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December 19, 2012

IRS Releases Final Regulations on the Medical Device Excise Tax

Arnold & Porter Advisory

On December 7, 2012, the Internal Revenue Service (IRS) published final regulations on the medical device excise tax that will apply to sales of applicable medical devices beginning on or after January 1, 2013. The tax was imposed as part of the broad health care reform legislation enacted in 2010. Specifically, section 1405(a) of the Health Care and Education Reconciliation Act (HCERA) amended the Patient Protection and Affordable Care Act (PPACA) to provide that any "manufacturer, producer, or importer" of taxable medical devices shall be required to pay a tax equal to 2.3 percent of the sales price of the device. Concurrently with the final regulations, the IRS also issued interim guidance (Notice 2012-77) dealing with certain pressing issues - including the determination of a manufacturer's taxable sales price. The IRS regulations apply to all manufacturers. There are no exemptions for small manufacturers.

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