The Medical Device Excise Tax was engineered to generate an estimated $20 billion for fiscal years 2013 through 2019 to help pay for the Affordable Care Act. Section 4191 of the Internal Revenue Code (IRC) imposes a 2.3% excise tax on the sale of certain medical devices by the manufacturer or importer of the device. The tax applies to sales of taxable medical devices after December 31, 2012.
A report released July 17 by the U.S. Treasury Inspector General for Tax Administration (TIGTA), stated the amount of revenue collected by the Internal Revenue Service (IRS) from the medical device excise tax is lower than expected – $913.4 million through the second quarter of fiscal year 2013.
Manufacturers, producers, and importers of medical devices are responsible for collecting the tax and must file a Form 720, Quarterly Federal Excise Tax Return. However, the IRS cannot identify the population of medical device manufacturers, producers, and importers registered with the Food and Drug Administration that are required to file Form 720 and pay the excise tax.
In addition, after conducting an audit to assess the IRS processing of tax returns, TIGTA found tax discrepancies and erroneously assessed taxpayer penalties.
This TIGTA report may add fuel to efforts to repeal the tax, which has already faced some opposition by lawmakers on both sides.
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