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IRS issues final rule implementing medical device excise tax

December 5, 2012

The Internal Revenue Service today released a final rule implementing a Patient Protection and Affordable Care Act provision that imposes on certain medical devices made after 2012 an excise tax equal to 2.3% of their sales price. In comments submitted on the proposed rule, the AHA, Association for Healthcare Resource & Materials Management and others urged the IRS to explicitly prohibit device companies from passing the tax on to customers, and to clarify that hospitals and other health care providers who package and sterilize devices for use in surgery kits should not be treated as device manufacturers or importers under the rule. The final rule does not address AHA's recommendation that manufacturers certify that the tax has not been passed on to customers, but provides that current rules apply in determining the sales price of items. The final rule also states that a kit produced by a hospital or medical institution for its own use would not be a taxable medical device.