A tax on medical device sales has come into force after a last-ditch effort to extend the suspension fell short. The failure to stop the progress of the tax means manufacturers will have to report sales to the Internal Revenue Service (IRS) and pay 2.3% on revenues generated by products covered by the levy.
Lawmakers originally came up with the tax to help fund the cost of Obamacare. The industry opposed the tax from day one. And, while it failed to get the tax repealed, it did succeed in pushing back its implementation by two years. That moratorium on the tax ended on 1 January.
The tax has come into force despite opposition by the medical device industry and many politicians. Republican attempts to repeal Obamacare would have eliminated the tax had they succeeded. When the repeal effort failed, focus shifted onto the major tax overhaul designed by the Trump administration. That law passed but lacked provisions for freeing medical device manufacturers from the excise tax.
With the tax bill passing shortly before the end of 2017, the medical device industry and its friends in Congress embarked on a last-ditch effort to extend the suspension. AdvaMed CEO Scott Whitaker wrote a letter (PDF) to President Donald Trump, in which he called for action to stop a “devastating tax” that has “resulted in the loss or deferred creation of jobs, reduced R&D and slowed capital expansion.”
Whitaker’s preferred option was legislative action to repeal the medical device tax—and he praised lawmakers who proposed such a change in a separate statement—but he also suggested Trump encourage the IRS to provide administrative relief. Such relief could free companies of biweekly deposit requirements that Whitaker thinks lead to “millions in compliance costs.”