News & Insights

Extension of the Moratorium for the 2.3% Medical Device Excise Tax

Journal of the Michigan Dental Association (March 2018)

By Daniel J. Schulte, MDA Legal Counsel
March 16, 2018

QUESTION:

I have been reading about the medical device excise tax (2.3% of the cost of medical devices) coming back in 2018. This was talked about in the past but I thought it had gone away. Is this true? MDA just got rid of the Michigan sales tax on what we buy from dental labs. Will dentists now be charged this 2.3% tax on these items?

ANSWER:

The Federal Medical Device Excise Tax was originally enacted in 2013 as part of the Affordable Care Act (a/k/a “Obamacare”). This tax was supposed to be imposed on manufacturers, importers and producers of “medical devices”. Medical devices was broadly defined as any: instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article…  intended for use in the diagnosis of disease or other condition, or in the cure, mitigation, treatment, or prevention of disease ... or ... intended to affect the structure or any function of the body that does not achieve its primary intended purpose through chemical action. The only exceptions are eyeglasses, contact lenses and hearing aids and devices generally purchased by the general public at retail for personal use. This definition is certainly broad enough to include dental implants, crowns and other items typically purchased by dentists from dental labs.

The tax is imposed upon manufacturers, importers and producers of medical devices. This tax is not required to be separately stated on invoices or otherwise separately charged to dentists or others. It is not known whether and to what extent dental laboratories and other manufacturers, importers, and producers of devices subject to the tax have already built into their price an additional 2.3% to cover the cost of this tax. Hopefully this is not the case.

Thanks to successful lobbying efforts of the ADA and others a moratorium was placed on the implementation of this tax in 2015 that expired December 31, 2017. The tax took effect January 1, 2018. Fortunately, the Internal Revenue Service announced that collection of this tax was not scheduled to begin until January 29, 2018, giving it time to publish guidance on collection and reporting issues.

On January 22, 2018, as part of HR 195 (the continuing appropriations that reopened the Federal government through February 8, 2018) the moratorium on the medical device excise tax has been further extended until January 1, 2020. The lobbying efforts of the ADA and others will continue and the hope is that the medical device excise tax will be repealed before this extension of the moratorium expires.


About Daniel Schulte ...

Daniel J. Schulte has more than 20 years experience representing small business owners in all aspects of transactional, operational and regulatory legal matters. A Certified Public Accountant as well as an attorney, Dan is the firm's managing partner and chair of the Health Care Practice Group.  

He regularly advises and counsels concerning the formation of business entities, the preparation and review of business and corporate contracts, the purchase and sale of ownership interests in businesses and/or their assets, and the purchase, sale and leasing of real estate. A significant component of Dan’s practice involves representing healthcare professionals in state regulatory matters, including disciplinary and other licensing disputes with the State of Michigan, and federal regulatory matters including fraud and abuse issues. He also counsels on the anti-kickback and Stark laws, preparation of compliance programs, and responding to and negotiating settlements in connection with government enforcement actions.

Dan is well-known for his knowledge and experience in the area of association law, and is primarily responsible for the firm’s representation of the Michigan State Medical Society the Michigan Dental Association and the Michigan Osteopathic Association.  His work related to association law includes the drafting and review of new legislation and the preparation of Amicus Curiae Briefs for filing in Michigan’s Supreme Court and Court of Appeals on a variety of topics affecting health care professionals practicing in Michigan.

Dan writes articles and presents frequently before legal, medical and business groups on a variety of topics, including HIPAA, the HITECH Act, the Stark Law, the fraud and abuse laws, health care compliance plans, business succession planning, asset protection, and estate and tax planning. 

He is ranked among The Best Lawyers in America®, and has been named a “Michigan Super Lawyer” by Thomson Reuters.


About Kerr Russell ...

We are proud of Detroit. We are proud to have had a seat at the table here since 1874.

Our exceptional attorneys understand the unique challenges facing business leaders. Our legal solutions are prompt, accurate, economical, and focused around your needs in every area, including business law, labor and employment, immigration, mergers and acquisitions, real estate and construction, healthcare, medical practices, tax, contract negotiation, restructuring, automotive, manufacturing, and commercial litigation.

Whereas many lawyers merely interpret the law, our attorneys help to make it. We have been involved in some of the most significant legal developments in state business and health care law, and our trial lawyers have been involved in many notable commercial cases in Michigan and other jurisdictions.

In business and legal circles, we are respected for our high standards, quality work, and professional ethics and integrity.

For nearly 150 years, Detroit has been our home. Detroit will always be our home.

 

CONTACT INFO:

Detroit Center

500 Woodward Ave., Suite 2500,

Detroit MI 48226

Phone: 313.961.0200

Fax: 313.961.0388

Website: www.kerr-russell.com

 

Columbia Center

201 West Big Beaver Road, Suite 260, Troy, MI 48084

Phone: 248.740.9820

Fax: 248.740.9840

Website: www.kerr-russell.com

 

7/F, Oriental Financial Centre

333 Lu Jia Zui Ring Road, Pudong District, Shanghai 200120, China

Phone: +86.21.20501851

Fax: +86.21.20501877

Website: www.kerr-russell.com.cn

           

Main Office - Detroit T 313.961.0200
Troy T 248.740.9820
China T +86 21 20501851