Owners of medical and dental practices beware! Due to a provision included in the Affordable Care Act, the cost of medical devices is set to increase by 2.3% on January 1, 2013.
Called an Excise Tax, manufacturers are required to collect a COST OF tax equal to 2.3% of the sales price of each piece of equipment sold, and then remit that tax to the federal government. Unless the manufacturer decides to reduce their prices by 2.3%, expect to pay more for your purchases of medical devices starting in 2013.
Let’s say you purchase a medical device for $10,000. As of January 1, 2013, your cost for that equipment will be $10,230. Make capital expenditures of $100,000 for your practice, and you’ll pay an extra $2,300 for that equipment starting next year.
Here is some information provided by our friends at the IRS regarding this new tax:
The following questions and answers provide general information on the medical device excise tax. For more detailed information see the proposed regulations issued on Feb. 3, 2012.
Q. What is the medical device excise tax?
A. The medical device excise tax is a tax on the sale of certain medical devices by the manufacturer, producer or importer of the device.
Q. When does the tax go into effect?
A. The tax applies to sales of taxable medical devices by the manufacturer or importer after December 31, 2012.
Q. How much is the tax?
A. The tax is 2.3-percent of the price for which the manufacturer or importer sells the taxable medical device.
Q. Who is responsible for reporting and paying the medical device excise tax?
A. The manufacturer or importer of a taxable medical device is responsible for reporting and paying the tax.
Q. Will individual consumers be subject to any reporting or recordkeeping requirements?
A. No action is required by individual consumers.
Q. What form will be used to report the medical device excise tax?
A. The medical device excise tax is a manufacturers excise tax. Manufacturers excise taxes are reported on Form 720, Quarterly Federal Excise Tax Return.
Q. I’m not familiar with manufacturers excise taxes. Where can I learn more?
A. For more information about manufacturers excise taxes in general, see Chapter 5 of IRS Publication 510, Excise Taxes.
Q. Has the IRS issued guidance on the medical device excise tax?
A. The IRS and the Treasury Department issued proposed regulations on February 3, 2012. The IRS and the Treasury Department welcome comments on the proposed regulations.
We’ll post Part 2 of this series tomorrow.