2.3% Excise Tax Goes into Effect in 2013; FDA Registration Fees Increase
Since the Health Care and Education Reconciliation Act was signed into law in May 2010, laboratory owners have been wondering whether the 2.3% excise tax on medical devices applies to dental restorations. Despite the efforts of the U.S. House of Representatives, NADL, ADA and nearly a dozen other allied dental organizations to have dental devices excluded from the tax, the IRS denied the request at a public hearing in Washington D.C. in May. "Effective January 1, 2013, it's prudent for dental laboratories to be prepared for remitting a 2.3% excise tax on sales of finished devices," says Bennett Napier, CAE Executive Director, NADL.
According to an analysis by Reed Smith, LLP, the NADL's Washington, D.C.-based law firm: - The tax applies to the finished device rather than components. For example, if Laboratory A outsources a partial framework to Laboratory B, there would be no tax due on the transaction. The tax only applies when Laboratory A delivers the final case to the prescribing dentist.
For imported restorations, the importer—meaning the U.S. agent for the foreign laboratory, or the domestic laboratory or dental practice that sent it directly overseas—is responsible for paying the tax.
Restorations fabricated in the dental office, including those fabricated via chairside milling systems, are also subject to the excise tax.
In terms of administrative filing, laboratories will have to use Form 720 which is available at 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. Form 720 includes sections that help your accountant or bookkeeper determine your tax liability for each quarter.
For more information, click this link, www.irs.gov/irb/2012-13_IRB/ar12.html
FDA Fee Increase
In August, the FDA released new requirements for the registration and listing of medical devices, including dental devices, that take effect on October 1, 2012. Among the changes:
For labs that undertake a business activity that requires it to register with the FDA (see "Who Needs to Register with the FDA" below), the registration fee has increased from $2,029 to $2,575; this increase applies to both domestic and foreign laboratories.
If you import, your business activity in that arena will become public record on the FDA website as foreign establishments must now identify their U.S. lab and dentist customers, even those who send work through a U.S. agent or broker.
"It's apparent this is an attempt by FDA to identify all entities in the U.S. that are importing and/or using devices from foreign establishments. This change significantly increases the transparency of entities that are doing any work offshore," says Napier.
The fee for filing a 510(k) form—required from labs that manufacture certain devices, like sleep apnea—has increased from $2,024 to $2,480; this is the fee for a small business with $100 million or less in sales. Filing this form also requires you to provide a website address. "FDA has been securing information from websites and apparently has been checking for 510(k)s on certain devices branded by the lab," says Napier. "If you don't have a 510(k) on the product, you shouldn't show that it treats any type of medical condition, symptom, disease or disorder such as sleep apnea. If you make a claim for treatment, then you must either file a 510(k) on the device yourself or ensure that the Manufacturer/Specification Developer has a 510(k)."
A lab that registers as a Manufacturer, Contract Manufacturer or Repacker/Relabeler must now identify any proprietary or brand names of the products (i.e. TAP III). Foreign operations must also now identify any proprietary names of the devices they manufacture.
For a complete summary of the requirements, click this link, www.fda.gov/MedicalDevices/ResourcesforYou/Industry/ucm314844.htm
Who Needs to Register with the FDA?
The rules dictating who must register with the FDA remain unchanged and include:
• All domestic and foreign laboratories that repackage or relabel restorations or material, including those who work through a U.S. broker or agent; domestic labs that import devices from a foreign laboratory; or domestic labs that fabricate sleep apnea or snoring devices (or any other medical device that is not part of the core dental lab function).
• All foreign dental laboratories shipping into the U.S.
• All U.S. brokers or agents for foreign dental labs shipping into the U.S.
To see past coverage of this topic, click on the links below:
New Healthcare Law Includes Excise Tax On Restorations, June 2010
Attention Laboratory Owners: You Remain On the FDA's Radar, June 2010
To see all conversations and activity related to Excise Tax, click here.
