The medical device industry is asking the IRS to “be reasonable” when it determines a key pricing rule in the 2.3% medical device excise tax.
“AdvaMed urges treasury to instruct its agents to be reasonable in their audit of this issue and mindful of the data limitations which companies face,” the industry council wrote to the Internal Revenue Service and U.S. Treasury Dept. "This acknowledgement should extend to the challenges our industry faces in complying with the complex constructive pricing rules.”
The constructive sales rule is the point of sale at which an excise tax is levied. It’s a complicated determination for medical devices, which are often made using components from other companies – each a potential point of sale at which to levy the tax. The industry council is asking the IRS to cut device companies a little slack when auditing initial returns, slated to roll in next year.
The medical device tax will go into effect Jan. 1, 2013, with the 1st checks to the federal government due Jan. 29.
As reported on MassDevice.com, tax experts and audit firms are telling med-tech executives that their companies will need up to 6 months to prepare for the tax, in order to put data management systems in place and begin maintaining a paper trail.
Calculating which devices are taxable and at what cost, AdvaMed said, is a tall order for its member companies to have squared away on day 1 – or day 720 for that matter.
“This determination and others will require substantial analysis by companies on a device-by-device basis and the development of record-keeping systems consistent with those determinations,” AdvaMed wrote.
In all, the group submitted 22 pages of comments to the IRS, arguing that the tax should also exempt all devices given away or used as demos, evaluation products, loaned devices, testing, development and replacement parts or donations.
More MassDevice coverage of the med-tech tax
The device tax, which became law nearly 2 years ago as part of the Patient Protection & Affordable Care Act, is forecast to generate at least $3 billion annually. The bulk of those funds will come from large companies such as Medtronic (NYSE:MDT), which will fork over somewhere between $125-$175 million in 2013, according to its own estimates. In all, the tax could put more than $30.1 billion in federal coffers by 2022, according to a MassDevice.com analysis.
