Sage 100

Client called me this morning, she is on 4.05 and is wondering how to handle the Obama Medical Device Tax of 2.3% on gross sales of MD's set to take effect 1/1/2013. She is thinking gross sales is the list/retail price vs the price they are selling it for to their client (might be discounted 20%, etc. but the discount is not listed on the form I believe). She thinks the consultants sit around a conference table all day discussing this and since she is not the only medical device company, we must have discussed how are others handling this. After clarifying that we don't sit around the table, haha! I discussed a tax code/tax schedule option, but she came back to the gross sale vs discounted price. Does anyone have a medical device customer that this is going to affect and what are you doing? For some humor let me add she called the White House this morning and evidently left a mess with John Boehner regarding her opinion of everything related to this tax and the fiscal cliff. Discussed upgrading too, but that's for another day. Have to deal with this issue first! Anybody have ideas on how to handle this?

She discussed upgrading with Boehner? She needs to wait another 4 years................

<snark> (1) Boehner's not at the White House and I doubt he's a Sage certified consultant anyway... (2) 4.05 is unsupported for several years, so even if Sage had done something about medical device tax they wouldn't get it. </snark> (3) Does the term ""gross sales"" really include the difference between list price and selling price?

It is an excise tax and reported on Form 720. It is not a value added tax passed on to the customer. They will need to track qualifying sales and report it accordingly. I don't see medical devices on the current 720 form at www.irs.gov. As i read it, they will need to report and pay quarterly. There is also the additional .9% Medicare tax on wages exceeding $200k that will require program changes.

In that case a UDF in inventory and a custom report should suffice, correct?

Likely those products are subject to excise tax all the time, so hopefully no UDF needed. For fun and head-scratching, take a look at Form 720 for the types of sales subject to excise taxes.

Thanks for the responses, appears you guys found the same humor in her statements that I did. She is indicating they are going to pass this along to the customer, and since she is a CPA she appears to know she is subject to this new tax (not going to argue with her, she has a direct line now to the White House!!) and wants the tax broken out separately down in the tax section of the invoice form. Would you all agree the price they sell it at is 'gross sales' for reporting this tax (regardless of list/retail, etc). I did mention that Sage would not be fixing 4.05. She mentioned the Medicare Tax and Wage too but I didn't bite on it. She asked me if I wanted the White House number, had to tell her No!!

I had a scripting request for this from a medical device manufacturer using 4.50 who wants to pass the charge on to their customers. Basically add a misc charge line for excise tax if the item qualified for it (based on UDF that flowed in from Inventory). But they also asked Avalara if AvaTax will be supporting it and Avalara sent this ... ------------------------------------------------------------------ We want to update you on the next release of AvaTax Calc, which includes changes to the AvaTax WSDL (Web Services Definition Language), enhancements to the user interface and support of the new Federal Medical Device Excise Tax. The AvaTax Calc SDK-DEV environment will be updated on December 12, 2012 from 5:00-9:00pm and to the production environment on December 27, 2012 from 5:00-9:00pm. These enhancements will not affect your product usage or ability to access AvaTax Calc. <middle snipped> ... Medical Device Excise Tax We have updated AvaTax Calc to support the Federal Medical Device Excise Tax (MDET) going into effect as part of the Health Care and Education Reconciliation Act of 2010 in January 2013. In support of this, AvaTax Calc will allow you to calculate medical device excise taxes and generate a report to file the appropriate federal IRS tax forms. We are introducing a new report and two new Entity Use Codes. The Entity Use Codes, used in combination with a Tax Code, will support the proper tax calculation. Federal excise tax summary report MED1 - calculates excise tax only (exempt sales and seller's use tax) MED2 - calculates excise tax in addition to sales and seller's use tax (taxable sales and seller's use) ------------------------------------------------------------------

Nancy someone like this really has no choice except to be current. If they choose to manually attempt this (depending on how many transactions) they'll probably realize the cost of becoming current could be far less than a compliance audit three or four years down the road. Unfortunately in my experience most customers do not appreciate this fact until they are starting at a $50,000 to $100,000 compliance audit tax bill on their desk...

This might make a good webinar for the group to offer. It's probably not a widespread problem but throughout the group I bet we have a half dozen customers who may be impacted. I'm sure Avalara would host.

From Russ Graf at Avalara last week after my inquiry regarding one of our MD clients (who also is on version 4.05!): ""Yes, we will be releasing a new version on January 1 that provides a solution to this. We have lots of medical device firms as users.