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Medical device excise tax temporarily repealed

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The president has signed a sweeping tax and spending deal that will suspend the 2.3% medical device excise tax (MDET) for sales in 2016 and 2017.

The tax first took effect in 2013, and device manufacturers and importers still need to remit and report tax for sales through the end of 2015. Device makers should consider the timing of any upcoming sales, as sales made after Dec. 31 will be free from tax. Under the excise tax regulations, a sale generally takes place when title passes to the purchaser, which is determined by the intention of the parties based on the contract of sale and the circumstances.

The MDET suspension was accompanied by delays in two other core healthcare reform revenue raisers: the excise tax on high cost health plans and the fee on insurance providers. All three of these provisions are unpopular with both parties, and now that Congress has delayed them once, it will be much easier for lawmakers to delay or even repeal them in the future. There is a good change the MDET never takes effect again, but device makers should be prepared to comply again in 2018 until another delay or repeal is actually enacted.

Device makers may still pursue refund claims for tax paid from 2013 to 2015. Many manufacturers have received significant refunds by identifying exempt devices, using the constructive price rules, and separating out the costs of transportation and installation.  Remember that refund claims for the first quarter of 2013 need be filed by the end of April 2016.

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Denise Miley
Managing Director, Tax
T +1 612 677 5117

Michael Cronin
Senior Manager, Tax
T +1 617 848 4999

Dustin Stamper
Director, Washington National Tax Office
T  +1 202 861 4144