CFO Studio Magazine with David Huber

4th QUARTER 2012 WWW.CFOSTUDIO.COM 19 vices in the relevant FDA classification regu- lation heading, or in the FDA’s product code name, the FDA’s device classification name, or the “classification name” field in the FDA’s device registration and listing database. Devices that qualify as durable medical equipment, prosthetics, orthotics, and supplies, for which payment is available on a purchase basis under Medicare Part B payment rules, are also included under this provision. The regulations provide that veterinary devices are specifically exempted. “Research Use Only” devices are exempt to the extent that they are not listed with the FDA pursuant to FDA requirements. A device would be listed if it had other purposes than research and/or had been introduced into commercial distribution. In addition, devices subject to “Investigational Device Exemptions” are not subject to the tax. Observations and Recommendations The principal area on which commentators have sought additional guidance is with respect to the retail exemption. Unfortunate- ly, the proposed regulations did not provide the clarity that many interested parties had been seeking. While the safe harbor is fairly straight- forward and exempts most over-the-counter items, more scrutiny is required in order to determine whether or not other types of medical devices qualify for the exemp- tion. Therefore, it is advisable that taxpayers review their product lists prior to year-end in order to ensure they have identified which of their devices are subject to the tax and which may qualify for an exemption. If any products qualify for an exemption, it is important that the correct forms be com- pleted to ensure the exemption is properly claimed and supportable. For those products on which the tax must be charged, manufacturers should evaluate their pricing structures to determine whether it is appropriate to adjust prices to compensate for the tax. Observers, however, have noted that it is unlikely that most companies will be able to pass the cost of the tax on to their customers. Some companies have already forecasted a large charge to their expected earnings due to the fact that they anticipate the need to absorb the cost, which is what many critics of the tax had feared. There has been concern that if companies are forced to absorb the cost of the tax it will eventually hinder inno- vation as there will be less reinvestment into research and development. Job loss within the industry has also been a primary criticism of those who oppose the tax. Companies with taxable devices should also familiarize themselves or contact their tax advisors regarding IRS Form 720, which is the form on which the excise tax is reported. Lastly, if the company is not already registered to electronically remit tax to the IRS, it may be required to register. C The material contained in this article is intended to provide a summary of the regulations. For additional information, please contact an EisnerAmper, LLP representative. The authors can be contacted at emmalee.macdonald@eisneramper.com or michael.hadjiloucas@eisneramper.com. Learn more about the author www.CFOstudio.com/EmmaleeMacDonald Learn more about the author www.CFOstudio.com/MichaelHadjiloucas Nicoll Davis & Spinella LLP New Jersey New York Florida www.NDSlaw.com CONTACT: Christopher M. Santomassimo, Esq. Nicoll Davis & Spinella LLP I 95 Route 17 South I Paramus, NJ 07652 voice: 201.712.1616 I fax: 201.712.9444 I mobile: 973.476.9552 email: CSantomassimo@ndslaw.com Helping You and Your Business Manage Legal Risk — Everyday. ND&S A proud partner and supporter of CFO Studio.com. Please view our CFO Studio interview at http://cfostudio.com/ChrisSantomassimo