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AAFCPAs Advises Clients to Prepare for the Return of the Medical Device Tax

AAFCPAs would like to make clients aware that, effective January 1, 2018 the “moratorium” on medical device excise taxation expired, which affects many companies in the life-sciences, including those focused on bio-medical, pharmaceutical, or manufacturing & distribution. As you may recall, the Obama administration enacted the “Protecting Americans From Tax Hikes Act of 2015” (“PATH Act”) which imposed a moratorium on medical device excise tax (“MDET”) beginning on January 1, 2016, and ending on December 31, 2017.  The recently enacted tax legislation does not extend the moratorium.

With the return of MDET, AAFCPAs advises clients to prepare for the reimplementation of this federal excise tax. The MDET is reported on Form 720, Quarterly Federal Excise Tax Return.  The first quarterly return for the medical device excise tax is due April 30, 2018, for the months of January, February and March 2018.  The payment of this tax is due with the return.

MDET is a 2.3% tax on medical devices that was enacted beginning with January 1, 2013.  The tax applies to manufacturers and importers of certain medical devices.  Generally, a “taxable medical device” is a device listed with the FDA under section 510(j) of the Federal Food, Drug and Cosmetic Act. This includes all biologic devices that are listed with the FDA.  Section 201(h) of the FFDCA defines “device” as an “instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article.” All such devices are subject to the 2.3% excise tax unless a specific exemption applies.

The MDET is particularly onerous due to its complexities and reporting requirements, and it essentially amounts to a sales tax applied to members of a targeted industry group regardless of a company’s profitability.  The medical device industry has made numerous requests to repeal the tax, arguing that it may jeopardize jobs or force companies to scale back critical research.

If you have any questions about the business impact of the January 2018 return of the MDET, please contact your AAFCPAs partner or Richard Weiner, CPA, MST at 774.512.4078 or rweiner@nullaafcpa.com.

About the Authors

Bella Amigud
Bella delivers compliance and tax planning solutions for public and privately-held companies, and family-owned businesses in a variety of industries, including: healthcare technology, high tech, software, green tech, clean tech, retail, and private equity.  Her skills are concentrated on federal and multi-state taxation, advising AAFCPAs’ clients on:  understanding the impact of the Tax Cuts and Jobs Act (H.R. 1); physical presence versus economic nexus; state apportionment; tax exposure in relation to FIN 48 financial reporting; and the tax implications of multi-state transactions, such as: mergers, acquisitions, expansions and relocations. Bella advises corporations, S corporations, partnerships, and limited liability companies on issues affecting tax liability.
Richard Weiner CPA
Rich has over 30 years of broad tax experience with a specialty in tax planning and consulting for private and publicly-held businesses. Rich has specific expertise in the Software, Bio-Technology, Medical Device, Life Science, Manufacturing, Retail, Professional Service and Publishing industries, as well as U.S. aspects of international taxation. He works extensively with European companies expanding into the U.S. market. Additional areas of focus include companies and stockholders in transition, including structuring of and planning for Mergers & Acquisitions, planning for changes in ownership and management, and adoption of tax methodologies with a view toward the long term. He is well known in his field and is a frequent speaker on a variety of tax related topics.