Tax & Accounting Blog

New Excise Tax on Medical Devices a Sales Tax?

Blog, Indirect Tax July 11, 2012

The Supreme Court’s recent ruling upholding President Obama’s health care plan as Constitutional under Congress’s Constitutional authority to levy taxes has given rise to a need for additional taxes to support that “tax”. Of those additional taxes the one that has received the most press so far, largely in part to the outcry from Jersey Shore’s Snooki, is the Tanning Tax. The Tanning Tax is a 10% excise tax on all indoor tanning that went into effect in 2010.  Less publicized taxes including an excise tax on medical-device manufacturers and other new taxes on drug manufacturers are expected to raise $20 billion.

Beginning on January 1st of next year medical device manufacturers will be required to pay a 2.3% excise tax on their sales of FDA approved medical devices. This would include items such as replacement hips and implantable defibrillators and applies to sales rather than profits causing it to be compared to a sales tax by some. The new tax is expected to cost Medtronic, Inc., the nation’s largest manufacturer of medical devices, between $130 and $150 million dollars next year. A bill was passed by the House in June to repeal the tax; however the White House is expected to veto that legislation if it reaches the President’s desk.