Is the New Medical Device Excise Tax Affecting Your Business?

In December 2013, Today's Medical Developments published an article, “Medical Device Excise Tax,” shedding light on a topic that, for many small to midsized businesses in the US, is causing much frustration and confusion.

For most businesses, Form 720 – Quarterly Federal Excise Return was completely unchartered territory before January 1, 2013, the date the medical excise tax took effect. The 2.3% tax is applied to sales of certain medical devices, as opposed to profits earned. For a small medical device start-up, this could mean a very significant portion of their profits must go to taxes, even before taking federal and state taxes into consideration.

The challenges that manufacturers must overcome if the tax is not repealed include remaining in compliance with the required Form 720 – Quarterly Federal Excise Return, utilizing lesser-known exceptions, such as the retail exception, and the administrative burden of tracking products subject to the tax.

Proponents of the new tax argue that the Patient Protection and Affordable Care Act will offset the costs by enabling more people to purchase the medical devices they need. Those against the tax argue that Obamacare will not be enough for many businesses, particularly those with older patients, and that the cost of the tax combined with the cost of administering the Affordable Care Act will push a great deal of manufacturing overseas.

In the current state of affairs, it seems unlikely that the tax will be repealed in the near future. Going forward, manufacturers' best bet will be to increase their awareness of cost-minimizing opportunities (like the retail exception) while remaining in full compliance with the law.

To read the full article, please click here.

If you have questions about how the medical device excise tax may affect your business, and what you can do to minimize the costs, please contact Richard Bartolanzo or call 770.396.2200.