and pay any remaining tax by Apr. 30. 2018.
Potential Impact of the Medical Device Excise Tax
The Joint Committee on Taxation has identified that repealing the medical device tax would cost the U.S. Treasury about $20 billion over a decade. Before the MDET was put on hold, the IRS collected between $1 billion and $2 billion a year in 2013, 2014 and 2015 and was slated to bring in $38 billion of excise tax revenues over a 10 year period.
See the links below for FAQs and additional information about MDET: