Most dealers in refurbished medical imaging equipment likely won't feel the sting of the new medical device excise tax, according to a summary of a phone conference with government lawyers released by a trade group yesterday.

The excise tax, which went into effect this month, hits manufacturers and importers with a 2.3 percent tax on the sale of medical equipment or devices. In its final rules released late last year, the Internal Revenue Service said the tax would apply to refurbished or remanufactured devices if the refurbishing process resulted in a "new and taxable product." But ambiguity remained. At what point would a device be refurbished enough that it would constitute a "new and taxable product"?

Now, dealers might have an answer. A letter published by the International Association of Medical Equipment Remarketers and Servicers Inc., a resellers and refurbishers trade group, on its website Wednesday suggests most companies that simply repair or spruce up equipment are off the hook.
In line with earlier reports, the IAMERS letter also suggests that secondhand equipment sales are not liable for the tax. However, the issue of how software upgrades are taxed remains unresolved.

"I think it's a really good thing for people selling pre-owned equipment, as is where is, I think they're very safe," Diana Upton, the president of IAMERS, told DOTmed News. "I think from the standpoint of refurbishment, it is going to be OK for the vast majority of those, too."

The letter, dated Jan. 8 and written by IAMERS counsel Robert J. Kerwin, was addressed to two attorneys, Natalie Payne and Stephanie N. Bland, with the Office of the Associate Chief Counsel, Passthroughs and Special Industries, a federal office that gives legal advice about excise taxes and other matters.

In the letter, Kerwin summarizes two telephone conferences with the office. In the first, on Dec. 21, IAMERS and the attorneys discussed used medical equipment. In his summary of the discussion, Kerwin suggests that the IRS indicated used medical equipment would not be taxed, even if the first sale of the equipment happened before the tax went into effect at the beginning of this year.

The second call happened Jan. 4, and also involved IAMERS board members Jeffrey Fall of Oxford Instruments and Hiren Desai of Soma Technology. On that call, Kerwin's summary of what the IRS said indicates that refurbished equipment merely repaired back to original equipment manufacturer specifications likely would not be taxed. But one situation in which refurbished devices could be taxed is if parts of several devices were used to create a new item. From Kerwin's letter:

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