Tax

[AJEL]

Internal Revenue Bulletin - March 26, 2012 - REG-113770-10
Sale price

The tax imposed under section 4191 is based on the price for which a taxable medical device is sold. Under section 48.4216(a)-1(a),the price for which a taxable article is sold includes the total consideration paid for the device, whether that consideration is in the form of money, services, or other things.
In other words a dentist must pay tax on what they charge as we must pay tax on what we charge.
The basic sale price rules assume that the manufacturer sells the taxable article in an arm’s length transaction (that is, in a transaction between two unrelated parties) to a wholesale distributor that then sells the taxable article to a retailer that resells to consumers. However, if a manufacturer sells a taxable article other than to a wholesale distributor or at less than a fair market arm’s length price, the taxable sale price is determined on a constructive sale price rather than the actual sale price. The constructive sale price rules are set forth in section 4216(b),in §48.4216(b)-1, §48.4216(b)-2, §48.4216(b)-3, and §48.4216(b)-4 of the regulations, and in numerous revenue rulings.
In human speak a DDS can not create a straw lab to sell them the device at a low price so that they can pay a lower tax. The DDS would be in violation of arms length transaction fraud against the government, jail-able offense.
Several commentators requested clarification on how the sale price rules work in the context of taxable medical devices, particularly with regard to “bonus” goods and rebates. These commentators indicated that rebates are a common practice in the medical device industry. Under existing manufacturers tax rules, if a manufacturer sells taxable articles at the regular price and includes some of the same articles as a bonus, the tax imposed under section 4191 applies to the total price charged for the entire order. With regard to rebates, §48.4216(a)-3(c) provides that the tax must be based on the original price of the taxable article, unless the rebate has been made prior to the close of the period for which the tax is returned.
Playing with the price with gimmicky the IRS has experience with people doing this in the past it would appear.

 

[Tom Moore]

Internal Revenue Bulletin - March 26, 2012 - REG-113770-10
Sale price

The tax imposed under section 4191 is based on the price for which a taxable medical device is sold. Under section 48.4216(a)-1(a),the price for which a taxable article is sold includes the total consideration paid for the device, whether that consideration is in the form of money, services, or other things.
In other words a dentist must pay tax on what they charge as we must pay tax on what we charge.
The basic sale price rules assume that the manufacturer sells the taxable article in an arm’s length transaction (that is, in a transaction between two unrelated parties) to a wholesale distributor that then sells the taxable article to a retailer that resells to consumers. However, if a manufacturer sells a taxable article other than to a wholesale distributor or at less than a fair market arm’s length price, the taxable sale price is determined on a constructive sale price rather than the actual sale price. The constructive sale price rules are set forth in section 4216(b),in §48.4216(b)-1, §48.4216(b)-2, §48.4216(b)-3, and §48.4216(b)-4 of the regulations, and in numerous revenue rulings.
In human speak a DDS can not create a straw lab to sell them the device at a low price so that they can pay a lower tax. The DDS would be in violation of arms length transaction fraud against the government, jail-able offense.
Several commentators requested clarification on how the sale price rules work in the context of taxable medical devices, particularly with regard to “bonus” goods and rebates. These commentators indicated that rebates are a common practice in the medical device industry. Under existing manufacturers tax rules, if a manufacturer sells taxable articles at the regular price and includes some of the same articles as a bonus, the tax imposed under section 4191 applies to the total price charged for the entire order. With regard to rebates, §48.4216(a)-3(c) provides that the tax must be based on the original price of the taxable article, unless the rebate has been made prior to the close of the period for which the tax is returned.
Playing with the price with gimmicky the IRS has experience with people doing this in the past it would appear.

For the dentist the crown is part of the treatment not all of the treatment. They will only pay on a fair market price of the crown manufacture not the entire amount billed for repairing the tooth. Is that office made crown price to be based on the average a domestic commercial labs charges or based on there cost to manufacture and a potential for profit?

This tax is going to force the bureaucratic creation of so many new rules to enforce collections it will be much like the complacated income tax before its through. Seems the current regime is interested more in redistribution of wealth an creating more government jobs that depend on taking the salaries from the productive in our society until we find easier to not be productive.

 

[VictoryDental]

If I understand it correctly I can itemize my invoices in doing so I will only tax the teeth along with processing and finishing of a denture or in case of partial denture- the framework, teeth, processing and finishing.

By itemizing I would not charge tax on the models, and wax-ups of any case

 

[JMN]

Has anybody heard a good guess on implant impression posts? They are made to go into the mouth, they are not made by us and they come out again straight away...

Way too much vagueness here, and a drawer full of rats is not going to fix that, only make it worse.

 

[AJEL]

Way too much vagueness here, and a drawer full of rats is not going to fix that, only make it worse.

I only wish the rats in DC had never looked our way.

By itemizing I would not charge tax on the models, and wax-ups of any case

The IRS hasn't spelled out enough, what seems to be is anything going into a new case would be taxed, anything going into a repair would not be. They have said the delivery is not taxed. So it would seem the model, custom tray, (have the DDS do it?) the baseplate, articulation, teeth, wax arrangement, processing, & ID would be taxed as those are all componts of complete new device. Packaging is not so denture box (also a normal retail exemption) not taxed as the handling & pickup fee is not taxed..
JMN that is one snake pit question, I wonder how it will be answered.
But again the IRS has not delivered the instructions for IRS 720 excise as it pertains to the medical device.

 

[CloudPeakDL]

The tax is only on the final product. If you subcontract a frame work it id not taxed. Only the final finished RPD. I have looked at the form we are suppose to use and don't understand it. All I see is questions about fuel. Maybe they will revise it???

 

[Tom Moore]

Has anybody heard a good guess on implant impression posts? They are made to go into the mouth, they are not made by us and they come out again straight away...

Way too much vagueness here, and a drawer full of rats is not going to fix that, only make it worse.

I agree. If I charge tax on things that are not taxable wouldn't I be braking the law? Somewhere there are rooms full of bureaucrats typing page after page of rules so we will not be confused.

 

[AJEL]

I agree. If I charge tax on things that are not taxable wouldn't I be braking the law? Somewhere there are rooms full of bureaucrats typing page after page of rules so we will not be confused.

I have read way to much of their prose. I must disagreethey are typing page after page of rules only that we will be confused.

 

[Flipperlady]

They've been having an informative chat about this over on the IDF the last few days. I'm torn between just charging on final denture/RPD as a whole and not charging tax on repairs/relines or just charging tax for all and waiting until someone spells things out further. Probably the first though, not going to line item anything, denture from start to finish will be taxed on final price and no tax for repair/reline.

 

[Kacey]

I didn't and won't vote for him. He's very very bad news for our country on many levels. So glad to see some of you are not voting for him, either. I'm in Ca where I'm mostly around liberals who think he's wonderful. I'm so sick of it.

 

[Kacey]

Well, I am not going to pay that tax. I make retainers and am going to consider them an aesthetic appliance rather than a medical device. So there.

 

[AJEL]

This is off topic of the tax but Kacey Y not enjoy a little easy reading try Breaking news and opinion on The Blaze

Well maybe not totally off topic.
Aug. Durable Goods Report Has Economist David Rosneberg Talking About Recession | TheBlaze.com

I like your idea but don't think I'll try it, after all a denture is an aesthetic appliance (ever see someone without one? when they usually wear one.)

 

[Rayne]

Here is a link to 3 videos and some info on the Medical Device Tax from Bennet Napier from the NADL:

FDA Medical Device Registration Requirements - Inside Dental Technology - dentalAEGIS.com

It clears up some of the confusion about the tax and ways the tax can be reduced by factoring delivery cost.

If you don't know where to start or how you will implement the new Medical Device Tax, Evident dental laboratory management software is already developing the features needed to make this new tax compliance as easy as possible.

Keep in mind the new tax for US dental laboratories is effective January 1st 2013. If you're considering empowering your dental lab with Evident, best start sooner than leave it to December 30th.

 

[VictoryDental]

Well, I am not going to pay that tax. I make retainers and am going to consider them an aesthetic appliance rather than a medical device. So there.

Kacey, I wish it was that easy but it does NOT matter what we say it is . . . The Infernal Revenue Service has already decided that

 

[subrisi]

I went to the local dental lab association meeting and got told that the IRS is still reworking the law to make it more detailed. This meeting is scheduled in October ( did not get a specific date) is someone able to keep track on the progress and update us whe it is published?
I also would like to know how you apply this tax to your quickbooks invoicing. I can't figure out how to do this. I charge a flat fee for a crown. This includes the modework and the shipping. So I could make up an amount for these items and deduct this from the total amount and itemize them as modes and shipping. But I got told that we have to be careful with our wording and if we charge for models separate, we might be punished with a regular sals tax. Also it is easy to do this for a single crown. But what to do when I have for example four crowns. I have to charge one crown at the reduced rate and three at the regular rate since I am only charging once for models and shipping per case and not per crown. So how are you guys dealing wiht this??

 

[subrisi]

I also learned that you can register for an exemption with the IRS using form 637
http://www.irs.gov/pub/irs-pdf/f637.pdf
for "certain excise tax activites" ( after they had their final meeting in October to clear up the last details). This will exempt you from paying the 2.3% medical device tax to companies like GC, Ivoclar, Jensen and more. They are also required to charge us the tax.

 

[JulesHouston]

I thought I would share the latest important news regarding our country's new Federal Medical Device Excise Tax (2.3% of the finished crown, denture, etc.) that will take into effect starting January 1, 2013.
I just received this from the NADL, IN THE EVENT YOU DID NOT KNOW - - - >
The National Association of Dental Laboratories has been active on the issue of the pending medical device excise tax at the federal level. The Florida Dental Laboratory Association believes the following information will be of interest to you as you prepare your laboratory budget for 2013.
In May 2012, NADL participated with the American Dental Association and nearly a dozen other allied dental organization in submitting formal comment to the Internal Revenue Service requesting that dental devices not be included in the administrative rule related to the medical device excise tax. This excise tax was included as a provision in the health care reform law passed in 2010.
The IRS held a public hearing in Washington D.C. in May 2012 and the formal submission on exempting dental devices was denied. This was the second time this had taken place, as NADL and ADA had submitted another request using different policy arguments in the spring of 2011 which was also denied.
In June 2012, the U.S. House of Representatives approved House Resolution H.R. 436, which would repeal the medical device excise tax, by a vote of 270-146. The U.S. Senate has not taken up the bill and all indications are that there are not enough votes for the U.S. Senate to hear the bill due to the political party composition of the Senate.
Even if the Senate were to pass and repeal this excise tax, President Obama has indicated he would VETO repeal of the medical device excise tax.
For dental laboratories this means come January 1, 2013, you will be required to remit a 2.3% excise tax on sales of finished devices.
For example, if the cost of your finished device such as a crown, to the dentist is $150.00, you would owe $3.45 for that crown. A laboratory that does $150,000.00 in gross sales of finished devices would owe $3,450.00 annually to the IRS.
NADL has researched the requirements of this new tax as it relates to administrative filing.
Dental laboratories will have to file excise taxes using Form 720 which is available at www.irs.gov<http://www.irs.gov> to report and pay the tax. This form has to be filed quarterly and then a final Form 720 is submitted at the end of each year.
Dental laboratories must use electronic funds transfer to make excise tax deposits. This can be done using the Electronic Federal Tax Payment System or same day wire transfers can be made from banking institutions.
The filing period for quarterly taxes is by the 14th day following the close of the previous quarter. The dates for filing taxes are April 30th, July 31st, October 31st and January 31st.
Excise taxes filed and deposited must be at least 95% of the net tax liability for the quarter. Form 720 includes sections which will assist a dental laboratory's accountant or bookkeeper figure the tax liability for each quarter.


Just received this


Sent from my iPad using Tapatalk HD

I've been reading for a while on this online and i'm finding most articles say "...domestically made crowns, bridges, dentures, veneers, and orthodontic appliances such as retainers WILL NOT BE SUBJECT TO THE TAX at the point of sale from dental labs to dentists." (i.e Dental Restorations and Restorative Materials)

But according to "National Health Insurance Reform and Its Impact on Dental Laboratories," NADL it says "The tax WILL BE ON THE SALE OF THE FINAL DEVICE rather than components...the tax would be on the sale of the finished device at the point that Laboratory A ships or delivers the finished device to the prescribing dentist..."

so what's the final verdict? are the labs to charge the "sales/federal" tax of 2.5% to dentists since they are buying a finished product? or is the tax to affect the dental labs, which inturn decreases their profit margin as they purchase the needed supplies to create the "finished product" that then dentist purchase?

is it just me or are sources contradicting? the new year is less than a week away...do we tax the dentists for buying the product? or are we getting taxed to get supplies?

 

[Rayne]

The MDT has been enabled in the Evident system. It was a little bit of a journey due to some pivotal information being left out of the preparation notes like the retail discount of 25%. But all has been corrected and we now have Evident users MDT-ing to their hearts content.

What a ridiculous tax! I haven't seen a tax so complicated .... ever! The accountants are going to rack up the billable hours on that little gem. However, if you are looking to simplify the integration of the new tax AND reduce the number of billable hours for your accountant, Evident is ready for your lab. We tried to minimize the time required so as not to impact the production of the lab, which is the goal of any good lab management software.

If any one is interested, please don't hesitate to call. Happy New Year and all the best for 2013!