March 16, 2018

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

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The Federal Medical Device Excise Tax was originally enacted in 2013 as part of the Affordable Care Act (a/k/a “Obamacare”).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 The lobbying efforts of the ADA and others will continue and the hope is that the medical device excise tax will be repealed before this extension of the moratorium expires.

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