UPDATE: Supreme Court Decision Allows Federal Medical Device Excise Tax to Take Effect on January 1, 2013

Thursday, June 28th, 2012

 
 
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On June 28, 2012, the United States Supreme Court voted to uphold the bulk of the Patient Protection and Affordable Healthcare Act (PPACA) of 2010. The court's decision means that the new federal medical device excise tax is still set to take effect on January 1, 2013. We previously reported on this tax here. See the Treasury Department's proposed regulation for this tax here.

Once effective, this portion of the PPACA will impose a 2.3% excise tax on the sale of certain medical devices by manufacturers or importers in the United States. Manufacturers and importers would be responsible for reporting and paying the tax, not the consumer.

For purposes of the excise tax, a "medical device" is a device intended for human use that meets the definition of "device" in section 201(h) of the Federal Food, Drug, and Cosmetics Act. According to that law, this definition includes any instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar article, including any component, part, or accessory, that is intended for use in the diagnosis or treatment of a human disease, or intended to affect the structure or any function of the body, but does not include drugs. Medical devices intended for use in the treatment of disease in animals will not be subject to excise tax.

While awaiting the Supreme Court's decision, there was some uncertainty as to whether the excise tax would take effect because it was conceivable that the Court could have invalidated the entire PPACA. Instead, in a 5-4 decision, the Supreme Court upheld the bulk of the law, including the controversial "individual mandate," which requires citizens to purchase health insurance or pay a penalty. The only portion of the PPACA that was held unconstitutional was the expansion of the federal-state Medicaid program.


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TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

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