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Medical Device Excise Tax - IRS Issues Revised Form 637


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On September 18, 2012, the Internal Revenue Service released the Form 637 "Application for Registration (for Certain Excise Tax Activities)” which is required to be submitted by manufacturers, producers and importers of taxable medical devices who are claiming either the export or further manufacture exemptions from the medical device excise tax.

Effective January 1, 2013, IRC §4191 imposes a 2.3% excise tax on sales of certain medical devices by the manufacturer, producer, or importer of the device. The Proposed Regulations provide guidance on the types of devices that are subject to the tax, provide clarification on the retail and other exemptions and leverage the existing manufacturing excise tax regulations.

The statute provides four exemptions to the tax: (1) products exported or destined for export; (2) components sold for further manufacture or for sale for resale for further manufacture; (3) products intended for non-human use; and (4) eyeglasses, contact lenses, hearing aids, or “any other medical device generally purchased by the general public at retail for individual use as prescribed by the Secretary” (referred to as the “retail exemption”).

To make a tax-free sale for further manufacture or export, the manufacturer, the first purchaser, and in some cases the second purchaser must be registered with the IRS. A manufacturer or purchaser applies for registration by filing IRS Form 637, “Application for Registration (For Certain Excise Tax Activities),” in accordance with the instructions on the form. The registration requirements for tax-free sales are contained in Treasury Regulation §48.4222(a)-1. Foreign purchasers of articles sold or resold for export are exempt from the registration requirement.

Generally, the purchaser of a taxable article must provide the purchaser’s registration number to the manufacturer and certify the exempt purpose for which the article will be used. The information must be in writing and may be noted on the purchase order or other document furnished by the purchaser to the manufacturer in connection with the sale.

Considerations for your organization

Given the rapidly approaching effective date of this new tax, your organization should consider filing Form 637 now to determine proper documentation will be in place to claim tax-free sales. Additionally, consider communicating with your customers to confirm that they are also filing IRS Form 637 now, if appropriate.

Contact

For additional guidance, contact one of the below Deloitte Tax practitioners.

David Green
Partner — Life Sciences Tax Managing Partner
Deloitte Tax LLP

John Seabrook
Partner — National Federal Tax Services
Deloitte Tax LLP

Pam Downs
Partner — Multistate Tax Services
Deloitte Tax LLP

Michelle Davis
Senior Manager — Business Tax Services
Deloitte Tax LLP

Ashley Price
Senior Manager — National Federal Tax Services
Deloitte Tax LLP

Arianda Hicks
Manager — Multistate Tax Services
Deloitte Tax LLP

Download the PDF attachment for a printable copy of this alert.

As used in this document, “Deloitte” means Deloitte Tax LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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