Obamacare Medical Device Excise Tax Causes Small Business Confusion

Obamacare Medical Device Excise Tax Causes Small Business Confusion

Besides the Fiscal Cliff deal, January 1 also brought the medical device excise tax as part of Obamacare. Based upon the Affordable Care Act, manufacturers, producers, and importers are required to add an extra 2.3 percent manufacturers excise tax levied on the sale of medical devices. But it’s possible the implementation of this new tax may cause some confusion with some small businesses.

Many people supported Obamacare as “free” health care. But now the real price of this dramatic overhaul to America’s health care system is about to be felt by our wallets. According to the Boston Herald, “medical device makers have warned the tax could cost about 43,000 jobs nationwide.”

If you have purchased or installed any medical devices, you’ll probably have noticed an extra little tax added. Unfortunately, it appears that some businesses are not sure how to properly implement the rules generated by the IRS and are accidentally charging customers when they should not be.

Over on Facebook, I ran into one person who was complaining about being charged extra taxes for Obamacare by posting a picture of his receipt:

“OK…. Here comes some of those Obama care taxes on Jan 1, 2013. Soon every purchase you make, there will more taxes. On 103.98 I was charged 8.58 for Texas state taxes. And then Obama care medical tax another 2.39. So the more you spend , the more goes to the ‘so called free Obama care.'”

It wasn’t long before other people noticed that this might have been a mistake. According to Mondaq.com, this sale should have not been taxed extra:

“Items exempt from the tax include eyeglasses, contact lenses, hearing aids and other medical devices determined by the IRS to be generally purchased by the public at retail for individual use.”


The purchaser then posted this on Facebook:

“Looks like glasses, contacts and hearing aids are exempt from the tax. I’m no tax man but the store told me it was an Obama tax.”

It’s possible that some businesses are taking a “better safe than sorry” approach to implementing this new Obamacare tax. While some medical devices are specifically exempted from extra retail taxation, the guidelines are fairly specific that these new taxes only apply to medical professionals, according to Mondaq.com:

“Devices that are not covered by this safe harbor will be subject to a facts-and-circumstances test to determine if they meet the retail exception. The device must generally satisfy two requirements:

  1. The device is regularly available for purchase and use by individual consumers who are not medical professionals.

  2. The device’s design demonstrates that it is not primarily intended for use in a medical institution or office, or by medical professionals”

What do you think about Obamacare and the new medical device excise tax?