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Medical Excise Tax Suspended

Medical Excise Tax Suspended

Under Section 4191 of the Internal Revenue Code, there is an excise tax imposed on the sale of certain medical devices by their manufacturers, distributors, or importers. Under this Section, a 2.3% tax rate applies to medical device sales after December 31, 2012.

The tax was in effect from 2013 to 2015, however, a two-year moratorium was in effect for 2016 and 2017. The medical excise tax was reinstated January 1, 2018.

In order to avoid the continuation of a government shutdown, President Trump signed H.R. 195 on January 22, 2018, which included a provision to suspend the medical excise tax for 2018 and 2019. The suspension is retroactively in effect to January 1, 2018. There is no need for manufacturers, distributors, or importers to collect and/or remit this tax for the month of January and deposits previously made are expected to be refunded by the IRS.

Had this temporary relief not been issued, sales occurring after December 31, 2017, would have generally required semi-monthly deposits if the tax liability exceeded $2,500. The medical excise tax is not set to be in effect until December 31, 2019, for medical device sales after this date, pending future legislation that may further suspend or repeal the tax.

If you have questions regarding the medical excise tax or any related subject, please do not hesitate to contact your Withum advisor or fill out the form below and we’ll reach out to you.

Author: Shawn Henderson, CPA | shenderson@withum.com 

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