Manufacturers Get a Two-Year Respite from the Medical Device Excise TaxMarch 23, 2016
If for 2016 you’ve made a medical device excise tax deposit or filed Form 720 and paid this tax, you may be eligible for a refund.
Medical device manufacturers that have been hoping for a permanent repeal of the unpopular medical device excise tax (MDET) recently received some promising news. While the tax hasn’t yet been repealed in its entirety, Congress has imposed a two-year moratorium on it. Here’s what you need to know.
The MDET in a Nutshell
The Affordable Care Act (ACA) created a new tax on the sale of certain medical devices. A 2.3% excise tax has been imposed since Jan. 1, 2013, generally on the manufacturer or importer of a taxable medical device. The rationale for the MDET was that the increased number of insured Americans under the ACA would boost demand for medical devices.
The MDET applies to a wide range of products, including pacemakers, artificial joints, surgical gloves and dental instruments. It generally doesn’t cover devices that consumers buy for individual use, such as eyeglasses, contact lenses, hearing aids and wheelchairs.
The Moratorium Nuts and Bolts
The Consolidated Appropriations Act, signed into law in December 2015, imposes the two-year moratorium. Specifically, the MDET doesn’t apply to taxable medical device sales that occur from Jan. 1, 2016, to Dec. 31, 2017.
Manufacturers aren’t required to file Form 720, Quarterly Federal Excise Tax Return, to report sales of taxable medical devices for any quarters in 2016 and 2017. (You may, however, need to file the form if you’re liable for other excise taxes besides the MDET.)
If for 2016 you’ve made a medical device excise tax deposit or filed Form 720 and paid this tax, you may be eligible for a refund. In the former situation, you can file a zero liability Form 720, and in the latter situation, you can file Form 720X.
Without additional legislative action, the MDET will resume for sales of taxable medical devices beginning in 2018, and manufacturers will be required to report sales in the first quarter of that year by April 30, 2018. For more information on the MDET and how to claim a refund for 2016 deposits or payments, please contact us.