2.3% Medical Device Tax to Impact Dental Offices in January 2013

Molly PereiraFeatured News

November 20, 2012

Starting Jan. 1, 2013, many medical and dental devices will be subject to a 2.3% excise tax, mandated by the Affordable Care Act (ACA).  The primary impact to most dental offices is expected to be a correlated price increase on purchases of dental equipment, materials and supplies in 2013.

While we are still waiting for the Internal Revenue Service (IRS) to issue final regulations on this tax, completed crowns, bridges, dentures, and other dental prosthetics may not be directly taxed. However, the materials used to make prosthetics and perform dental procedures (such as metal alloys, ceramics, resins, acrylics, porcelains, abutments, individual teeth used in prosthetics, etc.) are devices listed with the FDA and likewise expected to be subject to the tax. In addition to restorative, endodontic and prosthetic materials, dental suppliers are expected to tax the purchase of dental instruments (surgical and hand instruments) and dental equipment (x-ray units, etc.).

According to the draft IRS regulations, the direct impacts of this tax should primarily fall on manufacturers and importers of dental materials and devices. Manufacturers and importers would be responsible for paying and reporting the tax, though costs will often be passed through to dental offices and dental patients.  Also, dental laboratories that produce certain sleep apnea devices, snore guards and dental implants that must be listed with the FDA would be responsible for collecting and reporting the tax on these goods.  If your dental office uses a foreign laboratory and directly imports any crowns, bridges, dentures, dental implants, mouth guards or orthodontic devices such as retainers, consult with your legal or tax accounting professional to determine the applicability of the tax to your business activities. It appears that dental laboratories, manufacturers and suppliers will have the option of itemizing the medical device tax on the dentist’s invoice or incorporating the tax into the price of the good. However, final IRS regulations have not yet been issued, and these interpretations are subject to any clarification that those regulations may provide.

The ADA has repeatedly petitioned both the IRS and Congress for an exemption from the medical device tax, as it is expected to increase the aggregate cost of dental care by more than $160M each year. However, the IRS has been clear that it will not provide blanket exemptions to industries or professions, and that dental devices that must be listed with the FDA will be subject to the tax.  In Congress, a coalition of medical groups was successful in passing H.R. 436, a bill to repeal the medical device tax – through the U.S. House in June 2012 – but the bill has not passed the Senate. With little time remaining in this lame-duck Congress and other major issues at hand, Congress is not expected to act on a legislative exemption to the medical device tax before the tax takes effect in January 2013.

However, the ADA continues to advocate for repeal of the medical device tax. Please click here to take action and ask Congress to repeal the tax before January.