Medical Device Excise Tax

Who:

CareFusion
3750 Torrey View Court
San Diego, CA 92130 

When: January 2013

What: Client needed to comply with new federal law and pay a 2.3% excise tax applied to all sales in the U.S. of any taxable medical devise by manufacturer, producer or importer (IRC Section 4191).

The Challenge: By December 31, 2012, client needed to implement a fully functional compliance system based on a constructive price calculated and maintained for certain products dependent on supply chain. Since the client used several supply chains to distribute its products, depending on the workflow, the taxable sales price would need to be calculated differently. Therefore, calculations based on each scenario, including at what point the taxable event occurs, scenarios that required maintaining a quarterly price or even calculations made at the point of data collection in SAP BW would need to be identified. 

The Solution: A summary of Medical Device Excise Tax liability (MDET) for each manufacturing entity based on sales transactional data currently captured in the business warehouse billing cubes for Enterprise Resource Planning Central Component (ECC) and Customer Resource Management (CRM) plus additional MDET-specific characteristics was created.  New BW infocube(s) were developed to take data from existing ECC and CRM billing infocubes.  MDET characteristics were incorporated to support tax determination by business partner relationship.  Special characteristics were added to SAP ECC customer and material master to support new BW reporting.  

The Result: The client successfully met the deadline.  A robust solution that enabled the client to be compliant was implemented including a way to identify and maintain "taxable" products, finalizing a constructive price methodology, implementing business rules to calculate tax liability on an ongoing basis and providing reporting capabilities including reporting for audits.