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The Medical Device Tax & Dental Laboratory 
e Devices
The vast majority devices made by domestic dental laboratories do not meet the IRS’s Final Rule definition of a “Taxable Medical Device” as defined in § 48.4191–2. – December 7, 2012
Taxable Medical Device – IRS Final Rule
The IRS released its Final Rule on the Medical Device Tax on December 5, 2012. There was no change to the IRS proposed rule definition of “Taxable Medical Device” in the Final Rule. Therefore, the NADL’s analysis released in mid-October 2012 is confirmed. This is good news for most domestic dental laboratories as most domestic dental laboratories are manufacturing dental devices that are not required to be listed with the FDA. Devices that are not required to be listed as a device with the FDA do not meet the IRS definition of a “taxable medical device” and consequently will not be subject to the Medical Device Tax.
§ 48.4191–2 Taxable medical device.
(a) Taxable medical device—(1) In general. A taxable medical device is any device, as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act (FFDCA),that is intended for humans. For purposes of this section, a device defined in section 201(h) of the FFDCA that is intended for humans means a device that is listed as a device with the Food and Drug Administration (FDA) under section 510(j) of the FFDCA and 21 CFR part 807, pursuant to FDA requirements. (emphasis added)
77 Fed. Reg. 236 (7 December 2012) p. 72934
Discussion
Dental Laboratories make crowns, bridges, dentures, dental implants, mouth guards and orthodontic devices such as retainers and sleep apnea devices and snore guards. Many of the raw materials and components used to make these items (such as alloys, ceramic, resins, abutments, individual denture teeth, etc.) and some equipment such as articulators, handpieces and brushes are required to be listed with the FDA as a device. However, with the exception of sleep apnea devices and snore guards, most of the devices that are domestically made by dental laboratories are not required to be listed with the FDA.
While the FDA requires all establishments that manufacture medical devices to register with the FDA and requires these establishments to list the devices that they manufacture with the FDA pursuant to 21 CFR 807, § 807.65(i) generally exempts domestic dental laboratories from the FDA’s device listing requirements. However, if a dental laboratory undertakes certain activities, such as importing devices or manufacturing sleep apnea devices or snore guards, the dental laboratory will be required to register with the FDA and list those devices it makes with the FDA. The FDA also requires crowns, bridges, dentures, dental implants, mouth guards and orthodontic devices to be listed if they are made by a foreign manufacturer and imported by a domestic dental laboratory.
It is important to note that the IRS definition of importer that applies to excise taxes is different from the FDA’s importer definition. Under the IRS definition of “importer” the person who brings an article into the United States is only a nominal importer if they are not also the beneficial owner of the article. Generally, the cases and rulings hold that the “importer” is the first purchaser resident in the United States who arranges (as principal and not as an agent) for, or is the inducing and efficient cause of, goods being brought into the United States for sale or use by him. For example, if you engage a customs broker they are a nominal importer and the IRS deems the beneficial owner to be the importer for excise tax purposes, meaning the beneficial owner is the entity that will file quarterly returns and remit the tax to the IRS. See 26 CFR 48.0-2(a)(4) for the IRS definition of “importer.”
Conclusion
Domestically made crowns, bridges, dentures, dental implants, mouth guards and orthodontic devices such as retainers are generally not required to be listed as a device with the FDA under section 510(j) of the FFDCA and 21 CFR part 807, pursuant to FDA requirements. Therefore, domestically made crowns, bridges, dentures, dental implants, mouth guards and orthodontic devices such as retainers are not included in the IRS definition of “taxable medical devices” for the purposes of the Medical Device Tax.
PLEASE SHARE THIS ANALYSIS WITH YOUR LEGAL OR TAX ACCOUNTING PROFESSIONAL TO DETERMINE ITS APPLICABILITY TO YOUR INDIVIDUAL BUSINESS ACTIVITIES.
NOTHING IN THIS ANALYSIS IS INTENDED AS OR SHOULD BE CONSTRUED AS OR RELIED UPON AS
U.S. FEDERAL TAX ADVICE AND CAN NOT BE USED FOR THE PURPOSE OF AVOIDING ANY PENALTIES UNDER THE INTERNAL REVENUE CODE.
Continue reading...
e DevicesThe vast majority devices made by domestic dental laboratories do not meet the IRS’s Final Rule definition of a “Taxable Medical Device” as defined in § 48.4191–2. – December 7, 2012
Taxable Medical Device – IRS Final Rule
The IRS released its Final Rule on the Medical Device Tax on December 5, 2012. There was no change to the IRS proposed rule definition of “Taxable Medical Device” in the Final Rule. Therefore, the NADL’s analysis released in mid-October 2012 is confirmed. This is good news for most domestic dental laboratories as most domestic dental laboratories are manufacturing dental devices that are not required to be listed with the FDA. Devices that are not required to be listed as a device with the FDA do not meet the IRS definition of a “taxable medical device” and consequently will not be subject to the Medical Device Tax.
§ 48.4191–2 Taxable medical device.
(a) Taxable medical device—(1) In general. A taxable medical device is any device, as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act (FFDCA),that is intended for humans. For purposes of this section, a device defined in section 201(h) of the FFDCA that is intended for humans means a device that is listed as a device with the Food and Drug Administration (FDA) under section 510(j) of the FFDCA and 21 CFR part 807, pursuant to FDA requirements. (emphasis added)
77 Fed. Reg. 236 (7 December 2012) p. 72934
Discussion
Dental Laboratories make crowns, bridges, dentures, dental implants, mouth guards and orthodontic devices such as retainers and sleep apnea devices and snore guards. Many of the raw materials and components used to make these items (such as alloys, ceramic, resins, abutments, individual denture teeth, etc.) and some equipment such as articulators, handpieces and brushes are required to be listed with the FDA as a device. However, with the exception of sleep apnea devices and snore guards, most of the devices that are domestically made by dental laboratories are not required to be listed with the FDA.
While the FDA requires all establishments that manufacture medical devices to register with the FDA and requires these establishments to list the devices that they manufacture with the FDA pursuant to 21 CFR 807, § 807.65(i) generally exempts domestic dental laboratories from the FDA’s device listing requirements. However, if a dental laboratory undertakes certain activities, such as importing devices or manufacturing sleep apnea devices or snore guards, the dental laboratory will be required to register with the FDA and list those devices it makes with the FDA. The FDA also requires crowns, bridges, dentures, dental implants, mouth guards and orthodontic devices to be listed if they are made by a foreign manufacturer and imported by a domestic dental laboratory.
It is important to note that the IRS definition of importer that applies to excise taxes is different from the FDA’s importer definition. Under the IRS definition of “importer” the person who brings an article into the United States is only a nominal importer if they are not also the beneficial owner of the article. Generally, the cases and rulings hold that the “importer” is the first purchaser resident in the United States who arranges (as principal and not as an agent) for, or is the inducing and efficient cause of, goods being brought into the United States for sale or use by him. For example, if you engage a customs broker they are a nominal importer and the IRS deems the beneficial owner to be the importer for excise tax purposes, meaning the beneficial owner is the entity that will file quarterly returns and remit the tax to the IRS. See 26 CFR 48.0-2(a)(4) for the IRS definition of “importer.”
Conclusion
Domestically made crowns, bridges, dentures, dental implants, mouth guards and orthodontic devices such as retainers are generally not required to be listed as a device with the FDA under section 510(j) of the FFDCA and 21 CFR part 807, pursuant to FDA requirements. Therefore, domestically made crowns, bridges, dentures, dental implants, mouth guards and orthodontic devices such as retainers are not included in the IRS definition of “taxable medical devices” for the purposes of the Medical Device Tax.
PLEASE SHARE THIS ANALYSIS WITH YOUR LEGAL OR TAX ACCOUNTING PROFESSIONAL TO DETERMINE ITS APPLICABILITY TO YOUR INDIVIDUAL BUSINESS ACTIVITIES.
NOTHING IN THIS ANALYSIS IS INTENDED AS OR SHOULD BE CONSTRUED AS OR RELIED UPON AS
U.S. FEDERAL TAX ADVICE AND CAN NOT BE USED FOR THE PURPOSE OF AVOIDING ANY PENALTIES UNDER THE INTERNAL REVENUE CODE.
Continue reading...
