The IRS finalized its regulations on the medical device excise tax and released interim guidance that provides safe harbor rules for determining constructive sales price. Beginning on Jan. 1, 2013, manufacturers, producers and importers are required to remit a 2.3% manufacturers excise tax levied on the sale of medical devices. There are exceptions for devices sold for further manufacture or export, and devices that are generally purchased by the public at retail for individual use.
The final regulations (TD 9604) and interim guidance (Notice 2012-77) make very few changes to the facts-and-circumstances test and safe harbor for the retail exception, but do clarify several important points, including:
- there is a significant new safe harbor under the constructive pricing rules that will allow percentage reductions in the sales price;
- semi-monthly deposits of the tax are generally required, but the IRS is offering penalty relief for good faith efforts through the first three quarters of 2013;
- convenience kits made up of more than one taxable medical device will not themselves be taxable medical devices under interim guidance;
- installment sales of medical devices entered into before March 30, 2010, are exempt from tax, regardless of when payments are made;
- taxpayers may not file Form 637 or Form 720 on a consolidated basis; and
- the IRS rejected requests for carve-outs on many types of devices, including for nonhuman, nonmedical, dental or humanitarian uses.
Please read our Tax Insights to learn more about the definition of device, convenience kits, retail exemption, constructive price, uses and rebates and deposits and filing.
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