IV. Dual Use Devices
Devices That Have Medical and Non-Medical Uses
Many commentators expressed concern over the potential taxation of devices that have both medical and non-medical uses, such as latex gloves, and requested that the excise tax not be imposed on the sale of devices for non-medical uses.
Section 4191 imposes a tax upon the sale of a taxable medical device by the manufacturer, unless the sale is for export or further manufacture. In most instances, the manufacturer does not sell directly to the end user of the device. Therefore, the manufacturer does not typically know the identity of the end user at the time of sale. Further, commentators suggest that manufacturers would have difficulty tracking their products through the supply chain and determining the ultimate destination of their products once they are sold to a distributor. Commentators also stated that, in some cases, after the manufacturer sells a device to a distributor, the distributor may package and label the device for sale for non-medical uses.
Under the proposed regulations, the definition of “taxable medical device” is tied to the FDA’s listing requirements for devices. Therefore, a device that is listed with the FDA pursuant to FDA requirements is a “taxable medical device,” unless it falls within an exemption under section 4191(b)(2), such as the retail exemption.