Medical technology association AdvaMed has sent additional comments to the IRS regarding the taxation of certain types of devices including combination products, kits, and rented or leased items. AdvaMed has highlighted reasons that these items should be exempt from the tax to prevent taxing them twice.

“These combination products typically are sold for a single price, rather than separately with separate pricing in a sales invoice. In such cases, combination products that combine devices and branded prescription pharmaceuticals present the potential for double taxation of the same item by imposition of both the medical device excise tax and the brand prescription drug fee,” says the association. “However, Congress did not intent that double taxation should result.”

AdvaMed has recommended that the IRS determine the potential for such double taxation by reason of the manner in which the brand prescription drug fee is to be determined and, if necessary, provide a mechanism to prevent the imposition of double taxation when such products are sold for a single price. AdvaMed suggests that the IRS should follow FDA’s lead. If the FDA regulates the product as a device, only then should the device be subject to the device excise tax.

Similarly, AdvaMed is recommending that the medical device kits be exempt from the excise tax. “AdvaMed recommends that the analysis in Revenue Ruling 72-561 and Sealed Power be applied to medical device kits and that guidance clarify that kitting is not a manufacturing activity and that medical device kits are not subject to the excise tax.” Rather, AdvaMed, says that the only individual items in a kit are the articles that should be subject to the tax. The association points out that kitting is “merely the packaging of individual devices into a single package or container for the convenience of the end user.” The excise tax will be due and paid on the individual device in the kits when sold by the manufacturer.

AdvaMed is also recommending that the IRS apply special rules to rented or leased equipment. “For the purposes of the medical device excise tax, AdvaMed says the IRS should treat leases and rentals similarly and should clarify the leasing rules of section 4217 should apply to all lease or rental income.

AdvaMed has asked the IRS to “engage in dialog with industry on these issues in the leasing context” prior to issuing any guidance.