New Tax Laws Require Pharmacies to Upgrade Their Point of Sale Systems

Beginning January 1, 2009 a new IRS regulation requires pharmacies to have implemented an IIAS (inventory information approval system) compliant point of sale system. To comply with these new regulations, every pharmacy in the United States must implement a POS system that complies with these new requirements or discontinue the acceptance of FSA (flexible spending account) credit and debit cards.

 

In addition to the new IRS requirements, the government has also recently signed into law the Economic Stimulus Plan (ESP). The most significant stimulus for pharmacies is the bonus depreciation that the plan offers for capital purchases. This allows a business to expense a capital purchase 100% in the first year (up to $250,000.00) if it is put into service during the 2008 calendar year. This benefit returns to normal depreciation starting in 2009 (5 year depreciation schedule). Both laws implemented by the IRS will force pharmacies to purchase/upgrade POS systems in the 2008 year if they want to remain compliant with the new IRS regulations.
1. IIAS - Inventory Information Approval System. Beginning in 2009, the IRS is requiring all pharmacies to have implemented an IIAS compliant POS system if they want to continue accepting FSA (Flexible Spending Account) debit/credit cards. These credit cards are issued to employees of companies who have elected to withhold a portion of their pay in a non-taxable Flexible Spending Account or Health Savings Account (HSA).

a. To date, most pharmacies and retailers accept these credit cards without acknowledgement as they are branded as normal VISA or MasterCard credit cards. The IRS is now implementing a qualifying requirement, similar to the Food Stamp program, which designates eligible items that can be purchased with the FSA card. Non-eligible items will have to be paid for with a different form of payment. A IIAS compliant POS system must be able to maintain this eligibility list, have the functionality to separate the items and perform a split tender for eligible versus non-eligible items. The system will also be required to produce audit reports that adhere to IRS specifications and maintain five years of audit history.

b. If a retailer or pharmacy does not have an IIAS compliant POS system on January 1, 2009, they will no longer be able to accept FSA debit/credit cards.

c. Pharmacies will risk losing existing customers and sales to pharmacies who have implemented an IIAS system beginning January 1, 2009.

d. Visa has an established marketing campaign targeted towards every FSA/HRA cardholder. This marketing program educates cardholders on IIAS requirements and compliant merchants.

2. Economic Stimulus Plan (ESP) of 2008 - The President signed into law the ESP on February 13, 2008. This act returns the 50% Bonus Depreciation for the 2008 year and also increases the Section 179 expense purchases maximum allowance to $250,000.00. This will allow a pharmacy to expense a point of sale system purchase in the 2008 year and reduce their tax liability.

 

About the Author

 Chester Ritchie is the Vice President of Sales & Marketing at CAM Commerce Solutions, Inc. (NASDAQ: CADA) located in California. For more information regarding IIAS, FSA cards, and compliant pharmacy point of sale systems, visit http://www.camcommerce.com/

 

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