Medical Device Tax: IRS shows (some) mercy to medical device companies

MassDevice.com coverage of the medical device tax

The IRS will waive penalties for late payments of the medical device excise tax for the first 3 quarters of 2013, provided it’s an honest mistake, according to new regulations released the U.S. Treasury Thursday.

In doing so, the IRS acknowledged that medical device companies will have a difficult time complying with a new host of tax rules, which will require most companies to pay semi-monthly payments of 2.3% of all sales to the feds. While the move isn’t the delay industry had been lobbying for, it is perhaps some small bit of conciliation on behalf of the agency that the regulations took so long to get finalized.

"The IRS and the Treasury Department recognize that many medical device manufacturers will still be preparing their systems to comply with the medical device excise tax when the tax goes into effect on January 1, 2013, including the requirement to make semimonthly deposits," the agency wrote. "The first deposit of the medical device excise tax, covering the first 15 days of January, is due by January 29, 2013. In consideration of the short time frame between the effective date of the tax and the due date of the first deposit, and in the interest of sound tax administration, the IRS and the Treasury Department have decided to provide temporary relief from the § 6656 penalty for the first three calendar quarters of 2013. The normal rules under § 6656 and the corresponding regulations will apply with respect to deposits due during the fourth calendar quarter of 2013 and thereafter."

The agency added the caveat that it would uphold the delay "provided that the taxpayer demonstrates a good faith attempt to comply with requirements … and that the failure was not due to willful neglect."

In addition, the agency tried to clear up some lingering issues on the so-called "constructive sales price" or the point of sale at which an excise tax is levied, a particularly sticky wicket for medical device companies because there is so much variation in the sales process. The agency defined how it would look at sales to a host of different parties, including wholesalers, retailers and distributors.

For example, the IRS said that for medical device companies selling into hospitals or a physician’s office, the agency would treat the sale as "at retail" and the price at which the sales would be taxed would equal 75% of the actual selling price.

The agency made other special designations for donations of medical equipment, writing that "the donation of a taxable medical device by the manufacturer of the device to an eligible donee will not constitute a taxable use as defined in § 4218 of the Code."

In addition, the agency gave some small relief to small medical device companies whose taxable burden would be smaller than $2,500 for the quarter. Those companies would not be required to pay semi-monthly payments.

RSS From Medical Design & Outsourcing

  • Teknor Apex to showcase wide range of PVC compounds for medical devices at Medtec China
    Building on its international leadership role as a supplier of medical-grade PVC compounds, Teknor Apex Company has developed flexible and rigid formulations that address the special needs of device manufacturers. The company will highlight these capabilities at Medtec China 2015. “Teknor Apex produces or markets medical-grade PVC compounds in China, Singapore, Europe, and the United […]
  • The Raspberry Pi eco-system goes interstellar with the new Raspberry Pi Sense HAT
    Newark element14 has globally launched the latest addition to the expanding ecosystem of Raspberry Pi accessories, the Raspberry Pi Sense HAT, as featured in the ‘Astro Pi’ space mission. The Sense HAT will enable enthusiasts to control the same hardware used in space. The Sense HAT attaches to the Raspberry Pi board, and can be […]
  • CommScope completes acquisition of TE Connectivity’s Telecom
    CommScope Holding Company, has completed its previously announced acquisition of TE Connectivity’s Telecom, Enterprise and Wireless businesses, a leader in fiber optic connectivity for wireline and wireless networks. The all-cash transaction, valued at approximately $3 billion, strengthens CommScope’s position as a leading communications infrastructure provider with deeper resources to meet the world’s growing demand for network […]
  • SPI awards IKO Prosthetic Creative System the Student Design International Design Excellence Award
    SPI: The Plastics Industry Trade Association congratulated IKO Prosthetic Creative System for winning the SPI Student Design Award, part of the Industrial Designers Society of America’s (IDSA’s) International Design Excellence Awards (IDEA) program. The award was presented to IKO, an innovative, youth-focused prosthetic design company led by Chicago-based designer Carlos Torres, by SPI’s Senior Director of […]
  • New assay could revolutionize diagnosis and treatment of life-threatening disease
    Invasive Fungal Disease (IFD) is an emerging global health problem associated with high mortality rates in severely immunocompromised patients, such as those undergoing intensive chemotherapy or stem cell transplantation, and in patients suffering immune compromising conditions such as AIDS. The most common causative agents of this disease have been identified as Candida and Aspergillus species, […]
  • Molex delivers ISO 13485-compliant, medical-grade surgical cables from its class 100,000 clean room facility
    Molex, LLC operates a fully ISO 146441-1:1999 Class 8-certified clean room, satisfying strict particulate contamination levels specified by ISO-compliant requirements. Located in Thailand, the facility has less than 100,000 particulates (≥0.5µm) per cubic foot of air and manufactures a variety of ISO 13485-compliant medical cables and surgical cables used in operating theatres, hospitals, laboratories and […]
  • Swept-Source OCT: Patent license agreement between Massachusetts General Hospital and Heidelberg Engineering
    Heidelberg Engineering has entered into a patent license agreement with Massachusetts General Hospital (MGH) in Boston. The agreement grants global and exclusive rights to 77 basic patents and patent applications which relate to swept-source OCT technology and its application in ophthalmology. Spectral domain OCT has become indispensable to eye care professionals worldwide to diagnose and […]
  • MIT’s MultiFab presents a stark challenge to incumbent 3D Printer manufacturers’ hardware, software, and business Models
    MIT’s Computational Fabrication Group recently announced the MultiFab, a low-cost 3D printer that can combine up to 10 different resins in one part and also includes a 3D scanning system to identify and fix errors during production. According to Lux Research, these capabilities are rare in commercial 3D printers today due to the manufacturers’ need […]
  • AVX releases Accu-P MP medical grade film chip capacitors for medical devices
    AVX Corporation, a leading manufacturer of passive components and interconnect solutions, has released a new series of thin film chip capacitors specifically designed to meet the demanding performance specifications for implantable medical devices. Delivering extremely tight capacitive tolerances, exceptionally repeatable performance, and remarkably low ESR and high Q at high frequencies—including VHF, UHF, and RF […]
  • RIVANNA commences manufacturing of its Accuro device
    Rivanna Medical announced that it has begun manufacturing its FDA-cleared Accuro device, a handheld and untethered smart-phone-sized device that is designed to guide spinal anesthesia with automated 3D navigation technology in addition to ultrasound imaging of abdominal, musculoskeletal, cardiac and peripheral vascular anatomies. The product will be launched at the ASA annual meeting in San […]
  • FDA seeks public input on Quality Metrics guidance
    by Oliver Wolf, Senior Product Manager, MasterControl In line with the general shift towards risk-driven approaches in the quality management world, FDA is now taking steps towards applying those same principles to its own auditing schedule. At the end of July, the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation […]

Leave a Reply