IRS medical device tax likely to affect veterinarians in 2013
Veterinarians who are in the market for medical devices may want to consider making that purchase fairly soon.
On Jan. 1, 2013, a recently finalized rule from the IRS will take effect that places a 2.3 percent excise tax on some medical devices regularly found in veterinary hospitals.
Defining a medical device
From the IRS document on the medical device excise tax:
"The proposed regulations provide that for purposes of the medical device excise tax, a device defined in section 201(h) of the FFDCA that is intended for humans means a device that is listed as a device with the Food and Drug Administration (FDA) under section 510(j) of the FFDCA and 21 CFR part 807, pursuant to FDA requirements."
The rule specifies that although devices labeled and approved exclusively for veterinary use are exempt, devices that are approved for use in both humans and animals will be taxed.
The devices’ manufacturers will be responsible for paying the tax, which is based on their revenue from sales - something that may lead many of them to raise their prices in order to remain in business.
The AVMA medical device tax FAQ section lists several examples of devices that could be taxed because they are commonly used for both humans and animals, including IV fluid pumps, endoscopes, and cardiac monitors.
Potential implications for veterinarians
The most visible effect of the tax will occur when veterinarians go shopping for medical devices and encounter higher price tags on many items.
According to a survey of the medical device industry originally discussed on Heritage.org, 52.5 percent of 181 medical device companies surveyed said they planned on dealing with the tax by increasing prices.
Those increased costs will fall on the shoulders of veterinarians, who will ultimately face the tough decision of whether to pass them along to their clients, said AAHA President Mark Russak, DVM.
"Anytime you impact the cost of doing business, that impact is going to be passed on to consumers at a time when consumers just can’t afford to have more costs passed on to them," Russak said.
In an attempt to sidestep the tax, Russak said veterinarians might adjust their buying habits to specifically target devices that are exclusively for veterinary use. If that strategy isn't effective, Russak said veterinarians and their clients may simply have to find ways to absorb the higher costs.
“You’ll see a lot of ways to try to get around it, but here's the bottom line: If a piece of equipment costs $60,000 and somehow there’s a $2,000 tax on it, it’s going to be $62,000 and somebody’s going to have to pay that bill," he said.