
AJEL
Well-Known Member
Full Member
- Messages
- 1,756
- Reaction score
- 233
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.
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.