The 2.3% medical device excise tax (MDET) was reinstated on January 1, 2018 after a two year suspension. The MDET is imposed on domestic sales including imports, manufacturing and the production of medical devices.
The MDET initially went into effect in January 2013 to help fund the Affordable Care Act. In 2015, the MDET was suspended for sales made between January 1, 2016 and December 31, 2017. There was no repeal of the Affordable Care Act or mention of a continued suspension of the MDET in recently passed tax reform.
The reinstated tax applies to sales of taxable medical devices as of January 1, 2018. Per the IRS, a taxable medical device is a device that is listed as a device with the FDA under section 510(j) of the Federal Food, Drug and Cosmetic Act, and 21 CFR part 807, pursuant to FDA requirements. Contact lenses, and hearing aids, or devices deemed to be sold as a retail product to the general public for individual use are specifically exempt from the MDET.
The MDET requires semi-monthly deposits if the quarterly liability exceeds $2,500. September requires three deposits. The first deposit covering the first 15 days of sales in January will be due January 29, 2018. Publication 509 provides a tax calendar for the remaining deposit due dates.
In addition to the deposits, taxpayers are required to report the taxable sales and deposits quarterly on Form 720, Quarterly Federal Excise Tax Return. Form 720 is due April 30, July 31, October 31, and January 31.
It is important to note that even disregarded entities for federal tax purposes must still file a separate excise tax return from its owner.
For more information about how the medical device excise tax might affect your business, you can reach out to one of our tax professionals at Barnes Dennig here.