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Medical Excise Tax in Obamacare?


Fw: 2.3% Medical Excise Tax
Medical Excise Tax

Netlore Archive: Viral image of a customer receipt from Cabela's sporting goods store is offered as proof of a 'hidden' 2.3% medical excise tax under Obamacare.

Via forwarded email

Description: Viral image
Circulating since: Jan. 2013
Status: Mixed (see details below)

Forwarded text:
Email contributed by Jim W., Feb. 14, 2013:

Subject: 2.3% Medical Excise Tax

I hope other retailers take a clue from Cabela's .

The 2.3% Medical Excise Tax that began on January 1st is supposed to be "hidden" from the consumer, but it's been brought to the public’s attention by hunting and fishing store Cabela's who have refused to hide it and are showing it as a separate line item tax on their receipts.

Analysis: The image above is one of several scanned receipts in circulation showing that customers of Cabela's sporting goods stores in several states were charged a "medical excise tax" on goods purchased on Jan. 1, 2013.

The surcharges were a mistake, a Cabela's spokesperson told the World-Herald News Service on Jan. 9. He blamed the error on "a glitch in the system" and said all customers subjected to the charge would receive a full refund.

A Medical Device Excise Tax did go into effect Jan. 1, 2013

A 2.3% medical device excise tax imposed by the Patient Protection and Affordable Care Act of 2010 ("Obamacare") did, in fact, take effect as of Jan. 1, 2013, but according to the IRS it does not apply to consumer purchases: "Because the tax is imposed upon the sale of a taxable medical device by the manufacturer or importer, the manufacturer or importer is responsible for reporting and paying the tax."

In addition, the law provides for what is called a "retail exemption," meaning items such as eyeglasses, contact lenses, hearing aids, and "other devices that are of a type that are generally purchased by the general public at retail for individual use" are exempt from the medical device excise tax.

IRS Publication 510

Don't be misled by claims that a certain Internal Revenue Service document, IRS Publication 510: Excise Taxes, "proves" that sporting goods are subject to a medical excise tax under Obamacare. It doesn't. While you will indeed find items such as sport fishing equipment and bows and arrows listed as taxable in Chapter 5 of the publication, along with coal, tires, and gas-guzzling vehicles, none of these are categorized as medical device excise taxes. In fact, every one of these items was subject to federal excise taxes long before the Affordable Care Act was introduced in Congress.

For more details, see Medical Device Excise Tax: Frequently Asked Questions from the IRS.

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Sources and further reading:

Cabela's Blames 'Glitch' for Jan. 1 Tax Error, Promises Refunds
World-Herald News Service, 9 January 2013

Medical Device Excise Tax: Frequently Asked Questions
IRS.gov, 29 January 2013

Obamacare's Medical Device Tax Will Cost Innovation and Jobs
Forbes, 17 December 2012

Obamacare Taxes
About.com: U.S. Economy, 10 October 2012

Patients Will Not Pay a Wheelchair Tax Under Obamacare
About.com: Pharmacy, 29 August 2012

The Truth About the Health Care Tax Increases
About.com: Investing for Beginners, 23 March 2010

Last updated 08/01/13

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