OEM's ASK U.S. IRS TO BLOCK TAX CREDIT FOR RESELLERS

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OEM’s ASK U.S. IRS TO BLOCK TAX CREDIT FOR RESELLERS (Imaging and radiotherapy industry)

Imaging and radiotherapy OEMs are asking the Internal Revenue Service to make sure an excise tax on medical devices doesn’t put them at a disadvantage against resellers, and that it doesn’t hurt the leasing industry.In an appeal to the IRS, the Medical Imaging & Technology Alliance, a lobby made of imaging and radiation therapy OEMs, said that a 2.3 percent excise tax on device sales scheduled to take effect in 2013 could give some resellers a leg up if it’s only applied to Food and Drug Administration-registered companies, and not to everyone who sells the equipment. "We want to make sure that anybody, whether they’re reselling our equipment or they’re selling peripherals to our equipment, doesn’t have an advantage over the manufacturers for what they’re doing," MITA Executive Director David Fisher told DOTmed News."For example, if a company is selling a printer to print out images for a CT machine, and we have to pay a tax when we sell that printer, then whoever else is selling a replacement printer should also [be taxed]. And if someone is reselling a CT machine, then that person should be taxed the way we would be taxed," he said."What if a hospital resells a CT machine?" he added. "They would not be a registered FDA manufacturer, and so would they pay the tax? What we’re saying is, they should pay the tax."

Currently, the rules for the tax, which was created by the health reform bill last year, have not been finalized, and it’s not clear that only FDA-registered firms would be subject to the tax. But Fisher said they hope the IRS takes their arguments into account when figuring out what companies will pay it.

MITA also wants the federal tax collectors to note the differences between capital equipment — expensive, reusable devices that can be resold — and other types of medical devices when hashing out how the tax will be applied. For example, the group worries that replacement parts on service contracts might also be taxed."In the service contract, when we install replacement parts to keep the original product operating, those component parts…should not be taxed again, as they’re already taxed in the original sale," Fisher said.Because the devices are so expensive, they’re often leased. And Fisher is concerned that the new tax might have to be paid upfront instead of paid out over time."Leasing is not a new concept. There are rules for it. What we’re saying is, you’ve got to use those rules for this equipment too. It goes back to the fact that they can’t treat all medical devices the same in the regulation," he said.

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April 6, 2011 at 8:34 AM