You advised that repairing equipment would not ordinarily require the imposition of the medical device excise tax but that such would be applied if the equipment was repaired in such a way as to constitute a 'new and different' taxable item. A discussion was subsequently held wherein a situation was posited where a new piece of equipment was formed from the parts of three different pieces of equipment. I used the term 'cannibalized' which you did not adopt in your discussions. You did advise that in such a situation, you would expect that the refurbished or remanufactured equipment would be taxed, and that there would otherwise have to be adequate support for the taxpayer to take the position that the equipment was not subject to a medical device excise tax. Absent this type of situation, you advised that the medical device excise tax would not likely be imposed on refurbished or remanufactured equipment as the equipment would not be a new and taxable item.

However, there is one point of caution to note. Kerwin observed in the letter, "You also advised that there is no 'bright line' which could be imposed with respect to when equipment is determined to be 'a new and different taxable item."


In other words, for those who might be affected by the tax, it's still a good idea to get your tax lawyer on the line.

Also, one key issue for dealers and manufacturers remains open -- how the agency will tax software upgrades. Kerwin said the IRS indicated in its recently released guidance documents that it will still be considering and evaluating what to do about the matter.

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