For purposes of the excise tax, a “manufacturer” produces a taxable medical device from new, used or raw material by processing, manipulating or changing the form of an article, or by combining or assembling two or more articles. An “importer” brings a taxable medical device into the US from outside the country. (In this publication, we refer to both manufacturers and importers as manufacturers.)
The US Food and Drug Administration (FDA) requires the listing of medical devices by manufacturers. Under regulations the Internal Revenue Service (IRS) has proposed for implementing the excise tax, a device is subject to the excise tax if it is intended for humans and meets the definition of a device in section 201(h) of the Federal Food, Drug and Cosmetic Act (the FFDCA),2 which generally says devices don’t achieve their primary purpose through chemical action. Certain software and medical information technology may be considered medical devices if they are listed with the FDA.
An entity may perform other activities that make a device taxable under the proposed regulations. For example, a “convenience kit” is defined as two or more medical devices, or a combination of devices and other items, that are packaged together for the convenience of the user.
Certain health care organizations and distributors assemble kits for their own use or for sale to others. When a health care organization or distributor sells or uses a kit it assembled, it will need to determine whether it owes the excise tax. A key factor to consider in making this determination is whether the assembled kit is on the FDA list of medical devices.
For purposes of the excise tax, a “manufacturer” produces a taxable medical device from new, used or raw material by processing, manipulating or changing the form of an article, or by combining or assembling two or more articles. An “importer” brings a taxable medical device into the US from outside the country. (In this publication, we refer to both manufacturers and importers as manufacturers.)
The US Food and Drug Administration (FDA) requires the listing of medical devices by manufacturers. Under regulations the Internal Revenue Service (IRS) has proposed for implementing the excise tax, a device is subject to the excise tax if it is intended for humans and meets the definition of a device in section 201(h) of the Federal Food, Drug and Cosmetic Act (the FFDCA),2 which generally says devices don’t achieve their primary purpose through chemical action. Certain software and medical information technology may be considered medical devices if they are listed with the FDA.
An entity may perform other activities that make a device taxable under the proposed regulations. For example, a “convenience kit” is defined as two or more medical devices, or a combination of devices and other items, that are packaged together for the convenience of the user.
Certain health care organizations and distributors assemble kits for their own use or for sale to others. When a health care organization or distributor sells or uses a kit it assembled, it will need to determine whether it owes the excise tax. A key factor to consider in making this determination is whether the assembled kit is on the FDA list of medical devices.
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