Michigan General Sales and Use Tax Acts - Wayne State University

Michigan General Sales and Use Tax Acts

(as of January 1, 2004)

Prof. Michael J. McIntyreMultistate Taxation in the Digital AgeWayne State University Law School

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Michigan Sales Tax Act (2004) Page iii

Table of Contents

MICHIGAN GENERAL SALES TAX ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Sec. 205.51. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Sec. 205.52. Sales tax; rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Sec. 205.52a. Retail sale of vehicle with special registration; reduction in tax; certification, contents . 4Sec. 205.53. Sales taxpayer; license; bond or deposit; industrial processor; agricultural producer; license

suspension; penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Sec. 205.54. Deductions; estimated returns and annual periodic reconciliations; exclusions from gross

proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Sec. 205.54a. Sales excluded from gross proceeds.[M.S.A. 7.525] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Sec. 205.54b. Deductible sales of gasoline; statement of transferee . . . . . . . . . . . . . . . . . . . . . . . . . 11Sec. 205.54c. Exemptions of property affixed to real estate under certain contracts . . . . . . . . . . . . . 11Sec. 205.54e. Sales of vehicles to servicemen; exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Sec. 205.54f. Exclusions from gross proceeds, vending machine sales . . . . . . . . . . . . . . . . . . . . . . . . 12Sec. 205.54g. Prescription drugs, returnable containers, certain foods, fruit or vegetable seeds or plants;

exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Sec. 205.54i. Bad debts, deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Sec. 205.54j. Sale of tangible personal property for use in qualified business activity; inclusion in gross

proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Sec. 205.54k. Drop shipments; exclusion from gross proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Sec. 205.54l. Sale of tangible personal property to business engaged in high technology activity;

exclusion from gross proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Sec. 205.54m. Sale of certain railroad property; exclusion from gross proceeds . . . . . . . . . . . . . . . . . 17Sec. 205.54m[1]. Material purchased to alter, repair, or improve real estate for others; exemption . . . 18Sec. 205.54n. Sale of electricity, natural or artificial gas, or home heating fuels for residential use;

exemption from additional tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Sec. 205.54o. Schools, churches, hospitals, parent cooperative preschools, or nonprofit organizations;

fund-raising; exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Sec. 205.54p. Property offered to or made structural part of sanctuary; exclusion; “regularly organized

church or house of religious worship” and “sanctuary” defined. . . . . . . . . . . . . . . . . . . . . . . . . 19Sec. 205.54q. Sales of tangible personal property not for resale; exclusion from gross proceeds;

applicability; duties of transferee; evidence of exemption; limitation. . . . . . . . . . . . . . . . . . . . . 19Sec. 205.54r. Qualified truck, trailer, or rolling stock; exemption; definitions. . . . . . . . . . . . . . . . . . . 20Sec. 205.54s. Sale of investment coins and bullion; exclusion from gross proceeds; definitions. . . . . . 21Sec. 205.54t. Industrial processing equipment; exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Sec. 205.54u. Extractive operation, exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Sec. 205.54v. Central office equipment or wireless equipment; presumption. . . . . . . . . . . . . . . . . . . . 28Sec. 205.54w. Nonprofit hospital or nonprofit hospital or housing; exemption in business of

constructing, altering, repairing, or improving property; exception; definitions. . . . . . . . . . . . . 29Sec. 205.54x. Sales to domestic air carrier; tax exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Sec. 205.54y. Industrial processing; exemption; limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Sec. 205.54z. Construction, alteration, repair, or improvement to nonprofit hospital before July 1, 1999.32Sec. 205.55. Additional tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Sec. 205.55a. Labor or service charges in maintenance and repair of tangible property . . . . . . . . . . . 32Sec. 205.55b. Qualified athletic event; tax exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Sec. 205.56. Tax; filing of returns and payment; date of accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Sec. 205.56a. Prepayment of tax on gasoline at time of purchase or shipment . . . . . . . . . . . . . . . . . . 35Sec. 205.57. Sale of motor vehicle to new or used vehicle dealer; certificate . . . . . . . . . . . . . . . . . . . 37Sec. 205.57a. Purchase of used motor vehicle from private individual; certificate . . . . . . . . . . . . . . . 38Sec. 205.57b. Sale of used motor vehicle subsequent to purchase of new motor vehicle; refund . . . . . 39

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Sec. 205.58. Consolidated returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Sec. 205.59. Administration of tax; promulgation of rules; filing of refund claims, subsurface irrigation

pipe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Sec. 205.60. Refund by taxpayer for returned property; refund under sec. 445.360a. . . . . . . . . . . . . . 40Sec. 205.65. Corporation; dissolution, withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Sec. 205.66. Injunction for failure to pay tax or obtain license . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Sec. 205.66a. Duty of assessing officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Sec. 205.67. Inventory and records; sale to unlicensed person; return . . . . . . . . . . . . . . . . . . . . . . . 42Sec. 205.73. Advertisement; reimbursement of taxpayer; brackets . . . . . . . . . . . . . . . . . . . . . . . . . . 44Sec. 205.75. Sales tax revenues; distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Sec. 205.78. Short title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

MICHIGAN USE TAX ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Sec. 205.91. Use tax act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Sec. 205.92. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Sec. 205.93. Rate; presumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Sec. 205.93a. Tax for use or consumption; services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Sec. 205.93b. Tax for use or consumption; mobile telecommunications services. . . . . . . . . . . . . . . . . . 53Sec. 205.94. Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Sec. 205.94a. Exemptions of property affixed to real estate under certain contracts . . . . . . . . . . . . . 63Sec. 205.94b. Exemptions of property affixed to real estate under certain contracts . . . . . . . . . . . . . . 64Sec. 205.94c. Previously exempt bona fide contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Sec. 205.94d. Exemption; prescription drugs, food, returnable containers, food or tangible personal

property purchased with federal food stamps, or fruit or vegetable seeds or plants . . . . . . . . . . 64Sec. 205.94e. Property purchased to construct, alter, repair, or improve real estate for others . . . . . . 65Sec. 205.94f. Deductions; estimated returns and annual periodic reconciliations . . . . . . . . . . . . . . . . 65Sec. 205.94g. Exemption; property from purchase or transfer of business . . . . . . . . . . . . . . . . . . . . . 66Sec. 205.94h. Exemptions; tangible property used in qualified business activity . . . . . . . . . . . . . . . . 67Sec. 205.94i. Exemption; drop shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Sec. 205.94j. Exemptions; abandoned or abandoned scrap vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . 68Sec. 205.94k. Application of tax; application of section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Sec. 205.94l. Storage, use, or consumption of certain railroad property; exemption . . . . . . . . . . . . . . 70Sec. 205.94m. Personal property affixed to or made structural part of sanctuary; applicability of tax;

“regularly organized church or house of religious worship” or “sanctuary” defined. [M.S.A.7.555(4m)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Sec. 205.94n. Exemption; consumption of electricity, natural gas, and home heating fuels for residential use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Sec. 205.94o. Exemptions; limitation; industrial processing; definitions. . . . . . . . . . . . . . . . . . . . . . 71Sec. 205.94p. Extractive operations; exemption; limitation; eligible property; definitions. . . . . . . . . . 76Sec. 205.94q. Central office equipment or wireless equipment; presumption . . . . . . . . . . . . . . . . . . . 77Sec. 205.94r. Property used or consumed in industrial processing.Property used or consumed in

industrial processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78Sec. 205.94s. Construction or improvement of property of nonprofit hospital or housing. . . . . . . . . . . 79Sec. 205.94u. Storage, use, or consumption of investment coins and bullion; applicability of tax;

definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Sec. 205.94v. Construction or improvement of building of nonprofit hospital. . . . . . . . . . . . . . . . . . . 81Sec. 205.95. Registration requirements; seller to collect tax from consumer; foreign corporations;

dissolution or withdrawal of corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Sec. 205.96. Returns; contents; payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82Sec. 205.96a. Qualified athletic event; applicability of tax; repeal of section. . . . . . . . . . . . . . . . . . . . 84Sec. 205.97. Liability of consumer for tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Sec. 205.98. Direct payment authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Sec. 205.99. Personal liability of seller for failure to collect tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Sec. 205.99a. Bad debt deduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86Sec. 205.100. Administration; rules; claims for refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87Sec. 205.101. Refund or credit for returned tangible personal property or service. . . . . . . . . . . . . . . 88

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Sec. 205.101a. Persons liable for tax selling business or stock of goods or quitting business, final return; successors, withholding amount to cover taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Sec. 205.104. Inventory and records; sale to unlicensed person; return . . . . . . . . . . . . . . . . . . . . . . . 89Sec. 205.105. Penalty; failure to register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Sec. 205.106. Penalty; seller’s failure to comply with act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Sec. 205.108. Penalty; consumer’s failure to comply with act, making false statement . . . . . . . . . . . . 90Sec. 205.111. Deposit of receipts; state school aid fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

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MICHIGAN GENERAL SALES TAX ACT

Sec. 205.51. Definitions

(1) As used in this act:

(a) “Person” means an individual, firm, partnership, joint venture, association, socialclub, fraternal organization, municipal or private corporation whether organized for profitor not, company, estate, trust, receiver, trustee, syndicate, the United States, this state,county, or any other group or combination acting as a unit, and includes the plural as wellas the singular number, unless the intention to give a more limited meaning is disclosedby the context.

(b) “Sale at retail” means a transaction by which the ownership of tangible personalproperty is transferred for consideration, if the transfer is made in the ordinary course ofthe transferor’s business and is made to the transferee for consumption or use, or for anypurpose other than for resale, or for lease, if the rental receipts are taxable under the usetax act, 1937 PA 94, MCL 205.91 to 205.111, in the form of tangible personal property toa person licensed under this act, or for demonstration purposes or lending or leasing to apublic or parochial school offering a course in automobile driving. However, a vehiclepurchased by the school shall be certified for driver education and shall not be reassignedfor personal use of the school’s administrative personnel. For a dealer selling a new car ortruck, the exemption for demonstration purposes shall be determined by the number ofnew cars and trucks sold during the current calendar year or the immediately precedingyear without regard to specific make or style in accordance with the following scheduleof 0 to 25, 2 units; 26 to 100, 7 units; 101 to 500, 20 units; 501 or more, 25 units; but notto exceed 25 cars and trucks in a calendar year for demonstration purposes.

(c) “Sale at retail” includes a conditional sale, installment lease sale, or other transferof property if title is retained as security for the purchase price but is intended to betransferred later.

(d) “Sale at retail” includes the sale of electricity, natural or artificial gas, or steam ifthe sale is made to the consumer or user for consumption or use rather than for resale.Beginning September 20, 1999, sale at retail also includes the sale of the transmission anddistribution of electricity, whether the electricity is purchased from the delivering utilityor from another provider, if the sale is made to the consumer or user of the electricity forconsumption or use rather than for resale. Sale at retail also includes the sale of a prepaidtelephone calling card or a prepaid authorization number for telephone use, rather thanfor resale, and also includes the reauthorization of a prepaid telephone calling card or aprepaid authorization number. Sale at retail does not include the sale of water through

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water mains or the sale of water delivered in bulk tanks in quantities of not less than 500gallons.

(e) “Sale at retail” includes computer software offered for general sale to the publicor software modified or adapted to the user’s needs or equipment by the seller, only if thesoftware is available for sale from a seller of software on an as is basis or as an endproduct without modification or adaptation. Sale at retail does not include specificcharges for technical support or for adapting or modifying prewritten, standard, or cannedcomputer software programs to a purchaser’s needs or equipment if those charges areseparately stated and identified. Sale at retail does not include computer softwareoriginally designed for the exclusive use and special needs of the purchaser. As used inthis subdivision, “computer software” means a set of statements or instructions that whenincorporated in a machine usable medium is capable of causing a machine or devicehaving information processing capabilities to indicate, perform, or achieve a particularfunction, task, or result.

(f) “Sale at retail” includes the sale of tangible personal property by an industriallaundry under a sale, rental, or service agreement with a term of at least 5 days.

(g) “Sale at retail” does not include an isolated transaction by a person not licensed orrequired to be licensed under this act, in which tangible personal property is offered forsale, sold, transferred, and delivered by the owner.

(h) “Sale at retail” does not include a commercial advertising element if thecommercial advertising element is used to create or develop a print, radio, television, orother advertisement, the commercial advertising element is discarded or returned to theprovider after the advertising message is completed, and the commercial advertisingelement is custom developed by the provider for the purchaser. As used in thissubdivision, “commercial advertising element” means a negative or positive photographicimage, an audiotape or videotape master, a layout, a manuscript, writing of copy, adesign, artwork, an illustration, retouching, and mechanical or keyline instructions. Saleat retail includes black and white or full color process separation elements, an audiotapereproduction, or a videotape reproduction.

(i) “Gross proceeds” means the amount received in money, credits, subsidies,property, or other money’s worth in consideration of a sale at retail within this state,without a deduction for the cost of the property sold, the cost of material used, the cost oflabor or service purchased, an amount paid for interest or a discount, a tax paid oncigarettes or tobacco products at the time of purchase, a tax paid on beer or liquor at thetime of purchase or other expenses. Also, a deduction is not allowed for losses. Grossproceeds do not include an amount received or billed by the taxpayer for remittance to theemployee as a gratuity or tip, if the gratuity or tip is separately identified and itemized onthe guest check or billed to the customer. In a taxable sale at retail of a motor vehicle, ifanother motor vehicle is used as part payment of the purchase price, the value of the

Michigan Sales Tax Act (2004) Page 3

motor vehicle used as part payment of the purchase price shall be that value agreed to bythe parties to the sale as evidenced by the signed statement executed pursuant to section251 of the Michigan vehicle code, 1949 PA 300, MCL 257.251. A credit or refund forreturned goods or a refund less an allowance for use made for a motor vehicle returnedunder 1986 PA 87, MCL 257.1401 to 257.1410, as certified by the manufacturer on aform provided by the department of treasury, may be deducted.

(j) “Business” includes an activity engaged in by a person or caused to be engaged inby that person with the object of gain, benefit, or advantage, either direct or indirect.

(k) “Tax year” or “taxable year” means the fiscal year of the state or the taxpayer’sfiscal year if permission is obtained by the taxpayer from the department to use thetaxpayer’s fiscal year as the tax period instead.

(l) “Department” means the revenue division of the department of treasury.

(m) “Taxpayer” means a person subject to a tax under this act.

(n) “Tax” includes a tax, interest, or penalty levied under this act.

(o) “Textiles” means goods that are made of or incorporate woven or nonwovenfabric, including, but not limited to, clothing, shoes, hats, gloves, handkerchiefs, curtains,towels, sheets, pillows, pillow cases, tablecloths, napkins, aprons, linens, floor mops,floor mats, and thread. Textiles also include materials used to repair or construct textiles,or other goods used in the rental, sale, or cleaning of textiles.

(2) If the department determines that it is necessary for the efficient administration of thisact to regard an unlicensed person, including a salesperson, representative, peddler, orcanvasser as the agent of the dealer, distributor, supervisor, or employer under whom theunlicensed person operates or from whom the unlicensed person obtains the tangiblepersonal property sold by the unlicensed person, irrespective of whether the unlicensedperson is making sales on the unlicensed person’s own behalf or on behalf of the dealer,distributor, supervisor, or employer, the department may so regard the unlicensed personand may regard the dealer, distributor, supervisor, or employer as making sales at retail atthe retail price for the purposes of this act.

Amended by P.A. 193, 12-31-1997.

Amended by P.A. 365, 10-20-1998.

Amended by P.A. 451, 12-29-1998.

Amended by SB 544, 7-14-1999; retroactively effective 3-31-1995.


Amended by Act 390, 1-2-2001.

Sec. 205.52. Sales tax; rate

(1) Except as provided in section 2a, there is levied upon and there shall be collectedfrom all persons engaged in the business of making sales at retail, as defined in section 1,an annual tax for the privilege of engaging in that business equal to 6% of the grossproceeds of the business, plus the penalty and interest if applicable as provided by law,less deductions allowed by this act.

(2) Any person engaged in the business of making sales at retail who is at the same timeengaged in some other kind of business, occupation, or profession not taxable under thisact shall keep books to show separately the transactions used in determining the taxlevied by this act. If the person fails to keep separate books, there shall be levied uponhim or her the tax provided for in subsection (1) equal to 6% of the entire gross proceedsof both or all of his or her businesses. The taxes levied by this section are a personalobligation of the taxpayer.

Sec. 205.52a. Retail sale of vehicle with special registration; reduction in tax;certification, contents

(1) For a sale at retail to a person of a vehicle for which a special registration is securedpursuant to section 226(9) of Act No. 300 of the Public Acts of 1949, being section257.226 of the Michigan Compiled Laws, the tax imposed under this act shall be reducedby the sum of the following amounts:

(a) The use tax imposed on the vehicle by the state to which the vehicle was removedand in which it is registered.

(b) The amount obtained, even if negative, by subtracting the sales tax that wouldhave been imposed on the vehicle by the state to which the vehicle was removed and inwhich it is registered if the vehicle had been purchased in that state, from the taxotherwise due under this act.

(2) The reduction in the tax made pursuant to subsection (1) shall not exceed the taxotherwise due under this act.

(3) The taxpayer shall obtain from the person purchasing the vehicle, and shall furnish tothe department on a form provided by the department, a certification containing the name,address, and signature of the purchaser, a statement indicating the vehicle shall beprimarily used, stored, and registered outside of this state, and the name of thejurisdiction in which the vehicle shall be registered.


Sec. 205.53. Sales taxpayer; license; bond or deposit; industrial processor;agricultural producer; license suspension; penalties

(1) If a person engages or continues in a business for which a privilege tax is imposed bythis act, the person shall, under rules the department prescribes, apply for and obtain fromthe department a license to engage in and to conduct that business for the current taxyear. When the department considers it necessary in order to secure the collection of thetax or if an applicant taxpayer has at any time failed, refused, or neglected to pay any taxor interest or penalty upon a tax or has attempted to evade the payment of any tax orinterest or penalty upon a tax by means of petition in bankruptcy, or if applicant taxpayeris a corporation and the department has reason to believe that the management or controlof the corporation is under persons who have failed to pay any tax or interest or penaltyupon a tax under this act, the department shall require a surety bond payable to the stateof Michigan, upon which the applicant or taxpayer shall be the obligor, in the sum of notless than $1,000.00 nor more than $25,000.00. The surety bond shall be conditioned thatthe applicant or taxpayer shall comply with this act and shall promptly file true reportsand pay the taxes, interest, and penalties provided for or required by this act the bondsshall be approved as to the amount and surety by the department. The applicant ortaxpayer may in lieu of the surety bond deposit a sum of money with the department in anamount the department determines to guarantee the payment of the tax, interest, andpenalty and compliance with this act. However, the amount determined by the departmentshall not exceed the estimated tax payable during a 1-year period. The applicant ortaxpayer shall be licensed to engage in and conduct the business. The department mayrequire the applicant or taxpayer to furnish other and further bond as it considersnecessary within the limits in this section, after giving a 30-day notice in writing. Thelicense shall be renewed annually if the taxpayer pays the tax accrued to the state underthis act. A person shall not engage or continue in a business taxable under this act withoutsecuring a license. A person, firm, or corporation engaged solely in industrial processingor agricultural producing under this act and who makes no sales at retail within themeaning of this act is not required to have a license.

(2) The revenue commissioner or his or her designee, after notice and hearing, maysuspend the license of a person who violates or fails to comply with this act or a rulepromulgated by the department under this act. The revenue commissioner or his or herdesignee may restore licenses after suspension. If a person engages in business taxableunder this act while his or her license is in suspension, the tax imposed under this act isimposed and be payable with respect to that business. (3) A person who engages in any business in this state that is taxable under this act andwho fails to secure from the revenue commissioner or his or her designee a license toengage in that business, or who continues to engage in business after the license hasexpired or was suspended by the revenue commissioner or his or her designee is guilty ofa misdemeanor punishable by a fine of not more than $1,000.00 or imprisonment for notmore than 1 year, or both.


Amended by PA 457, 6-21-2002.

Sec. 205.54. Deductions; estimated returns and annual periodic reconciliations;exclusions from gross proceeds

(1) In computing the amount of tax levied under this act for any month, a taxpayer notsubject to section 6(2) may deduct the amount provided by subdivision (a) or (b),whichever is greater:

(a) If the tax that accrued to the state from the sales at retail during the precedingmonth is remitted to the department on or before the seventh day of the month in whichremittance is due, 0.75% of the tax due at a rate of 4% for the preceding monthly period,but not to exceed $20,000.00 of the tax due for that month. If the tax that accrued to thestate from the sales at retail during the preceding month is remitted to the departmentafter the seventh day and on or before the fifteenth day of the month in which remittanceis due, 0.50% of the tax due at a rate of 4% for the preceding monthly period, but not toexceed $15,000.00 of the tax due for that month.

(b) The tax at a rate of 4% due on $150.00 of taxable gross proceeds for thepreceding monthly period, or a prorated portion of $150.00 of the taxable gross proceedsfor the preceding month if the taxpayer engaged in business for less than a month.

(2) Before January 1, 1999, in computing the amount of tax levied under this act for anymonth, a taxpayer subject to section 6(2) may deduct the amount provided in thissubsection. If the tax that is due to the state is remitted to the department on or before theeleventh day of the month in which remittance is due, 0.75% of the tax due at a rate of4% but not to exceed $20,000.00 of the tax due for that month may be deducted. If thetax that is due to the state is remitted to the department after the eleventh day and on orbefore the eighteenth day of the month in which remittance is due, 0.50% of the tax dueat a rate of 4% but not to exceed $15,000.00 of the tax due for that month may bededucted.

(3) Beginning January 1, 1999, in computing the amount of tax levied under this act forany month, a taxpayer who is subject to section 6(3) may deduct from the amount of thetax paid 0.50% of the tax due at a rate of 4%.

(4) A deduction is not allowed under this section for payments of taxes made to thedepartment after the day the taxpayer is required to pay, pursuant to section 6, the taximposed by this act.

(5) If, pursuant to section 6(5), the commissioner of revenue prescribes the filing ofreturns and the payment of the tax for periods in excess of 1 month, a taxpayer is entitledto a deduction from the tax collections remitted to the department for the extended


payment period that is equivalent to the deduction allowed under subsection (1), (2), or(3) for monthly periods.

(6) The commissioner may prescribe the filing of estimated returns and annual periodicreconciliations as necessary to carry out the purposes of this section.

(7) A person subject to a tax under this act shall not include in the amount of his or hergross proceeds used for the computation of the tax any proceeds of his or her businessderived from sales to the United States, its unincorporated agencies and instrumentalities,any incorporated agency or instrumentality of the United States wholly owned by theUnited States or by a corporation wholly owned by the United States, the American RedCross and its chapters and branches, and this state or its departments and institutions orany of its political subdivisions.

Amended by P.A. 267, 7-15-1998.

Sec. 205.54a. Sales excluded from gross proceeds.[M.S.A. 7.525]

(1) A person subject to tax under this act may exclude from the amount of the grossproceeds used for the computation of the tax, a sale of tangible personal property, subjectto subsection (2):

(a) Not for resale to a nonprofit school, nonprofit hospital, or nonprofit home for thecare and maintenance of children or aged persons operated by an entity of government, aregularly organized church, religious, or fraternal organization, a veterans’ organization,or a corporation incorporated under the laws of the state, if the income or benefit from theoperation does not inure, in whole or in part, to an individual or private shareholder,directly or indirectly, and if the activities of the entity or agency are carried onexclusively for the benefit of the public at large and are not limited to the advantage,interests, and benefits of its members or any restricted group. At the time of the transferof this tangible personal property, the transferee shall sign a statement, in a formapproved by the department, stating that the property is to be used or consumed inconnection with the operation of the institution or agency and that the institution oragency qualifies as an exempt entity under this subdivision. The statement shall beaccepted by all courts as prima facie evidence of the exemption and the statement shallprovide that if the claim for tax exemption is disallowed the transferee will reimburse thetransferor for the amount of tax involved. A sale of tangible personal property to a parentcooperative preschool is exempt from taxation under this act. As used in this subdivision,“parent cooperative preschool” means a nonprofit, nondiscriminatory educationalinstitution, maintained as a community service and administered by parents of childrencurrently enrolled in the preschool, that provides an educational and developmental program for children younger than compulsory school age, that provides an educationalprogram for parents, including active participation with children in preschool activities,


that is directed by qualified preschool personnel, and that is licensed by the department ofconsumer and industry services pursuant to 1973 PA 116, MCL 722.111 to 722.128.

(b) Not for resale to a regularly organized church or house of religious worship,except the following:

(i) Sales in activities that are mainly commercial enterprises.

(ii) Sales of vehicles licensed for use on public highways other than a passengervan or bus with a manufacturer’s rated seating capacity of 10 or more that is usedprimarily for the transportation of persons for religious purposes.

(c) To bona fide enrolled students, of food by a school or other educational institutionnot operated for profit.

(d) That is a vessel designated for commercial use of registered tonnage of 500 tonsor more, if produced upon special order of the purchaser, and bunker and galley fuel,provisions, supplies, maintenance, and repairs for the exclusive use of the vessel engagedin interstate commerce.

(e) To persons engaged in a business enterprise and using or consuming the tangiblepersonal property in the tilling, planting, caring for, or harvesting of the things of the soil;in the breeding, raising, or caring for livestock, poultry, or horticultural products,including transfers of livestock, poultry, or horticultural products for further growth; or inthe direct gathering of fish, by net, line, or otherwise only by an owner-operator of thebusiness enterprise, not including a charter fishing business enterprise. This exemptionincludes agricultural land tile, which means fired clay or perforated plastic tubing used aspart of a subsurface drainage system for land, and subsurface irrigation pipe, if the landtile or irrigation pipe is used in the production of agricultural products as a businessenterprise. At the time of the transfer of this tangible personal property, the transfereeshall sign a statement, in a form approved by the department, stating that the property isto be used or consumed in connection with the production of horticultural or agriculturalproducts as a business enterprise, or in connection with fishing as an owner-operatorbusiness enterprise. The statement shall be accepted by all courts as prima facie evidenceof the exemption. This exemption includes a portable grain bin, which means a structurethat is used or is to be used to shelter grain and that is designed to be disassembledwithout significant damage to its component parts. This exemption does not includetransfers of food, fuel, clothing, or any similar tangible personal property for personalliving or human consumption. This exemption does not include tangible personal propertypermanently affixed and becoming a structural part of real estate.

(f) That is a copyrighted motion picture film or a newspaper or periodical admittedunder federal postal laws and regulations effective September 1, 1985 as second-classmail matter or as a controlled circulation publication or qualified to accept legal notices


for publication in this state, as defined by law, or any other newspaper or periodical ofgeneral circulation, established not less than 2 years, and published not less than once aweek. Tangible personal property used or consumed in producing a copyrighted motionpicture film, a newspaper published more than 14 times per year, or a periodicalpublished more than 14 times per year, and not becoming a component part of that film,newspaper, or periodical is subject to the tax. After December 31, 1993, tangible personalproperty used or consumed in producing a newspaper published 14 times or less per yearor a periodical published 14 times or less per year and that portion or percentage of tangible personal property used or consumed in producing an advertising supplement thatbecomes a component part of a newspaper or periodical is exempt from the tax under thissubdivision. A claim for a refund for taxes paid before January 1, 1999, under thissubdivision shall be made before June 30, 1999. For purposes of this subdivision,tangible personal property that becomes a component part of a newspaper or periodicaland consequently not subject to tax includes an advertising supplement inserted into andcirculated with a newspaper or periodical that is otherwise exempt from tax under thissubdivision, if the advertising supplement is delivered directly to the newspaper orperiodical by a person other than the advertiser, or the advertising supplement is printedby the newspaper or periodical.

(g) To persons licensed to operate commercial radio or television stations if theproperty is used in the origination or integration of the various sources of programmaterial for commercial radio or television transmission. This subdivision does notinclude a vehicle licensed and titled for use on public highways or property used in thetransmission to or receiving from an artificial satellite.

(h) That is a hearing aid, contact lenses if prescribed for a specific disease thatprecludes the use of eyeglasses, or any other apparatus, device, or equipment used toreplace or substitute for a part of the human body, or used to assist the disabled person tolead a reasonably normal life if the tangible personal property is purchased on a writtenprescription or order issued by a health professional as defined by section 21005 of thepublic health code, 1978 PA 368, MCL 333.21005; a hearing aid battery; or eyeglassesprescribed or dispensed to correct the person’s vision by an ophthalmologist, optometrist,or optician.

(i) That is a vehicle not for resale to a Michigan nonprofit corporation organizedexclusively to provide a community with ambulance or fire department services.

(j) To inmates in a penal or correctional institution purchased with scrip issued andredeemed by the institution.

(k) To or for the use of students enrolled in any part of a kindergarten through twelfthgrade program, of textbooks sold by a public or nonpublic school.


(l) Installed as a component part of a water pollution control facility for which a taxexemption certificate is issued pursuant to part 37 (water pollution control facilities; taxexemption) of the natural resources and environmental protection act, 1994 PA 451, MCL324.3701 to 324.3708, or an air pollution control facility for which a tax exemptioncertificate is issued pursuant to part 59 (air pollution control facility; tax exemption) ofthe natural resources and environmental protection act, 1994 PA 451, MCL 324.5901 to324.5908.

(m) To a purchaser of a new motor vehicle purchased before January 1, 1993 if thepurchaser qualifies for a special registration under section 226(12) of the Michiganvehicle code, 1949 PA 300, MCL 257.226, and the vehicle is purchased through acountry determined by the department to be providing a like or complete exemption forthe purchase of a new motor vehicle to be removed from that country.

(n) That is the following sold or leased to an industrial laundry after December 31,1997:

(i) Textiles and disposable products including, but not limited to, soap, paper,chemicals, tissues, deodorizers and dispensers, and all related items such aspackaging, supplies, hangers, name tags, and identification tags.

(ii) Equipment, whether owned or leased, used to repair and dispense textilesincluding, but not limited to, roll towel cabinets, slings, hardware, lockers, mophandles and frames, and carts.

(iii) Machinery, equipment, parts, lubricants, and repair services used to clean,process, and package textiles and related items, whether owned or leased.

(iv) Utilities such as electric, gas, water, or oil.

(v) Production washroom equipment and mending and packaging supplies andequipment.

(vi) Material handling equipment including, but not limited to, conveyors, racks,and elevators and related control equipment.

(vii) Wastewater pretreatment equipment and supplies and related maintenanceand repair services.

(o) To a person holding a direct payment permit under section 8 of the use tax act,1937 PA 94, MCL 205.98.

(2) The tangible personal property under subsection (1) is exempt only to the extent thatthat property is used for the exempt purpose if one is stated in subsection (1). The


exemption is limited to the percentage of exempt use to total use determined by areasonable formula or method approved by the department.

Amended by HB 5303, 2-25-1996.

Amended by P.A. 435, 1996; effective 12-10-1996.

Amended by P.A. 365, 10-20-1998.

Amended by P.A. 490, 1-4-1999.


Sec. 205.54b. Deductible sales of gasoline; statement of transferee

Any taxpayer, who does not include in the amount of his gross proceeds used for thecomputation of the tax on sales of gasoline pursuant to the provisions of subdivision (f) ofsection 4a by reason of the filing with him by the transferee of a statement in a formapproved by the department of revenue, shall not hereafter be subject to the requirementsof this act as to any portion of such sales of gasoline which are not used by the transfereefor the purposes described in said statement: Provided, That this section shall also applyto and be effective in relation to similar transactions of the taxpayer subsequent toJanuary 1, 1949.

Sec. 205.54c. Exemptions of property affixed to real estate under certaincontracts

The sale of material purchased by persons engaged in the business of constructing,altering, repairing or improving real estate for others when the material so purchased bysuch persons is affixed and made a structural part of real estate or used and completelyconsumed in the fulfillment of a single contract, when the contract is either at a fixedprice not subject to change or modification or entered into pursuant to the obligation of aformal written bid which cannot be altered or withdrawn, which contract was entered intoor which bid was made before December 13, 1960, shall be exempt from the additionaltax imposed by Act No. 1 of the Public Acts of the Second Extra Session of 1960 fromJanuary 1, 1961.

Sec. 205.54d. Repealed

Repealed by P.A. 257, 7-15-1998.


Sec. 205.54e. Sales of vehicles to servicemen; exemption

No person subject to tax under this act need include in the amount of his gross proceedsused for the computation of the tax a sale of tangible personal property to any nonresidentperson of Michigan actually serving in the United States armed forces of a vehicle from aMichigan retailer for titling and registration in his home state of residency or domicile.This claim for exemption shall be allowed only if at the time of sale, or purchase, a swornstatement is furnished the vendor from the immediate commanding officer of thepurchaser certifying the person claiming the exemption is a member of the armed forceson active duty and furnishing the recorded domiciliary or home address of the purchaser.

Sec. 205.54f. Exclusions from gross proceeds, vending machine sales

A person subject to tax under this act may exclude from gross proceeds used for thecomputation of the tax that portion of the gross proceeds which represents commissionspaid to an entity exempt under the provisions of section 4a, to the extent that the grossproceeds are from sales of tangible personal property dispensed through a nonelectricallyoperated vending machine containing unsorted confections, nuts, or merchandise which,upon insertion of a coin dispenses the same in substantially equal portions, at random andwithout selection by the customer, and where the consideration is 10 cents or less.

Sec. 205.54g. Prescription drugs, returnable containers, certain foods, fruit orvegetable seeds or plants; exemptions

(1) A person subject to tax under this act may exclude from the amount of the grossproceeds used for the computation of the tax 1 or more of the following:

(a) Sales of prescription drugs for human use or food for human consumption, exceptprepared food intended for immediate consumption.

(b) The deposit on a returnable container for a beverage or the deposit on a carton orcase that is used for returnable containers.

(c) Food or tangible personal property purchased with federal food stamps.

(d) Fruit or vegetable seeds and fruit or vegetable plants if purchased at a place ofbusiness authorized to accept food stamps by the food and nutrition service of the UnitedStates department of agriculture or a place of business that has made a complete andproper application for authorization to accept food stamps but has been deniedauthorization and provides proof of denial to the department of treasury.

(2) “Prescription drugs for human use” means insulin or a drug dispensed by a licensedpharmacist pursuant to a written prescription prescribed by a licensed physician or otherhealth professional as defined by section 21005 of the public health code, 1978 PA 368,


MCL 333.21005, for the use of a designated person, or oxygen dispensed pursuant to awritten prescription or order issued by a licensed physician or other health professional asdefined in section 21005 of the public health code, 1978 PA 368, MCL 333.21005.

(3) “Food for human consumption” means all food and drink items, including bottledwater, intended primarily for human consumption except beverages with an alcoholcontent of 1/2 of 1% or more by volume, tobacco and tobacco products, and preparedfood intended for immediate consumption. Food for human consumption includes liveanimals purchased with the intent to be slaughtered for human consumption.

(4) “Prepared food intended for immediate consumption” means a retail sale of 1 or moreof the following:

(a) Food or drink prepared and served for immediate consumption at or near thepremises or ordinarily sold on a takeout basis for immediate consumption either on or offthe premises. For the purposes of this section premises includes the total space andfacilities in or on which a retailer conducts his or her business, including, but not limitedto, parking areas for the convenience of in-car consumption, outdoor tables, benches,chairs, and similar conveniences.

(b) Food or drink furnished, prepared, or served for immediate consumption at atable, chair, or counter or from a tray, glass, dish, container, or other tableware.

(c) Food or drink arranged on a plate or platter, whether intended for individual ormultiple servings and whether sold by the pound or by the serving; a sandwich, either hotor cold; or a combination of taxable and nontaxable items when sold as a plate orpackaged as a meal, even though intended for more than 1 serving.

(d) Food that is cooked to the order of the purchaser, or that is cooked andmaintained at a temperature higher than the surrounding air temperature before sale, orprepared food that is sold by the piece rather than by weight or measure.

(e) After December 31, 1994, carbonated beverages sold from a mobile facility orvending machine, or food or drink heated or cooled mechanically, electrically, or by otherartificial means to an average temperature above 75 degrees Fahrenheit or below 65degrees Fahrenheit before sale and sold from a mobile facility or vending machine,except milk, noncarbonated beverages containing 10% or more juice content, and freshfruit. A refund shall not be made for any taxes paid after December 31, 1994 and beforeJanuary 16, 1997 for food or drink otherwise exempt under this subdivision. The tax dueunder this act on the sale of food or drink from a vending machine selling both taxableitems and items exempt under this subsection shall be calculated under this act afterDecember 31, 1994 based on 1 of the following as determined by the taxpayer:

(i) Actual gross proceeds from sales at retail.


(ii) The sum of proceeds from carbonated beverages and 45% of proceeds fromthe sale of items subject to tax under this act or exempt from the tax levied under thisact, other than from the sale of carbonated beverages.

(5) Prepared food intended for immediate consumption does not include bakery productsfor off-premises consumption, such as doughnuts, pastry, bread, and cakes; meals eligibleto be purchased with federal food stamps; or nonalcoholic beverages and prepared foodintended for immediate consumption provided during work hours for free or at a reducedrate to employees of food service establishments licensed by the Michigan department ofagriculture. As used in this subsection, “food service establishment” means that term asdefined in section 1107 of the food law of 2000, 2000 PA 92, MCL 289.1107.


Amended by P.A. 60, 4-22-98.


Amended by P.A. 417, 1-8-2001; effective 1-8-2001.


Sec. 205.54h. Repealed.

Repealed by P.A. 190, 1983; effective 1-1-1984.

Sec. 205.54i. Bad debts, deduction

(1) As used in this section, “bad debt” means any portion of a debt that is related to a saleat retail for which gross proceeds are not otherwise deductible or excludable, that hasbecome worthless or uncollectible in the time period between the date when taxes accrueto the state for the taxpayer’s preceding sales tax return and the date when taxes accrue tothe state for the present return, and that is eligible to be claimed, or could be eligible to beclaimed if the taxpayer kept accounts on an accrual basis, as a deduction pursuant tosection 166 of the internal revenue code. A bad debt shall not include any interest or salestax on the purchase price, uncollectible amounts on property that remains in thepossession of the taxpayer until the full purchase price is paid, expenses incurred inattempting to collect any account receivable or any portion of the debt recovered, anyaccounts receivable that have been sold to a third party for collection, and repossessedproperty.

(2) In computing the amount of tax levied under this act for any month, a taxpayer maydeduct the amount of bad debts from his or her gross proceeds used for the computationof the tax. The amount of gross proceeds deducted must be charged off as uncollectible


on the books of the taxpayer. If the business consists of taxable and nontaxabletransactions, the deduction shall equal the full amount of the bad debt if the bad debt isdocumented as a taxable transaction in the taxpayer’s records. If documentation is notavailable, the maximum deduction from gross proceeds for any bad debt shall equal theamount of the bad debt multiplied by the quotient obtained by dividing the sales taxedpursuant to this act during the preceding calendar year by all sales during the precedingcalendar year, whether or not taxed under this act. If a consumer or other person pays allor part of a bad debt with respect to which a taxpayer claimed a deduction under thissection, the taxpayer shall be liable for the amount of taxes deducted in connection withthat portion of the debt for which payment is received and shall remit these taxes in his orher next payment to the department.

(3) Any claim for a bad debt deduction under this section shall be supported by thatevidence required by the department. The department shall review any change in the rateof taxation applicable to any taxable sales by a taxpayer claiming a deduction pursuant tothis section and shall ensure that the deduction on any bad debt does not result in thetaxpayer claiming the deduction recovering any more or less than the taxes imposed onthe sale that constitutes the bad debt.

Sec. 205.54j. Sale of tangible personal property for use in qualified businessactivity; inclusion in gross proceeds

(1) A person subject to tax under this act may exclude from the gross proceeds used forthe computation of the tax a sale of tangible personal property to the extent the tangiblepersonal property is used in a qualified business activity of the purchaser.

(2) As used in this section, “qualified business activity” means that term as defined in theenterprise zone act.


Sec. 205.54k. Drop shipments; exclusion from gross proceeds

(1) A person subject to tax under this act may exclude from gross proceeds used for thecomputation of the tax sales of tangible personal property if the tangible personalproperty is part of a drop shipment and if the taxpayer complies with the requirements ofsubsection (3).

(2) As used in this section, “drop shipment” means the direct delivery of tangible personalproperty to a purchaser in Michigan by a person who has sold the property to anotherperson not licensed under this act but possessing a resale or exemption certificate or otherwritten evidence of exemption authorized by another state, for resale to the Michiganpurchaser.


(3) For each transaction for which an exemption is claimed under subsection (1), thetaxpayer shall provide the following information to the department annually in anyreasonable form:

(a) The name, address, and, if readily available, the federal taxpayer identificationnumber of the person to whom the property is sold for resale.

(b) The name, address, and, if readily available, the federal taxpayer identificationnumber of the person to whom the property is shipped in Michigan.

(4) A sale at retail includes a drop shipment.

Sec. 205.54l. Sale of tangible personal property to business engaged in hightechnology activity; exclusion from gross proceeds

(1) A person subject to tax under this act may exclude from gross proceeds used for thecomputation of the tax a sale of tangible personal property to a business engaged in a hightechnology activity and located in a central city if all of the following apply:

(a) The tangible personal property is for use in the high technology activity.

(b) The high technology activity is the primary purpose and use of eligible propertysubject to a tax increment financing plan that provides for the use of captured assessedvalue from that eligible property.

(c) The business was not located in the central city before the authority district inwhich the eligible property is located was created.

(d) The department of treasury has issued a certificate to the business certifying thatthe eligible property is used for a high technology activity and that the other requirementsof this section are met. A certificate issued under this subdivision shall be effective for 10years after the date of issuance or until the certificate is revoked. The department oftreasury shall revoke a certificate if the requirements of this section are no longer met. Acertificate shall not be issued by the department of treasury after December 31, 1991.

(2) As used in this section:

(a) “Authority district”, “eligible property”, and “tax increment financing plan” meanthose terms as used in the local development financing act.

(b) “Central city” means a city that has the largest population within a metropolitanstatistical area as designated by the United States bureau of the census and meets all ofthe following criteria or a city that has the largest population within a county, but not lessthan 40,000, and meets all of the following criteria:


(i) Has had a poverty rate for families that is more than the statewide average rateas defined by the most recent federal decennial census.

(ii) Shows a population decline from the next most recent to the most recentfederal decennial census.

(iii) Has had an increase in state equalized valuation of real and personalproperty over the prior 10 calendar years that is less than the statewide averageincrease in state equalized valuation over the prior 10 calendar years.

(iv) Has had an unemployment rate higher than the state average unemploymentrate for 3 of the preceding 5 calendar years.

However, a central city does not include a city of which all or a portion has beendesignated as an enterprise zone under the enterprise zone act, Act No. 224 of the PublicActs of 1985, being sections 125.2101 to 125.2122 of the Michigan Compiled Laws.

(c) “High technology activity” means an activity specified by section 2(h)(iii) of thelocal development financing act but shall exclude those businesses also qualifying aseligible property under section 2(h)(i) or 2(h)(ii) of the local development financing act orthose businesses whose high technology activity relates to the activity of a business thatalso qualifies as eligible property under section 2(h)(i) or 2(h)(ii) of the localdevelopment financing act.

Sec. 205.54m. Sale of certain railroad property; exclusion from gross proceeds

A person subject to tax under this act may exclude from gross proceeds used for thecomputation of the tax the sale of rail freight or passenger cars, locomotives or otherrolling stock, roadway machines and work equipment primarily of a flanged wheel nature,accessories, attachments including parts and materials used for repair, lubricants, or fuel,used in rail operations. This exemption does not include vehicles licensed and titled foruse on public highways.

Sec. 205.54m[1]. Material purchased to alter, repair, or improve real estate forothers; exemption

The sale of material purchased by persons engaged in the business of constructing,altering, repairing, or improving real estate for others is exempt from the sales taximposed at the additional rate of 2% approved by the electors on March 15, 1994 if thematerial purchased is affixed and made a structural part of real estate or used andcompletely consumed, in the fulfillment of a single contract that is either a fixed pricecontract offered before March 15, 1994, accepted before June 15, 1994, and not subjectto change or modification or a contract entered into pursuant to the obligation of a formalwritten bid made before March 15, 1994 and accepted before June 15, 1994 that cannot


be altered or withdrawn. The tax imposed at the additional rate of 2% approved by theelectors on March 15, 1994 also does not apply to bona fide sales agreements madebefore March 15, 1994 if the agreement cannot be withdrawn or altered, or contains afixed price not subject to change or modification of greater than 15%.

Sec. 205.54n. Sale of electricity, natural or artificial gas, or home heating fuelsfor residential use; exemption from additional tax rate

The sale for residential use of electricity, natural or artificial gas, or home heating fuels isexempt from the sales tax at the additional rate of 2% approved by the electors on March15, 1994. For purposes of applying the sales tax at the additional rate of 2% to the sale ofelectricity, natural or artificial gas, or steam, the taxpayer, with respect to all itscustomers to which the additional rate of 2% applies, shall prorate usage for a period thatincludes May 1, 1994 based on the number of days occurring after April 30, 1994 if thetaxpayer has 100,000 or more customers in this state. If the taxpayer has less than100,000 customers in this state, the taxpayer shall either prorate usage for a period thatincludes May 1, 1994 based on the number of days occurring after April 30, 1994 or shallapply the additional rate of 2% beginning with the first bill that covers a usage period thatbegins after April 30, 1994.

Sec. 205.54n[1]. Repealed

Repealed by P.A. 258, 7-15-1998.

Sec. 205.54o. Schools, churches, hospitals, parent cooperative preschools, ornonprofit organizations; fund-raising; exemptions

(1) A person subject to tax under this act with aggregate sales at retail in the calendar yearof less than $5,000.00 and not operating for profit who is a school, church, hospital,parent cooperative preschool, or nonprofit organization with a tax exempt status undersection 4n(1)(a) or (b) may exclude from the proceeds used for the computation of the taxthe sales of tangible personal property for fund-raising purposes.

(2) A club, association, auxiliary, or other organization affiliated with a school, church,hospital, parent cooperative preschool, or nonprofit organization with a tax exempt statusunder section 4n(1)(a) or (b) is not considered a separate person for purposes of thisexemption. As used in this section, “school” means each elementary, middle, junior, orhigh school site within a local school district that represents a district attendance area asestablished by the board of the local school district.


Sec. 205.54p. Property offered to or made structural part of sanctuary;exclusion; “regularly organized church or house of religious worship” and“sanctuary” defined.

(1) A person subject to tax under this act may exclude from the gross proceeds used forthe computation of the tax the sale of tangible personal property purchased by a personengaged in the business of constructing, altering, repairing, or improving real estate forothers if the property is to be affixed to or made a structural part of a sanctuary.


(a) “Regularly organized church or house of religious worship” means a religiousorganization qualified under section 501(c)(3) of the internal revenue code of 1986.

(b) “Sanctuary” means only that portion of a building that is owned and occupied bya regularly organized church or house of religious worship that is used predominantly andregularly for public worship. Sanctuary includes a sanctuary to be constructed that will beowned and occupied by a regularly organized church or house of religious worship andthat will be used predominantly and regularly for public worship.

Added by P.A. 274, 7-22-1998.

Sec. 205.54q. Sales of tangible personal property not for resale; exclusion fromgross proceeds; applicability; duties of transferee; evidence of exemption;limitation.

(1) A person subject to tax under this act may exclude from the gross proceeds used forthe computation of this tax, sales of tangible personal property not for resale to thefollowing subject to subsection (5):

(a) A health, welfare, educational, cultural arts, charitable, or benevolent organizationnot operated for profit that has been issued an exemption ruling letter to purchase itemsexempt from tax before the effective date of this section signed by the administrator ofthe sales, use, and withholding taxes division of the department.

(b) An organization not operated for profit and exempt from federal income tax undersection 501(c)(3) or 501(c)(4) of the internal revenue code of 1986.

(2) The exemptions provided for in subsection (1) do not apply to sales of tangiblepersonal property and sales of vehicles licensed for use on public highways, that are notused primarily to carry out the purposes of the organization as stated in the bylaws orarticles of incorporation of the exempt entity.


(3) At the time of the transfer of the tangible personal property exempt under subsection(1), the transferee shall do 1 of the following:

(a) Present the exemption ruling letter signed by the administrator of the sales, use,and withholding taxes division of the department certifying that the property is to be usedor consumed in connection with the operation of the organization.

(b) Present a signed statement, on a form approved by the department, stating that theproperty is to be used or consumed in connection with the operation of the organizationand that the organization qualifies as an exempt organization under this section. Thetransferee shall also provide to the transferor a copy of the federal exemption letter.

(4) The letter provided under subsection (3)(a) and the statement with the accompanyingletter provided under subsection (3)(b) shall be accepted by all courts as prima facieevidence of the exemption and the statement shall provide that if the claim for taxexemption is disallowed, the transferee will reimburse the transferor for the amount of taxinvolved.

(5) The tangible personal property under subsection (1) is exempt only to the extent thatthe property is used to carry out the purposes of the organization as stated in theorganization’s bylaws or articles of incorporation. The exemption is limited to thepercentage of exempt use to total use determined by a reasonable formula or methodapproved by the department.

Added by P.A. 258, 7-15-1998.


Sec. 205.54r. Qualified truck, trailer, or rolling stock; exemption; definitions.

(1) A person subject to tax under this act may exclude from the amount of the grossproceeds used for the computation of the tax 1 or more of the following:

(a) The product of the out-of-state usage percentage and the gross proceeds otherwisetaxable under this act from the sale of a qualified truck or a trailer designed to be drawnbehind a qualified truck, purchased after December 31, 1996 and before May 1, 1999 byan interstate motor carried and used in interstate commerce.

(b) A sale of rolling stock purchased by an interstate motor carrier or for rental orlease to an interstate motor carrier and used in interstate commerce.



(a) “Interstate motor carrier” means a person engaged in the business of carryingpersons or property, other than themselves, their employees, or their own property, forhire across state lines, whose fleet mileage was driven at least 10% outside of this state inthe immediately preceding tax year.

(b) “Out-of-state usage percentage” is a fraction, the numerator of which is thenumber of miles driven outside of this state in the immediately preceding tax year byqualified trucks used by the interstate motor carrier and the denominator of which is thetotal miles driven in the immediately preceding tax year by qualified trucks used by theinterstate motor carrier. Miles driven by qualified trucks used solely in intrastatecommerce shall not be included in calculating the out-of-state usage percentage.

(c) “Qualified truck” means a commercial motor vehicle power unit that has 2 axlesand a gross vehicle weight rating in excess of 10,000 pounds or a commercial motorvehicle power unit that has 3 or more axles.

(d) “Rolling stock” means a qualified truck, a trailer designed to be drawn behind aqualified truck, and parts affixed to either a qualified truck or a trailer designed to bedrawn behind a qualified truck.

Added by SB 544, 7-14-1999; retroactively effective 4-30-1999.

Sec. 205.54s. Sale of investment coins and bullion; exclusion from grossproceeds; definitions.

(1) A person subject to tax under this act may exclude from the gross proceeds used forthe computation of this tax the sale of investment coins and bullion.


(a) “Bullion” means gold, silver, or platinum in a bulk state, where its value dependson its content rather than its form, with a purity of not less than 900 parts per 1,000.

(b) “Investment coins” means numismatic coins or other forms of money and legaltender manufactured of gold, silver, platinum, palladium, or other metal and issued by theUnited States government or a foreign government with a fair market value greater thanthe face value of the coins.

Added by P.A. 105, 7-7-1999.


Sec. 205.54t. Industrial processing equipment; exemption.

(1) A person subject to the tax under this act may exclude from the gross proceeds usedfor computation of the tax the sale of tangible personal property to the following afterMarch 30, 1999, subject to subsection (2):

(a) An industrial processor for use or consumption in industrial processing.

(b) A person, whether or not the person is an industrial processor, if the tangiblepersonal property is intended for ultimate use in and is used in industrial processing by anindustrial processor.

(c) A person, whether or not the person is an industrial processor, if the tangiblepersonal property is used by that person to perform an industrial processing activity for oron behalf of an industrial processor.

(d) A person, whether or not the person is an industrial processor, if the tangiblepersonal property is 1 of the following:

(i) A computer used in operating industrial processing equipment.

(ii) Equipment used in a computer assisted manufacturing system.

(iii) Equipment used in a computer assisted design or engineering system integralto an industrial process.

(iv) A subunit or electronic assembly comprising a component in a computerintegrated industrial processing system.

(v) Computer equipment used in connection with the computer assistedproduction, storage, and transmission of data if the equipment would have beenexempt had the data transfer been made using tapes, disks, CD-ROMs, or similarmedia by a company whose business includes publishing doctoral dissertations andinformation archiving, and that sells the majority of the company’s products tononprofit organizations exempt under section 4q.

(vi) Equipment used in the production of computer software that is offered forgeneral sale to the public or software modified or adapted to the user’s needs orequipment by the seller, only if the software is available for sale from a seller of asoftware on an as-is basis or as an end product without modification or adaption.

(2) The property under subsection (1) is exempt only to the extent that the property isused for the exempt purpose stated in this section. The exemption is limited to the


percentage of exempt use to total use determined by a reasonable formula or methodapproved by the department.

(3) Industrial processing includes the following activities:

(a) Production or assembly.

(b) Research or experimental activities.

(c) Engineering related to industrial processing.

(d) Inspection, quality control, or testing to determine whether particular units ofmaterials or products or processes conform to specified parameters at any time beforematerials or products first come to rest in finished goods inventory storage.

(e) Planning, scheduling, supervision, or control of production or other exemptactivities.

(f) Design, construction, or maintenance of production or other exempt machinery,equipment, and tooling.

(g) Remanufacturing.

(h) Processing of production scrap and waste up to the point it is stored for removalfrom the plant of origin.

(i) Recycling of used materials for ultimate sale at retail or reuse.

(j) Production material handling.

(k) Storage of in-process materials.

(4) Property that is eligible for an industrial processing exemption includes the following:

(a) Property that becomes an ingredient or component part of the finished product tobe sold ultimately at retail.

(b) Machinery, equipment, tools, dies, patterns, foundations for machinery orequipment, or other processing equipment used in an industrial processing activity and intheir repair and maintenance.

(c) Property that is consumed or destroyed or that loses its identity in an industrialprocessing activity.


(d) Tangible personal property, not permanently affixed and not becoming astructural part of real estate, that becomes a part of, or is used and consumed ininstallation and maintenance of, systems used for an industrial processing activity.

(e) Fuel or energy used or consumed for an industrial processing activity.

(f) Machinery, equipment, or materials used within a plant site or between plant sitesoperated by the same person for movement of tangible personal property in the process ofproduction.

(g) Office equipment, including data processing equipment, used for an industrialprocessing activity.

(5) Property that is not eligible for an industrial processing exemption includes thefollowing:

(a) Tangible personal property permanently affixed and becoming a structural part ofreal estate including building utility systems such as heating, air conditioning, ventilating,plumbing, lighting, and electrical distribution, to the point of the last transformer, switch,valve, or other device at which point usable power, water, gas, steam, or air is divertedfrom distribution circuits for use in industrial processing.

(b) Office equipment, including data processing equipment used for nonindustrialprocessing purposes.

(c) Office furniture or office supplies.

(d) An industrial processor’s own product or finished good that it uses or consumesfor purposes other than industrial processing.

(e) Tangible personal property used for receiving and storage of materials, supplies,parts, or components purchased by the user or consumer.

(f) Tangible personal property used for receiving or storage of natural resourcesextracted by the user or consumer.

(g) Vehicles, including special bodies or attachments, required to display a vehiclepermit or license plate to operate on public highways, except for a vehicle bearing amanufacturer’s plate or a specially designed vehicle, together with parts, used to mix andagitate materials at a plant or job site in the concrete manufacturing process.

(h) Tangible personal property used for the preparation of food or beverages by aretailer for ultimate sale at retail through its own locations.


(i) Tangible personal property used or consumed for the preservation or maintenanceof a finished good once it first comes to rest in finished goods inventory storage.

(j) Returnable shipping containers or materials, except as provided in subsection(4)(f).

(k) Tangible personal property used in the production of computer software originallydesigned for the exclusive use and special needs of the purchaser.

(6) Industrial processing does not include the following activities:

(a) Purchasing, receiveing, or storage of raw materials.

(b) Sales, distribution, warehousing, shipping, or advertising activities.

(c) Administrative, accounting, or personnel services.

(d) Design, engineering, construction, or maintenance of real property andnonprocessing equipment.

(e) Plant security, fire prevention, or medical or hospital services.


(a) “Industrial processing” means the activity of converting or conditioning tangiblepersonal property by changing the form, composition, quality, combination, or characterof the property for ultimate sale at retail or for use in the manufacturing of a product to beultimately sold at retail. Industrial processing begins when tangible personal propertybegins movement from raw materials storage to begin industrial processing and endswhen finished goods first come to rest in finished goods inventory storage.

(b) “Industrial processor” means a person who performs the activity of converting orconditioning tangible personal property for ultimate sale at retail or use in themanufacturing of a product to be ultimately sold at retail.

(c) “Product”, as used in subdivision (e), includes but is not limited to a prototype,pilot model, process, formula, invention, technique, patent, or similar property, whetherintended to be used in a trade or business or to be sold, transferred, leased, or licensed.

(d) “Remanufacturing” means the activity of overhauling, retrofitting, fabricating, orrepairing a product or its component parts for ultimate sale at retail.

(e) “Research of experimental activity” means activity incident to the development,discovery, or modification of a product or a product related process. Research or


experimental activity also includes activity necessary for a product to satisfy agovernment standard or to receive government approval. Research or experimentalactivity does not include the following:

(i) Ordinary testing or inspection of materials or products for quality controlpurposes.

(ii) Efficiency surveys.

(iii) Management surveys.

(iv) Market or consumer surveys.

(v) Advertising or promotions.

(vi) Research in connection with literacy, historical, or similar projects.


Sec. 205.54u. Extractive operation, exemption.

(1) A person subject to the tax under this act may exclude from the gross proceeds usedfor the computation of the tax the sale of tangible personal property to an extractiveoperator for use or consumption in extractive operations.

(2) The property under subsection (1) is exempt only to the extent that the property isused for the exempt purposes stated in this section. The exemption is limited to thepercentage of exempt use to total use determined by a reasonable formula or methodapproved by the department.

(3) Extractive operations include the actual production of oil, gas, brine, or other naturalresources. Property eligible for the exemption includes the following:

(a) Casing piper or drive pipe.

(b) Tubing.

(c) Well-pumping equipment.

(d) Chemicals.

(e) Explosives or acids used in fracturing, acidizing, or shooting wells.

(f) Christmas tree, derricks, or other wellhead equipment.


(g) Treatment tanks.

(h) Piping, valves, or pumps used before movement or transportation of the naturalresource from the production area.

(i) Chemicals or acids used in the treatment of crude oil, gas, brine, or other naturalresources.

(j) Tangible personal property used or consumed in depositing tailings from hard rockmining processing.

(k) Tangible personal property used or consumed in extracting the lithologic unitsnecessary to process iron ore.

(4) The extractive operation exemption does not include the following:

(a) Tangible personal property consumed or used in the construction, alteration,improvement, or repair of buildings, storage tanks, and storage and housing facilities.

(b) Tangible personal property consumed or used in transporting the product from theplace of extraction, except for tangible personal property consumed or used intransporting extracted materials from the extraction site to the place where the extractedmaterials first come to rest in finished goods inventory storage.

(c) Tangible personal property that is a product the extractive operator produces andthat is consumed or used by the extractive operator for a purpose other than themanufacturing or producing of a product for ultimate sale. The extractor shall account forand remit the tax to the state based upon the product’s fair market value.

(d) Equipment, materials, and supplies used in exploring, prospecting, or drilling foroil, gas, brine, or other natural resources.

(e) Equipment, materials, and supplies used in the storing, withdrawing, ordistribution of oil, gas, or brine from a storage facility.

(f) Vehicles, including special bodies or attachments, required to display a vehiclepermit or license plate to operate on public highways.


(a) “Extractive operations” means the activity of taking or extracting for resale ore,oil, gas, coal, timber, stone, gravel, clay, minerals, or other natural resource material. Anextractive operation begins when contact is made with the actual type of natural rawproduct being recovered. Extractive operation includes all necessary processing


operations before shipment from the place of extraction. Extractive operations includesall necessary processing operations and movement of the natural resource material untilthe point at which the natural raw product being recovered first comes to rest in finishedgoods inventory storage at the extraction site.

(b) An extractive operator is a person who, either directly or by contract, performsextractive operations.


Sec. 205.54v. Central office equipment or wireless equipment; presumption.

(1) The tax levied under this act does not apply to the purchase of machinery andequipment for use or consumption in the rendition of any combination of services, the useor consumption of which is taxable under section 3a(a) or (c) or section 3b of the use taxact, 1937 PA 94 MCL 205.93a, except that this exemption is limited to the tangiblepersonal property located on the premises of the subscriber and to central officeequipment or wireless equipment, directly used or consumed in transmitting, receiving, orswitching, or in the monitoring of switching of a 2-way interactive communication. Asused in this subsection, central office equipment or wireless equipment does not includedistribution equipment including cable or wire facilities.

(2) Beginning April 1, 1999, the property under subsection (1) is exempt only to theextent that the property is used for the exempt purposes stated in this section. There is anirrebutable presumption that 90% of total use is for exempt purposes. This presumption isin effect until April 1, 2006, at which time the presumption shall be reviewed andredetermined by the department of treasury using nonexempt and exempt userinformation for the previous 12-month period. That redetermined irrebuttablepresumption shall be in effect for the following 7 years. The irrebutable presumptionshall be reviewed and redetermined every 7 years after April 1, 2006 and applied to thefollowing 7 years.


Amended by PA 452, 6-21-2002.

Sec. 205.54w. Nonprofit hospital or nonprofit hospital or housing; exemption inbusiness of constructing, altering, repairing, or improving property; exception;definitions.

(1) For taxes levied after June 30, 1999, a person subject to the tax under this act mayexclude from the gross proceeds used for the computation of the tax the sale of tangiblepersonal property to a person directly engaged in the business of constructing, altering,repairing, or improving real estate for others to the extent that the property is affixed to


and made a structural part of a nonprofit hospital or a nonprofit housing entity qualifiedas exempt under section 15a of the state housing development authority act of 1996, 1996PA 346, MCL 125.1415a.

(2) An exemption shall not be granted under this section for any portion of propertyotherwise qualifying for exemption under this section if income or a benefit inuresdirectly or indirectly to an individual, private stockholder, or other private person fromthe independent or nonessential operation of that portion of property.


(a) “Nonprofit hospital” means 1 of the following:

(i) That portion of a building to which 1 of the following applies:

(A) Is owned or operated by an entity exempt under section 501(c)(3) of theinternal revenue code of 1986 that is licensed as a hospital under part 215 of thepublic health code, 1978 PA 368, MCL 333.21501 to 333.21568.

(B) Is owned or operated by a governmental unit in which medical attentionis provided.

(C) Is owned or operated by an entity or entities exempt under section501(c)(2) or (3) of the internal revenue code of 1986 in which medical attentionis provided.

(ii) That portion of real property necessary and related to a building described insubparagraph (i) in which medical attention is provided.

(iii) A county long-term medical care facility built after December 31, 1995.

(b) “Nonprofit hospital” does not include the following:

(i) A freestanding building or other real property of a nursing home or skillednursing facility licensed under part 217 of the public health code, 1978 PA 368, MCL333.21701 to 333.21799e.

(ii) A hospice licensed under part 214 of the public health code, 1978 PA 368,MCL 333.21401 to 333.21421.

(iii) A home for the aged licensed under part 213 of the public health code, 1978PA 368, MCL 333.21301 to 333.21333.


(c) “Medical attention” means that level of medical care in which a physicianprovides acute care or active treatment of medical, surgical, obstetrical, psychiatric,chronic, or rehabilitative conditions, that require the observation, diagnosis, and dailytreatment by a physician.


Sec. 205.54x. Sales to domestic air carrier; tax exemption.

(1) A person subject to the tax under this act may exclude from the gross proceeds usedfor the computation of this tax sales to a domestic air carrier of 1 or more of thefollowing:

(a) An aircraft that has a maximum certificated takeoff weight of at least 6,000pounds for use solely in the transport of air cargo, passengers, or a combination of aircargo and passengers.

(b) Parts and materials, excluding shop equipment or fuel, affixed or to be affixed toan aircraft that has a maximum certificated takeoff weight of at least 6,000 pounds for usesolely in the transport of air cargo, passengers, or a combination of air cargo andpassengers.

(2) A person subject to the tax under this act may exclude from the gross proceeds usedfor the computation of this tax sales of an aircraft to a person for subsequent lease to adomestic air carrier operating under a certificate issued by the federal aviationadministration under 14 C.F.R. 121, for use solely in the regularly scheduled transport ofpassengers.

(3) As used in this section, “domestic air carrier” is limited to entities engaged primarilyin the commercial transport for hire of air cargo, passengers, or a combination of aircargo and passengers as a business activity.History: Add. 2000, Act 204, Imd. Eff. June 27, 2000 .

Amended by PA 40, 7-11-2001; effective 7-11-2001.

Sec. 205.54y. Industrial processing; exemption; limitation.

(1) Subject to subsection (2), a person subject to the tax under this act may exclude fromthe gross proceeds used for the computation of the tax the sale of tangible personalproperty to the following after March 30, 1995 but before March 31, 1999:

(a) An industrial processor for use or consumption in industrial processing. Propertyused or consumed in industrial processing does not include tangible personal propertypermanently affixed and becoming a structural part of real estate; office furniture, office


supplies, and administrative office equipment; or vehicles licensed and titled for use onpublic highways other than a specially designed vehicle, together with parts, used to mixand agitate materials added at a plant or job site in the concrete manufacturing process.Industrial processing does not include receipt and storage of raw materials purchased orextracted by the user or consumer, or the preparation of food and beverages by a retailerfor retail sale. As used in this subdivision, “industrial processor” means a person whotransforms, alters, or modifies tangible personal property by changing the form,composition, or character of the property for ultimate sale at retail or sale to anotherindustrial processor to be further processed for ultimate sale at retail. Sales to a personperforming a service who does not act as an individual processor while performing theservice may not be excluded under this subdivision, except as provided in subdivision (b).

(b) A person, whether or not the person is an industrial processor, if the property is acomputer used in operating industrial processing equipment; equipment used in acomputer assisted design or engineering system integral to an industrial process; a subunitor electronic assembly comprising a component in a computer integrated industrialprocessing system; or computer equipment used in connection with the computer assistedproduction, storage, and transmission of data if the equipment used would have beenexempt had the data transfer been made using tapes, disks, cd-roms, or similar media by acompany whose business includes publishing doctoral dissertations and informationarchiving, and that sells the majority of the company’s products to nonprofitorganizations exempt under section 4q.

(2) The property under subsection (1) is exempt only to the extent that the property isused for the exempt purposes stated in this section. The exemption is limited to thepercentage of exempt use to total use determined by a reasonable formula or methodapproved by the department.


Sec. 205.54z. Construction, alteration, repair, or improvement to nonprofithospital before July 1, 1999.

(1) For taxes levied after December 31, 1990 and before July 1, 1999, the tax leviedunder this act does not apply to a claimed exemption of tangible personal property used inthe construction, alteration, repair, or improvement of the real estate or is affixed to andmade a structural part of a building of a nonprofit hospital provided the following criteriahave been met:

(a) A nonprofit hospital is an entity described in section 4w(3)(a)(i).

(b) A binding contract had been entered into for the construction, alteration, repair, orimprovement of the real estate or the affixation to the building before July 1, 1999.


(c) The claimed exemption was made in good faith.

(2) The provisions of this section shall not be applied to affect any final decision of acourt.

(3) A claim for refund for an exemption under this section shall be filed not later thanJuly 15, 1999. The approved refunds shall be paid without interest.


Sec. 205.55. Additional tax

Additional tax. The tax imposed by this act shall be in addition to all other license feesand taxes levied by law as a condition precedent to engaging or continuing in anybusiness taxable hereunder, except as in this act otherwise specifically provided.

Sec. 205.55a. Labor or service charges in maintenance and repair of tangibleproperty

Notwithstanding the provisions of section 2, labor or service charges involved inmaintenance and repair work on tangible property of others shall be separately itemizedand the tax applied only to the amount charged for the tangible personal property sold.

Sec. 205.55b. Qualified athletic event; tax exemption.

(1) Notwithstanding the provisions of section 2, the organizing entity of a qualifiedathletic event that sells corporate sponsor contracts for the event that include both taxabletangible personal property and nontaxable services may apply the tax only to the amountcharged for the sale of taxable tangible personal property if all of the following criteriahave been met:

(A) The organizing entity is exempt or is wholly owned by an entity exempt undersection 501(c)(6) of the internal revenue code of 1986.

(B) The goddamning entity pomaded both of the following to the department at least180 days in advance of entering into the first corporate sponsor contract:

(i) Written notice of its intent to enter into corporate sponsor contracts.(ii) An itemized schedule of the taxable tangible personal property and

nontaxable services that will be provided under each corporate sponsor contract.

(C) The department has given written approval to the organizing entity’s allocation ofthe tax among taxable tangible personal property and nontaxable services.


(2) As used in this section, “Qualified Athletic Event” means either of the following:

(A) A professional sporting competition in which individuals officially representingat least 2 countries or nations compete.

(B) A professional football competition in which teams compete in a postseasonevent to determine the league champion.

(3) This section is repealed effective January 1, 2007.

Added by PA 510, 7-23-2002; effective 7-23-2002.

Sec. 205.56. Tax; filing of returns and payment; date of accrual

(1) Each taxpayer, unless otherwise provided by law or as required pursuant to subsection(2), (3), (5), or (6), on or before the fifteenth day of each month shall make out a returnfor the preceding month on a form prescribed by the department showing the entireamount of all sales and gross proceeds of his or her business, the allowable deductions,and the amount of tax for which he or she is liable. The taxpayer shall also transmit thereturn, together with a remittance for the amount of the tax, to the department on orbefore the fifteenth day of that month. The monthly return shall be signed by the taxpayeror his or her duly authorized agent and, if prepared for the taxpayer by any other person,the return shall so state, give the name and address of that person, be signed by thatperson, and give the name of that person’s employer, if any.

(2) Before January 1, 1999, each taxpayer that had a total tax liability, after subtractingthe tax payments made to the secretary of state under this act or the use tax act, 1937 PA94, MCL 205.91 to 205.111, or after subtracting the tax credits available under section6a, in the immediately preceding calendar year of $720,000.00 or more on or before theeighteenth of each month shall remit to the department, by an electronic funds transfermethod approved by the commissioner of revenue, an amount equal to 95% of thetaxpayer’s liability under this act for the same month in the immediately precedingcalendar year, or 95% of the actual liability for the current month being reported, plus areconciliation payment equal to the difference between the tax liability determined for theimmediately preceding month minus the amount of tax previously paid for that month.

(3) Beginning January 1, 1999, each taxpayer that had a total tax liability after subtractingthe tax payments made to the secretary of state under this act or the use tax act, 1937 PA94, MCL 205.91 to 205.111, or after subtracting the tax credits available under section6a, in the immediately preceding calendar year of $720,000.00 or more shall remit to thedepartment, by an electronic funds transfer method approved by the commissioner ofrevenue on or before the fifteenth day of the month, an amount equal to 50% of thetaxpayer’s liability under this act for the same month in the immediately precedingcalendar year, or 50% of the actual liability for the month being reported, whichever is


less, plus a reconciliation payment equal to the difference between the tax liabilitydetermined for the immediately preceding month minus the amount of tax previously paidfor that month. Additionally, the seller shall remit to the department, by an electronicfunds transfer method approved by the commissioner of revenue on or before the last dayof the month, an amount equal to 50% of the taxpayer’s liability under this act for thesame month in the immediately preceding calendar year, or 50% of the actual liability forthe month being reported, whichever is less.

(4) The tax imposed under this act shall accrue to the state on the last day of the month inwhich the sale is incurred.

(5) The commissioner of revenue, when necessary to insure payment of the tax or toprovide a more efficient administration, may require the filing of returns and payment ofthe tax for other than monthly periods.

(6) A taxpayer who is a materialperson may at the option of the taxpayer include theamount of all taxable sales and gross proceeds from materials furnished to an owner,contractor, subcontractor, repairperson, or consumer on a credit sale basis for the purposeof making an improvement to real property in his or her return in the first quarterly returndue following the date in which the materialperson made the credit sale to the owner,contractor, subcontractor, repairperson, or consumer. Notwithstanding subsections (1)through (4), a materialperson may at the option of the taxpayer file quarterly returns for acredit sale only as determined by the department. As used in this subsection, “credit sale”means an extension of credit for the sale of taxable goods by a seller other than a creditcard sale; and “materialperson” means a person who provides materials for theimprovement of real property, who has registered with and has demonstrated to thedepartment that he or she is primarily engaged in the sale of lumber and building materialrelated products to owners, contractors, subcontractors, repairpersons, or consumers, andwho is authorized to file a construction lien upon real property and improvements underthe construction lien act, 1980 PA 497, MCL 570.1101 to 570.1305.

Amended by P.A. 265, 7-15-1998.

Amended by P.A. 453, 12-30-1998.

Sec. 205.56a. Prepayment of tax on gasoline at time of purchase or shipment

(1) At the time of purchase or shipment from a refiner, pipeline terminal operator, ormarine terminal operator, a purchaser or receiver of gasoline shall prepay a portion of thetax imposed by this act at the rate provided in this section to the refiner, pipeline terminaloperator, or marine terminal operator for the purchase or receipt of gasoline. If thepurchase or receipt of gasoline is made outside this state for shipment into andsubsequent sale within this state, the purchaser or receiver, other than a refiner, pipelineterminal operator, or marine terminal operator, shall make the prepayment required by


this section directly to the department. Prepayments shall be made at a cents per gallonrate determined by the department and shall be based on 6% of the statewide averageretail price of a gallon of self-serve unleaded regular gasoline as determined and certifiedby the department rounded up to the nearest 1/10 of 1 cent. A person who makesprepayments direct to the department shall make those prepayments according to theschedule in subsection (5).

(2) The rate of prepayment applied pursuant to subsection (1) shall be determined every 6months by the department unless the department certifies that the change in the statewideaverage retail price of a gallon of self-serve unleaded regular gasoline has been less than10% during the 6-month period. However, the rate shall be determined not less thanannually.

(3) A person subject to tax under this act who makes prepayment to another person asrequired by this section may claim an estimated prepayment credit on its regular monthlyreturn filed pursuant to section 6. The credit shall be for prepayments made during themonth for which the return is required and shall be based upon the difference betweenprepayments made in the immediately preceding month and collections of prepaid taxreceived from sales or transfers. A sale or transfer for which collection of prepaid tax isdue the taxpayer is subject to a bad debt deduction under section 4i, whether or not thesale or transfer is a sale at retail. The credit shall not be reduced because of actualshrinkage. A taxpayer who does not, in the ordinary course of business sell gasoline ineach month of the year, may, with the approval of the department, base the initialprepayment deduction in each tax year on prepayments made in a month other than theimmediately preceding month. Estimated prepayment credits claimed with the return duein January 1984 shall be based on the taxpayer’s retail sales of gasoline in December1983. The difference in actual prepayments shall be reconciled on the annual return inaccordance with procedures prescribed by the department.

(4) At the option of the taxpayer the estimated prepayment credit may be claimed on thereturn required to be filed under Act No. 150 of the Public Acts of 1927, being sections207.101 to 207.202 of the Michigan Compiled Laws, instead of a claim for the credit onthe return required to be filed under section 6. Prepayments claimed on the motor fuel taxreturn shall be based on the difference in the prepayments made in the immediatelypreceding month and collections of prepaid tax received from sales or transfer and shallbe for prepayments made in the month in which the return is due. A taxpayer electing anoption under this subsection shall be entitled to a deduction under section 4i as permittedby subsection (3). Amounts credited pursuant to this section shall not be deducted fromamounts required to be credited to the Michigan transportation fund pursuant to section18b of Act No. 150 of the Public Acts of 1927, being section 207.118b of the MichiganCompiled Laws. The department may establish procedures for the election of claimsunder subsection (3) and this subsection to avoid duplication of claims.


(5) Notwithstanding the other provisions for the payment and remitting of tax due underthis act, a refiner, pipeline terminal operator, or marine terminal operator shall accountfor and remit to the department the prepayments received pursuant to this section inaccordance with the following schedule:

(a) On or before the twenty-fifth of each month, prepayments received after the endof the preceding month and before the sixteenth of the month in which the prepaymentsare made.

(b) On or before the tenth of each month , payments received after the fifteenth andbefore the end of the preceding month.

(6) A refiner, pipeline terminal operator, or marine terminal operator who fails to remitprepayments made by a purchaser or receiver of gasoline is subject to the penaltiesprovided by Act No. 122 of the Public Acts of 1941, being sections 205.1 to 205.31 ofthe Michigan Compiled Laws.

(7) The refiner, pipeline terminal operator, or marine terminal operator shall not receive adeduction under section 4 for receiving and remitting prepayments from a purchaser orreceiver pursuant to this section.

(8) The purchaser or receiver of gasoline who makes prepayments is not subject to furtherliability for the amount of the prepayment if the refiner, pipeline terminal operator, ormarine terminal operator fails to remit the prepayment.


(a) “Marine terminal operator” means a person who stores gasoline at a boat terminaltransfer defined as a dock, a tank, or equipment contiguous to a dock or a tank, includingequipment used in the unloading of gasoline from a ship and in transferring the gasolineto a tank pending wholesale bulk reshipment.

(b) “Pipeline terminal operator” means a person who stores gasoline in tanks andequipment used in receiving and storing gasoline from interstate and intrastate pipelinespending wholesale bulk reshipment.

(c) “Purchase” or “shipment” does not include an exchange of gasoline, or anexchange transaction, between refiners, pipeline terminal operators, or marine terminaloperators.

(d) “Refiner” means a person who manufactures or produces gasoline by any processinvolving substantially more than the blending of gasoline.


Sec. 205.57. Sale of motor vehicle to new or used vehicle dealer; certificate

(1) Upon purchase of a motor vehicle by a new vehicle dealer or a used or secondhandvehicle dealer made on or after March 1, 1984 and on or before February 1, 1985 that isnot part of a transaction in which the dealer also sells a motor vehicle and provides thestatement specifying the amount credited the buyer for a trade-in as required by section251 of Act No. 300 of the Public Acts of 1949, being section 257.251 of the MichiganCompiled Laws, the dealer shall provide the owner of the motor vehicle who is selling themotor vehicle to the dealer with a certificate, signed by each party, specifying all of thefollowing information:

(a) The year, make, model, and vehicle identification number of the motor vehicle.

(b) The name and address of each party.

(c) The dealer’s license number.

(d) The price paid for the motor vehicle.

(e) The date the dealer purchased the motor vehicle.

(f) A statement indicating that the seller may present the certificate when purchasinga new motor vehicle within 90 days after the date specified on the certificate from aperson licensed under this act to reduce the gross proceeds upon which the taxpayer istaxed and may reimburse himself or herself.

(2) A person receiving a certificate prescribed by this section upon the sale of their motorvehicle to a new vehicle dealer or a used or secondhand vehicle dealer may present thecertificate to a person subject to tax under this act upon purchasing a new motor vehiclewithin 90 days after the date on the certificate as the date the person sold their vehicle toa dealer. A certificate presented at a sale at retail shall reduce, pursuant to section 1, thegross proceeds of the sale at retail for which the certificate was presented and shallreduce the basis on which the taxpayer may reimburse himself or herself by adding anytax levied by this act on the sale at retail to the sale price. Except as provided by thissection, a certificate issued pursuant to this section shall not be transferable.

(3) A person subject to tax under this act who, upon making a sale at retail of a newmotor vehicle, receives from the purchaser a completed certificate that evidences a sale ofa motor vehicle by the purchaser to a new vehicle dealer or a used or secondhand dealerwithin 90 days before the sale at retail shall note the date of the sale at retail for whichthe certificate was presented upon the certificate and forward the certificate with any taxliability of the taxpayer on the sale at retail for which the certificate was presented.


(4) The department shall prescribe and distribute certificates to be used for purposes ofthis section.

(5) For purposes of section 27 of Act No. 122 of the Public Acts of 1941, being section205.27 of the Michigan Compiled Laws, and the penalties provided by that section, acertificate under this section shall be considered a return.

Sec. 205.57a. Purchase of used motor vehicle from private individual; certificate

(1) Upon the purchase from a private individual of a used or secondhand motor vehicleby an individual who is not a new vehicle dealer, or a used or secondhand vehicle dealer,made on or after March 1, 1984 and on or before February 1, 1985, and upon the requestof the seller, both parties to the transaction shall sign a certificate to be provided by theseller specifying all of the following:

(a) The year, make, model, and vehicle identification number of the motor vehicle.

(b) The name and address of each party.

(c) The price paid for the motor vehicle.

(d) The date the individual purchased the motor vehicle.

(e) A statement indicating that when purchasing a new motor vehicle within 90 daysafter the date specified on the certificate from a person licensed and subject to tax underthis act, the seller of the used vehicle may present the certificate to the taxpayer to reducethe gross proceeds upon which the taxpayer is taxed and to reduce the amount by whichthe taxpayer is reimbursed.

(2) A person receiving a certificate pursuant to subsection (1) upon the sale of their motorvehicle to another individual may present the certificate to a person subject to tax underthis act upon purchasing a new motor vehicle within 90 days after the date of sale of theused vehicle specified on the certificate. A certificate presented at a sale at retail shallreduce, pursuant to section 1, the gross proceeds of the sale at retail for which thecertificate was presented and shall reduce the basis on which the taxpayer may reimbursehimself or herself by adding any tax levied by this act on the sale at retail to the saleprice. Except as provided by this section, a certificate issued pursuant to this section shallnot be transferable.

(3) If a person subject to tax under this act makes a sale at retail and receives from thepurchaser a certificate evidencing a prior sale of a used vehicle, the taxpayer shall notethe date of the prior sale on the certificate. If the sale of the used vehicle occurred within90 days before the sale at retail, the taxpayer shall forward the certificate with any tax


liability of the taxpayer on the sale at retail for which the certificate was presented to thedepartment.

(4) The department shall prescribe and distribute certificates to be used for purposes ofthis section. Certificates shall be available at all offices of the secretary of state.

(5) For purposes of section 27 of Act No. 122 of the Public Acts of 1941, being section205.27 of the Michigan Compiled Laws, and the penalties provided by that section, acertificate under this section shall be considered a return.

Sec. 205.57b. Sale of used motor vehicle subsequent to purchase of new motorvehicle; refund

(1) If within 30 days after purchasing a new motor vehicle during the period beginning onMarch 14, 1984 through February 1, 1985, a person sells a used motor vehicle that he orshe owned prior to the purchase of the new motor vehicle, that person shall be eligibleand may apply to the department for a refund. The refund shall be in an amount equal tothe reduction of sales tax liability that the new motor vehicle dealer from whom theperson purchased the new motor vehicle would have been entitled to if the person hadutilized the proceeds from the sale of the used motor vehicle as part payment of the newmotor vehicle.

(2) Application for a refund provided for in subsection (1) shall be made on a formprescribed and distributed by the department. If a sale of a used motor vehicle thatqualifies the seller for a refund pursuant to subsection (1) is made before the effectivedate of this section, the seller shall attest by signature to the accuracy of all informationcontained on the form, but shall not be required to obtain the signature of the purchaser ofthe used motor vehicle.

Sec. 205.58. Consolidated returns

Consolidated returns. Any person engaging in 2 or more places in the same business orbusinesses taxable under this act, shall file a consolidated return covering all suchbusiness activities engaged in within this state and shall be entitled to deduct 1 exemptiononly in the amount of $50.00 per month as allowed in section 4.

Sec. 205.59. Administration of tax; promulgation of rules; filing of refundclaims, subsurface irrigation pipe

(1) The tax imposed by this act shall be administered by the commissioner pursuant to1941 PA 122, MCL 205.1 to 205.31, and this act. In case of conflict between theprovisions of 1941 PA 122, MCL 205.1 to 205.31, and this act, the provisions of this actshall prevail.


(2) The department shall promulgate rules to implement this act pursuant to theadministrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.

(3) A claim for a refund under the 1991 amendatory act amending section 4a to providefor the exemption of subsurface irrigation pipe shall be filed not later than September 30,1991. The approved refunds shall be paid without interest.

(4) A claim for a refund for the exemption provided by the 1998 amendatory act thatadded subdivision (q) to section 4a shall be filed not later than 90 days after the effectivedate of the amendatory act that added this subsection.

Amended by P.A. 365, 10-20-1998.

Sec. 205.60. Refund by taxpayer for returned property; refund under sec.445.360a.

(1) If a taxpayer refunds or provides a credit for all or a portion of the amount of thepurchase price of returned tangible personal property within the time period for returnsstated in the taxpayer’s refund policy or 180 days after the initial sale, whichever issooner, the taxpayer shall also refund or provide a credit for the tax levied under this actthat the taxpayer added to all or that portion of the amount of the purchase price that isrefunded or credited.

(2) If a taxpayer tenders an amount to a buyer under section 10a of the pricing andadvertising of consumer items act, 1976 PA 449, MCL 445.360a, the taxpayer shallrefund the tax levied under this act on the difference between the price stamped or affixedto the item and the price charged.

Added by HB 4664, 6-7-2000; effective 6-7-2000.

Sec. 205.61. Repealed.Repealed by P.A. 164, 1980; effective 9-17-1980.





Sec. 205.65. Corporation; dissolution, withdrawal

(1) A domestic corporation or a foreign corporation authorized to transact business inthis state that submits a certificate of dissolution or requests a certificate of withdrawalfrom this state shall request a certificate from the department stating that taxes are not dueunder section 27A of 1941 PA 122, MCL 205.27a, not more than 60 days aftersubmitting the certificate of dissolution or requesting the certificate of withdrawal. Acorporation that does not request a certificate stating that taxes are not due is subject tothe same penalties under section 24 of 1941 PA 122, MCL 205.24, that a taxpayer wouldbe subject to for failure to file a return.

(2) If a corporation licensed under this act fails for any reason to file the requiredreturns or to pay the tax due, any of its officers having control, or supervision of, orcharged with the responsibility for making the returns and payments is personally liablefor the failure. The dissolution of a corporation does not discharge an officer’s liabilityfor a prior failure of the corporation to make a return or remit the tax due. The sum duefor the liability may be assessed and collected as provided in sections 23 and 24 of PA122, MCL 205.23 and 205.24.


Sec. 205.66. Injunction for failure to pay tax or obtain license

Any person against whom a tax shall be assessed as herein provided may be restrainedand enjoined by proper proceedings instituted in the name of the state of Michigan,brought by the attorney general at the request of the department, from engaging and/orcontinuing in a business for which a privilege tax is required by the provisions of this act,until such tax shall have been paid, and/or license secured, and until such person shallhave complied with the provisions of this act.

Sec. 205.66a. Duty of assessing officers

It shall be the duty of each assessing officer of each city, village or township in preparingthe annual property tax roll of personal property to show on the assessment roll the salestax license number of each person engaged in the business of making retail sales oftangible personal property subject to tax under this act. It shall be the duty of each saidassessing officer to immediately report to the department of revenue the name andaddress and type of business of any person found in the business of making such retailsales and not licensed to do so as required by section 3 of this act.

Any city, village or township clerk, marketmaster, or any other state, county or municipalofficial whose duty it is to issue licenses or permits to engage in a business involving thesale at retail of tangible personal property subject to tax under this act shall, beforeissuing such license or permit, require proof that the person to whom such license or


permit is to be issued is the holder of a sales tax license as required by section 3 of thisact or has applied to the department of revenue for such license.

Any city, village, township or state officer who shall receive information which leads himto believe that a person making retail sales subject to tax under this act is about to closehis business or cease making retail sales shall immediately notify the department ofrevenue of this fact in order that the department may make such investigation as may benecessary to protect the interests of the state.

Sec. 205.67. Inventory and records; sale to unlicensed person; return

(1) A person liable for any tax imposed under this act shall keep accurate and completebeginning and annual inventory and purchase records of additions to inventory, completedaily sales records, receipts, invoices, bills of lading, and all pertinent documents in aform the department requires. If an exemption from sales tax is claimed because the saleis for resale or for any of the other exemptions or deductions granted under this act, arecord shall be kept of the name and address of the person to whom the sale is made, thedate of the sale, the article purchased, the type of exemption claimed, the amount of thesale, and, if that person has a sales tax license, the sales tax license number. If a taxpayermaintains the records required under this section, and accepts an exemption certificatefrom the buyer in good faith on a form prescribed by the department, the taxpayer is notliable for collection of the unpaid tax after a finding that the sale did not qualify forexemption under this act. As used in this section, “good faith” means that the taxpayerreceived a completed and signed exemption certificate from the buyer. A personknowingly making a sale of tangible personal property for the purpose of resale at retailto another person not licensed under this act is liable for the tax imposed under this actunless the transaction is exempt under the provisions of section 4k. These records must beretained for a period of 4 years after the tax imposed under this act to which the recordsapply is due or as otherwise provided by law. If the department considers it necessary, thedepartment may require a person, by notice served upon that person, to make a return,render under oath certain statements, or keep certain records the department considerssufficient to show whether or not that person is liable for tax under this act. If thetaxpayer fails to file a return or to maintain or preserve proper records as prescribed inthis section, or the department has reason to believe that any records maintained orreturns filed are inaccurate or incomplete and that additional taxes are due, thedepartment may assess the amount of the tax due from the taxpayer based on informationthat is available or that may become available to the department. That assessment isconsidered prima facie correct for the purpose of this act and the burden of proof ofrefuting the assessment is upon the taxpayer. For purposes of this section, exemptioncertificate includes a blanket exemption certificate on a form prescribed by thedepartment that covers all exempt transfers between the taxpayer and the buyer for aperiod of 4 years or for a period of less than 4 years as stated on the blanket exemptioncertificate if that period is agreed to by the buyer and taxpayer.


(2) For a period of not less than 30 days or more than 60 days that ends before September1, 2000, as designated by the department, a person liable for any tax imposed under thisact is exempt from the good faith requirement described in subsection (1) if that personsubmits to the department copies of all sales tax exemption certificates from buyersdescribed in subsection (1).

(3) A buyer eligible to claim any of the exemptions or deductions granted under this actshall register on a form prescribed by the department. If a buyer fails to satisfy theregistration requirement 6 months after either notice to register from the department orbecoming eligible to claim an exemption or deduction under this act, whichever is later,the buyer is not entitled to submit an exemption certificate claiming an exemption ordeduction otherwise granted by this act until the buyer registers. After the department hasissued notice to register, a nonregistered buyer shall be allowed to claim exemption in arefund claim that is filed with the department within the time permitted under section 27aof 1941 PA 122, MCL 205.27a.

(4) If all information described in subsection (1) is otherwise maintained in routinebusiness records, the good faith exemption certificate requirement in subsection (1) doesnot apply to the following:

(a) A person licensed by the Michigan liquor control commission as a wholesaler forpurposes of sales of alcoholic liquor to another person licensed by the Michigan liquorcontrol commission. As used in this subsection, “alcoholic liquor”, “authorizeddistribution agent”, and “wholesaler” mean those terms as defined in the Michigan liquorcontrol code of 1998, 1998 PA 58, MCL 436.1101 to 436.2303.

(b) The Michigan liquor control commission or a person certified by the commissionas an authorized distribution agent for purposes of the sale and distribution of alcoholicliquor to a person licensed by the Michigan liquor control commission.



Sec. 205.68. Repealed









Sec. 205.73. Advertisement; reimbursement of taxpayer; brackets

(1) A person engaged in the business of selling tangible personal property at retail shallnot advertise or hold out to the public in any manner, directly or indirectly, that the taximposed under this act is not considered as an element in the price to the consumer. Thisact does not prohibit any taxpayer from reimbursing himself or herself by adding to thesale price any tax levied by this act.

(2) The following brackets shall be used by retailers in determining amounts to be addedto sales prices for reimbursement purposes:

Amount of Sale Tax

1 cent to 10 cents 011 cents to 24 cents 1 cent25 cents to 41 cents 2 cents42 cents to 58 cents 3 cents59 cents to 74 cents 4 cents75 cents to 91 cents 5 cents92 cents to 99 cents 6 cents

For $1.00 and each multiple of $1.00, 6% of the sale price.

(3) A person other than the state may not enrich himself or herself or gain any benefitfrom the collection or payment of the tax. The use of the above brackets does not relievethe retailer from liability for payment of the full amount of the tax levied by this act.



Sec. 205.75. Sales tax revenues; distribution

Sec. 25 (1) All sums of money received and collected under this act shall be deposited bythe department in the state treasury to the credit of the general fund, except as provided inthis section.


(2) Fifteen percent of the collections of the tax imposed at a rate of 4% shall bedistributed to cities, villages, and townships pursuant to the state revenue sharing act of1971, Act No. 140 of the Public Acts of 1971, being sections 141.901 to 141.921 of theMichigan Compiled Laws.

(3) Sixty percent of the collections of the tax imposed at a rate of 4% shall be depositedin the state school aid fund established in section 11 of article IX of the state constitutionof 1963 and distributed as provided by law. In addition, all of the collections of the taximposed at the additional rate of 2% approved by the electors March 15, 1994 shall bedeposited in the state school aid fund.

(4) For the fiscal year ending September 30, 1988 and each fiscal year ending afterSeptember 30, 1988, of the 25% of the collections of the general sales tax imposed at arate of 4% directly or indirectly on fuels sold to propel motor vehicles upon highways, onthe sale of motor vehicles, and on the sale of the parts and accessories of motor vehiclesby new and used car businesses, used car businesses, accessory dealer businesses, andgasoline station businesses as classified by the department of treasury remaining after theallocations and distributions are made pursuant to subsections (2) and (3), the followingamounts shall be deposited each year into the respective funds:

(a) Not less than 27.9% to the comprehensive transportation fund. However, for thefiscal year ending September 30, 1991 only, the amount to be deposited in thecomprehensive transportation fund shall be reduced by $1,500,000.00.

(b) The balance to the state general fund.

(5) After the allocations and distributions are made pursuant to subsections (2) and (3), anamount equal to the collections of the tax imposed at a rate of 4% by this act from thesale at retail of computer software as defined in section 1 shall be deposited in theMichigan health initiative fund created in section 5911 of the public health code, Act No.368 of the Public Acts of 1978, being section 333.5911 of the Michigan Compiled Lawsand shall be considered in addition to, and is not intended as a replacement for any othermoney appropriated to the department of public health. The funds deposited in theMichigan health initiative fund on an annual basis shall not be less than $9,000,000.00 ormore than $12,000,000.00.

(6) The balance in the state general fund shall be disbursed only on an appropriation orappropriations by the legislature.




Sec. 205.78. Short title

This act may be cited as the “General Sales Tax Act.”

MICHIGAN USE TAX ACT

Sec. 205.91. Use tax act

This act may be cited as the “Use Tax Act”.

Sec. 205.92. Definitions

As used in this act:

(a) “Person” means an individual, firm, partnership, joint venture, association, socialclub, fraternal organization, municipal or private corporation whether or not organized forprofit, company, limited liability company, estate, trust, receiver, trustee, syndicate, theUnited States, this state, county, or any other group or combination acting as a unit, andthe plural as well as the singular number, unless the intention to give a more limitedmeaning is disclosed by the context.

(b) “Use” means the exercise of a right or power over tangible personal propertyincident to the ownership of that property including transfer of the property in atransaction where possession is given.

(c) “Storage” means a keeping or retention of property in this state for any purposeafter the property loses its interstate character.

(d) “Seller” means the person from whom a purchase is made and includes everyperson selling tangible personal property or services for storage, use, or otherconsumption in this state. If, in the opinion of the department, it is necessary for theefficient administration of this act to regard a salesperson, representative, peddler, orcanvasser as the agent of a dealer, distributor, supervisor, or employer under whom theperson operates or from whom he or she obtains tangible personal property or servicessold by him or her for storage, use, or other consumption in this state, irrespective ofwhether or not he or she is making the sales on his or her own behalf or on behalf of thedealer, distributor, supervisor, or employer, the department may so consider him or her,and may consider the dealer, distributor, supervisor, or employer as the seller for thepurpose of this act.

(e) “Purchase” means to acquire for a consideration, whether the acquisition iseffected by a transfer of title, of possession, or of both, or a license to use or consume;whether the transfer is absolute or conditional, and by whatever means the transfer iseffected; and whether consideration is a price or rental in money, or by way of exchangeor barter.


(f) “Price” means the aggregate value in money of anything paid or delivered, orpromised to be paid or delivered, by a consumer to a seller in the consummation andcomplete performance of the transaction by which tangible personal property or servicesare purchased or rented for storage, use, or other consumption in this state, without adeduction for the cost of the property sold, cost of materials used, labor or service cost,interest or discount paid, or any other expense. The price of tangible personal property,for affixation to real estate, withdrawn by a construction contractor from inventoryavailable for sale to others or made available by publication or price list as a finishedproduct for sale to others is the finished goods inventory value of the property. If aconstruction contractor manufactures, fabricates, or assembles tangible personal propertybefore affixing it to real estate, the price of the property is equal to the sum of thematerials cost of the property and the cost of labor to manufacture, fabricate, or assemblethe property but does not include the cost of labor to cut, bend, assemble, or attachproperty at the site of affixation to real estate. For the purposes of the preceding sentence,for property withdrawn by a construction contractor from inventory available for sale toothers or made available by publication or price list as a finished product for sale toothers, the materials cost of the property means the finished goods inventory value of theproperty. For purposes of this subdivision, “manufacture” means to convert or conditiontangible personal property by changing the form, composition, quality, combination, orcharacter of the property and “fabricate” means to modify or prepare tangible personalproperty for affixation or assembly. The price of a motor vehicle, trailer coach, or titledwatercraft is the full retail price of the motor vehicle, trailer coach, or titled watercraftbeing purchased. The tax collected by the seller from the consumer or lessee under thisact is not considered part of the price, but is a tax collection for the benefit of the state,and a person other than the state shall not derive a benefit from the collection or paymentof this tax. A price does not include an assessment imposed under the convention andtourism marketing act, 1980 PA 383, MCL 141.881 to 141.889, 1974 PA 263, MCL141.861 to 141.867, the state convention facility development act, 1985 PA 106, MCL207.621 to 207.640, the regional tourism marketing act, 1989 PA 244, MCL 141.891 to141.900, 1991 PA 180, MCL 207.751 to 207.759, or the community convention ortourism marketing act, 1980 PA 395, MCL 141.871 to 141.880, that was added to chargesfor rooms or lodging otherwise subject, pursuant to section 3a, to tax under this act. Pricedoes not include specific charges for technical support or for adapting or modifyingprewritten, standard, or canned computer software programs to a purchaser’s needs orequipment if the charges are separately stated and identified. The tax imposed under thisact shall not be computed or collected on rental receipts if the tangible personal propertyrented or leased has previously been subjected to a Michigan sales or use tax whenpurchased by the lessor.

(g) “Consumer” means the person who has purchased tangible personal property orservices for storage, use, or other consumption in this state and includes a personacquiring tangible personal property if engaged in the business of constructing, altering,repairing, or improving the real estate of others.

Michigan Use Tax Act (2004) Page 49

(h) “Business” means all activities engaged in by a person or caused to be engaged inby a person with the object of gain, benefit, or advantage, either direct or indirect.

(i) “Department” means the revenue division of the department of treasury.

(j) “Tax” includes all taxes, interest, or penalties levied under this act.

(k) “Tangible personal property” includes computer software offered for general useby the public or software modified or adapted to the user’s needs or equipment by theseller, only if the software is available from a seller of software on an as is basis or as anend product without modification or adaptation. Tangible personal property does notinclude computer software originally designed for the exclusive use and special needs ofthe purchaser. As used in this subdivision, “computer software” means a set of statementsor instructions that when incorporated in a machine usable medium is capable of causinga machine or device having information processing capabilities to indicate, perform, orachieve a particular function, task, or result.

(l) “Tangible personal property” beginning September 20, 1999, includes electricity,natural or artificial gas, or steam and also the transmission and distribution of electricityused by the consumer or user of the electricity, whether the electricity is purchased fromthe delivering utility or from another provider.

(m) “Tangible personal property” does not include a commercial advertising elementif the commercial advertising element is used to create or develop a print, radio,television, or other advertisement, the commercial advertising element is discarded orreturned to the provider after the advertising message is completed, and the commercialadvertising element is custom developed by the provider for the purchaser. As used in thissubdivision, “commercial advertising element” means a negative or positive photographicimage, an audiotape or videotape master, a layout, a manuscript, writing of copy, adesign, artwork, an illustration, retouching, and mechanical or keyline instructions.“Tangible personal property” includes black and white or full color process separationelements, an audiotape reproduction, or a videotape reproduction.

(n) “Textiles” means goods that are made of or incorporate woven or nonwovenfabric, including, but not limited to, clothing, shoes, hats, gloves, handkerchiefs, curtains,towels, sheets, pillows, pillowcases, tablecloths, napkins, aprons, linens, floor mops, floormats, and thread. Textiles also include materials used to repair or construct textiles, orother goods used in the rental, sale, or cleaning of textiles.

Amended by P.A. 336, 10-20-1998.

Amended by Act 391, 1-2-2001; effective 1-3-2001.



Sec. 205.93. Rate; presumption

(1) There is levied upon and there shall be collected from every person in this state aspecific tax for the privilege of using, storing, or consuming tangible personal property inthis state at a rate equal to 6% of the price of the property or services specified in section3a or 3b. Penalties and interest shall be added to the tax if applicable as provided in thisact. For the purpose of the proper administration of this act and to prevent the evasion ofthe tax, it is presumed that tangible personal property purchased is subject to the tax ifbrought into the state within 90 days of the purchase date and is considered as acquiredfor storage, use, or other consumption in this state.

(2) The tax imposed by this section for the privilege of using, storing, or consuming avehicle, ORV, manufactured housing, aircraft, snowmobile, or watercraft shall becollected before the transfer of the vehicle, ORV, manufactured housing, aircraft,snowmobile, or watercraft, except a transfer to a licensed dealer or retailer for purposesof resale that arises by reason of a transaction made by a person who does not transfervehicles, ORVs, manufactured housing, aircraft, snowmobiles, or watercraft in theordinary course of his or her business done in this state. The tax on a vehicle, ORV,snowmobile, and watercraft shall be collected by the secretary of state before the transferof the vehicle, ORV, snowmobile, or watercraft registration. The tax on manufacturedhousing shall be collected by the department of consumer and industry services, mobilehome commission, or its agent before the transfer of the certificate of title. The tax on anaircraft shall be collected by the department of treasury. Notwithstanding any limitationcontained in section 2 and except as provided in this subsection, the price tax base of anyvehicle, ORV, manufactured housing, aircraft, snowmobile, or watercraft subject totaxation under this act shall be not less than its retail dollar value at the time ofacquisition as fixed pursuant to rules promulgated by the department. The price tax baseof a new or previously owned car or truck held for resale by a dealer and that is notexempt under section 4(1)(c) is the purchase price of the car or truck multiplied by 2.5%plus $30.00 per month beginning with the month that the dealer uses the car or truck in anonexempt manner.

(3) The following transfers or purchases are not subject to use tax:

(a) A transaction or a portion of a transaction if the transferee or purchaser is thespouse, mother, father, brother, sister, child, stepparent, stepchild, stepbrother, stepsister,grandparent, grandchild, legal ward, or a legally appointed guardian with a certified letterof guardianship, of the transferor.

(b) A transaction or a portion of a transaction if the transfer is a gift to a beneficiaryin the administration of an estate.

(c) If a vehicle, ORV, manufactured housing, aircraft, snowmobile, or watercraft thathas once been subjected to the Michigan sales or use tax is transferred in connection with


the organization, reorganization, dissolution, or partial liquidation of an incorporated orunincorporated business and the beneficial ownership is not changed.

(d) If an insurance company licensed to conduct business in this state acquiresownership of a late model distressed vehicle as defined in section 12a of the Michiganvehicle code, 1949 PA 300, MCL 257.12a, through payment of damages in response to aclaim or when the person who owned the vehicle before the insurance companyreacquires ownership from the company as part of the settlement of a claim.

(4) The department may utilize the services, information, or records of any otherdepartment or agency of state government in the performance of its duties under this act,and other departments or agencies of state government are required to furnish thoseservices, information, or records upon the request of the department.

Amended by HB 4744, 7-14-1999; retroactively effective 3-31-1995.

Amended by PA 678, 3-27-2002.



Sec. 205.93a. Tax for use or consumption; services

(1) The use or consumption of the following services is taxed under this act in the samemanner as tangible personal property is taxed under this act:

(a) Except as provided in section 3b, intrastate telephone, telegraph, leased wire, andother similar communications, including local telephone exchange and long distancetelephone service that both originates and terminates in Michigan, and telegraph, privateline, and teletypewriter service between places in Michigan, but excluding telephoneservice by coin-operated installations, switchboards, concentrator-identifiers, interofficecircuitry and their accessories for telephone answering service, and directory advertisingproceeds.

(b) Rooms or lodging furnished by hotelkeepers, motel operators, and other personsfurnishing accommodations that are available to the public on the basis of a commercialand business enterprise, irrespective of whether or not membership is required for use ofthe accommodations, except rooms and lodging rented for a continuous period of morethan 1 month. As used in this act, “hotel” or “motel” means a building or group ofbuildings in which the public may obtain accommodations for a consideration, including,without limitation, such establishments as inns, motels, tourist homes, tourist houses orcourts, lodging houses, rooming houses, nudist camps, apartment hotels, resort lodges andcabins, camps operated by other than nonprofit organizations but not including those


licensed under 1973 PA 116, MCL 722.111 to 722.128, and any other building or groupof buildings in which accommodations are available to the public, exceptaccommodations rented for a continuous period of more than 1 month andaccommodations furnished by hospitals or nursing homes.

(c) Except as provided in section 3b, interstate telephone communications that eitheroriginate or terminate in this state and for which the charge for the service is billed to aMichigan service address or phone number by the provider either within or outside thisstate including calls between this state and any place within or without the United Statesof America outside of this state. However, if the tax under this act is levied at a rate of6%, this subdivision does not apply to a wide area telecommunication service or a similartype service, an 800 prefix service or similar type service, an interstate private networkand related usage charges, or an international call either inbound or outbound.

(d) The laundering or cleaning of textiles under a sale, rental, or service agreementwith a term of at least 5 days. This subdivision does not apply to the laundering orcleaning of textiles used by a restaurant or retail sales business. As used in thissubdivision, “restaurant” means a food service establishment defined and licensed underthe food law of 2000, 2000 PA 92, MCL 289.1101 to 289.8111.

(2) If charges for intrastate telecommunications services or telecommunications servicesbetween this state and another state and other billed services not subject to the tax underthis act are aggregated with and not separately stated from charges fortelecommunications services that are subject to the tax under this act, the nontaxabletelecommunications services and other nontaxable billed services are subject to the taxunder this act unless the service provider can reasonably identify charges fortelecommunications services not subject to the tax under this act from its books andrecords that are kept in the regular course of business.

(3) If charges for intrastate telecommunications services or telecommunications servicesbetween this state and another state and other billed services not subject to the tax underthis act are aggregated with and not separately stated from telecommunications servicesthat are subject to the tax under this act, a customer may not rely upon the nontaxabilityof those telecommunications services and other billed services unless the customer’sservice provider separately states the charges for nontaxable telecommunications servicesand other nontaxable billed services from taxable telecommunications services or theservice provider elects, after receiving a written request from the customer in the formrequired by the provider, to provide verifiable data based upon the service provider’sbooks and records that are kept in the regular course of business that reasonably identifythe nontaxable services.

Amended by P.A. 336, 10-20-1998.



Sec. 205.93b. Tax for use or consumption; mobile telecommunications services.

(1) The use or consumption of mobile telecommunications services is subject to thetax levied under this act in the same manner as tangible personal property regardlessof where the mobile telecommunications services originate, terminate, or passthrough, subject to all of the following:

(a) Mobile telecommunications services provided to a customer, the charges forwhich are billed by or for the customer’s home service provider, are considered to beprovided by the customer’s home service provider if the customer’s place of primaryuse for the mobile telecommunications services is in this state. If the customer’splace of primary use for mobile telecommunications services is outside of this state,the mobile telecommunications services are not subject to the tax levied under thisact.

(b) A home service provider is responsible for obtaining and maintaining a recordof the customer’s place of primary use. Subject to subsection (2), in obtaining andmaintaining a record of the customer’s place of primary use, a home service providermay do all of the following:

(i) Rely in good faith on information provided by a customer as to thecustomer’s place of primary use.

(ii) Treat the address used for a customer under a service contract oragreement in effect on August 1, 2002 as that customer’s place of primary use forthe remaining term of the service contract or agreement, excluding anyextension or renewal of the service contract or agreement.

(c) Notwithstanding section 9 and subject to subsection (5), if the departmentchooses to create or provide a database that complies with the provisions of 4 U.S.C.119, a home service provider shall use that database to determine the assignment ofthe customer’s place of primary use to this state. If a database is not provided by thedepartment, a home service provider may use an enhanced zip code to determine theassignment of the customer’s place of primary use to this state. A home serviceprovider that uses a database provided by the department is not liable for any taxthat otherwise would be due solely as a result of an error or omission in thatdatabase. A home service provider that uses an enhanced zip code is not liable forany tax that otherwise would be due solely as a result of an assignment of a streetaddress to another state if the home provider exercised due diligence to ensure thatthe appropriate street addresses are assigned to this state.

(d) If a customer believes that the amount of the tax levied under this act orthat the home service provider’s record of the customer’s place of primary use is


incorrect, the customer shall notify the home service provider in writing and provideall of the following information:

(i) The street address of the customer’s place of primary use.

(ii) The account name and number for which the customer requests thecorrection.

(iii) A description of the error asserted by the customer.

(iv) Any other information that the home service provider reasonablyrequires to process the request.

(e) Not later than 60 days after the home service provider receives a requestunder subdivision (d) or subsection (5)(b), the home service provider shall review itsrecord of the customer’s place of primary use and the customer’s enhanced zip codeto determine the correct amount of the tax levied under this act. If the home serviceprovider determines that the tax levied under this act or its record of the customer’splace of primary use is incorrect, the home service provider shall correct the errorand refund or credit any tax erroneously collected from the customer. A refund underthis subdivision shall not exceed a period of 4 years. If the home service providerdetermines that the tax levied under this act and the customer’s place of primary useare correct, the home service provider shall provide a written explanation of thatdetermination to the customer. The procedures prescribed in this subdivision and insubdivision (d) are the first course of remedy available to a customer requesting acorrection of the provider’s record of place of primary use or a refund of taxeserroneously collected by the home service provider.

(2) If the department makes a final determination that the home service provider’srecord of a customer’s place of primary use is incorrect, the home service providershall change its records to reflect that final determination. The corrected record of acustomer’s place of primary use shall be used to calculate the tax levied under thisact prospectively, from the date of the department’s final determination. Thedepartment shall not make a final determination under this subsection before thedepartment has notified the customer that the department has found that the homeservice provider’s record of the customer’s place of primary use is incorrect and thecustomer has been afforded an opportunity to appeal that finding. An appeal to thedepartment shall be conducted according to the provision of section 22 of 1941 PA122, MCL 205.22.

(3) Notwithstanding section 8 and subject to section 5, if the department makes afinal determination under subsection (2) that a customer’s place of primary use isincorrect, a home service provider is not liable for any taxes that would have beenlevied under this act if the customer’s place of primary use had been correct.


(4) If charges for mobile telecommunications services and other billed services notsubject to the tax levied under this act are aggregated with and not separately statedfrom charges for mobile telecommunications services that are subject to the taxlevied under this act, the nontaxable mobile telecommunications services and otherbilled services are subject to the tax levied under this act unless the home serviceprovider can reasonably identify billings for services not subject to the tax leviedunder this act from its books and records kept in the regular course of business.

(5) If charges for mobile telecommunications services and other billed services notsubject to the tax levied under this act are aggregated with and not separately statedfrom charges for mobile telecommunications services that are subject to the taxlevied under this act, a customer may not rely upon the exempt status for thosemobile telecommunications services and other billed services unless 1 or more of thefollowing conditions are satisfied:

(a) The customer’s home service provider separately states the charges for mobiletelecommunications services that are exempt and other exempt billed services fromtaxable mobile telecommunications services.

(b) The home service provider elects, after receiving a written request from thecustomer in the form required by the home service provider, to identify the exemptmobile telecommunications services and other exempt billed services by reference tothe home service provider’s books and records kept in the regular course of business.

(6) This section is repealed as of the date of entry of a final judgment by a court ofcompetent jurisdiction that substantially limits or impairs the essential elements ofsections 116 to 126 of title 4 of the united states code, 4 U.S.C. 116 to 126, and thatfinal judgment is no longer subject to appeal.

(7) For an air-ground radiotelephone service, the tax under this act is imposed at thelocation of the origination of the air-ground radiotelephone service in this state asidentified by the home service provider or information received by the home serviceprovider from its servicing carrier.


(a) “Air-ground radiotelephone service” means that term as defined in 47 C.F.R.part 22.

(b) “Commercial mobile radio service” means that term as defined in 47 C.F.R.20.3.

(c) “Charge”, “charges”, or “charge for mobile telecommunications services”means any charge for, or associated with, the provision of commercial mobile radio


service, or any charge for, or associated with, a service provided as an adjunct to acommercial mobile radio service, that is billed to a customer by or for the customer’shome service provider regardless of whether individual transmissions originate orterminate within the licensed service area of the home service provider.

(d) “Customer” means 1 of the following, but does not include a reseller or aserving carrier:

(i) The person who contracts with the home service provider for mobiletelecommunications services.

(ii) If the end user of mobile telecommunications services is not thecontracting party, then the end user of the mobile telecommunications service.This subparagraph applies only for the purpose of determining the place ofprimary use.

(e) “Enhanced zip code” means a united states postal zip code of 9 or moredigits.

(f) “Home service provider” means the facilities-based carrier or reseller thatenters into a contract with a customer for mobile telecommunications services.

(g) “Licensed service area” means the geographic area in which a home serviceprovider is authorized by law or contract to provide commercial mobile radio servicesto its customers.

(h) “Mobile telecommunications services” means commercial mobile radio servicesthat originate and terminate in the same state or originate in 1 state and terminatein another state. Mobile telecommunications services do not include prepaid mobiletelecommunications services or air-ground radiotelephone service.

(i) “Place of primary use” means the residential street address or the primarybusiness street address within the licensed service area of the home service providerat which a customer primarily uses mobile telecommunications services.

(j) “Prepaid mobile telecommunications service” means the advance purchase ofexclusive mobile telecommunications services, which enables the origination of callsusing an access number or authorization code, whether manually or electronicallydialed, if the remaining units of service are known by the provider of the service on acontinuous basis.

(k) “Reseller” means a telecommunications services provider who purchasestelecommunications services from another telecommunications services provider andthen resells the telecommunication services, uses the telecommunication services as


a component part of a mobile telecommunications service, or integrates thetelecommunication services into a mobile telecommunications service. Reseller doesnot include a serving carrier.

(l) “Serving carrier” means a facilities-based telecommunications services providerthat contracts with a home service provider for mobile telecommunications servicesto a customer outside of the home service provider’s or reseller’s licensed servicearea.

Added by P.A. 456, 6-21-2002; effective 6-21-2002.

Sec. 205.94. Exemptions

(1) The tax levied under this act does not apply to the following, subject tosubsection (2):

(a) Property sold in this state on which transaction a tax is paid under thegeneral sales tax act, 1933 PA 167, MCL 205.51 to 205.78, if the tax was due and paidon the retail sale to a consumer.

(b) Property, the storage, use, or other consumption of which this state isprohibited from taxing under the constitution or laws of the United States, or underthe constitution of this state.

(c) Property purchased for resale, demonstration purposes, or lending or leasingto a public or parochial school offering a course in automobile driving except that avehicle purchased by the school shall be certified for driving education and shall notbe reassigned for personal use by the school’s administrative personnel. For a dealerselling a new car or truck, exemption for demonstration purposes shall be determinedby the number of new cars and trucks sold during the current calendar year or theimmediately preceding year without regard to specific make or style according to thefollowing schedule of 0 to 25, 2 units; 26 to 100, 7 units; 101 to 500, 20 units; 501 ormore, 25 units; but not to exceed 25 cars and trucks in 1 calendar year fordemonstration purposes. Property purchased for resale includes promotionalmerchandise transferred pursuant to a redemption offer to a person located outsidethis state or any packaging material, other than promotional merchandise, acquiredfor use in fulfilling a redemption offer or rebate to a person located outside thisstate.

(d) Property that is brought into this state by a nonresident person for storage,use, or consumption while temporarily within this state, except if the property isused in this state in a nontransitory business activity for a period exceeding 15 days.


(e) Property the sale or use of which was already subjected to a sales tax or usetax equal to, or in excess of, that imposed by this act under the law of any otherstate or a local governmental unit within a state if the tax was due and paid on theretail sale to the consumer and the state or local governmental unit within a state inwhich the tax was imposed accords like or complete exemption on property the saleor use of which was subjected to the sales or use tax of this state. If the sale or useof property was already subjected to a tax under the law of any other state or localgovernmental unit within a state in an amount less than the tax imposed by this act,this act shall apply, but at a rate measured by the difference between the rateprovided in this act and the rate by which the previous tax was computed.

(f) Property sold to a person engaged in a business enterprise and using andconsuming the property in the tilling, planting, caring for, or harvesting of thethings of the soil or in the breeding, raising, or caring for livestock, poultry, orhorticultural products, including transfers of livestock, poultry, or horticulturalproducts for further growth. At the time of the transfer of that tangible personalproperty, the transferee shall sign a statement, in a form approved by thedepartment, stating that the property is to be used or consumed in connection withthe production of horticultural or agricultural products as a business enterprise. Thestatement shall be accepted by the courts as prima facie evidence of the exemption.This exemption includes agricultural land tile, which means fired clay or perforatedplastic tubing used as part of a subsurface drainage system for land used in theproduction of agricultural products as a business enterprise and includes a portablegrain bin, which means a structure that is used or is to be used to shelter grain andthat is designed to be disassembled without significant damage to its componentparts. This exemption does not include transfers of food, fuel, clothing, or similartangible personal property for personal living or human consumption. This exemptiondoes not include tangible personal property permanently affixed and becoming astructural part of real estate.

(g) Property or services sold to the United States, an unincorporated agency orinstrumentality of the United States, an incorporated agency or instrumentality ofthe United States wholly owned by the United States or by a corporation whollyowned by the United States, the American Red Cross and its chapters or branches,this state, a department or institution of this state, or a political subdivision of thisstate.

(h) Property or services sold to a school, hospital, or home for the care andmaintenance of children or aged persons, operated by an entity of government, aregularly organized church, religious, or fraternal organization, a veterans’organization, or a corporation incorporated under the laws of this state, if notoperated for profit, and if the income or benefit from the operation does not inure,in whole or in part, to an individual or private shareholder, directly or indirectly, andif the activities of the entity or agency are carried on exclusively for the benefit of


the public at large and are not limited to the advantage, interests, and benefits of itsmembers or a restricted group. The tax levied does not apply to property or servicessold to a parent cooperative preschool. As used in this subdivision, “parentcooperative preschool” means a nonprofit, nondiscriminatory educational institution,maintained as a community service and administered by parents of children currentlyenrolled in the preschool that provides an educational and developmental programfor children younger than compulsory school age, that provides an educationalprogram for parents, including active participation with children in preschoolactivities, that is directed by qualified preschool personnel, and that is licensed bythe department of consumer and industry services pursuant to 1973 PA 116, MCL722.111 to 722.128.

(i) Property or services sold to a regularly organized church or house of religiousworship except the following:

(i) Sales in which the property is used in activities that are mainlycommercial enterprises.

(ii) Sales of vehicles licensed for use on the public highways other than apassenger van or bus with a manufacturer’s rated seating capacity of 10 or morethat is used primarily for the transportation of persons for religious purposes.

(j) A vessel designed for commercial use of registered tonnage of 500 tons ormore, if produced upon special order of the purchaser, and bunker and galley fuel,provisions, supplies, maintenance, and repairs for the exclusive use of a vessel of 500tons or more engaged in interstate commerce.

(k) Property purchased for use in this state where actual personal possession isobtained outside this state, the purchase price or actual value of which does notexceed $10.00 during 1 calendar month.

(l) A newspaper or periodical classified under federal postal laws and regulationseffective September 1, 1985 as second class mail matter or as a controlled circulationpublication or qualified to accept legal notices for publication in this state, asdefined by law, or any other newspaper or periodical of general circulation,established at least 2 years, and published at least once a week, and a copyrightedmotion picture film. Tangible personal property used or consumed in producing acopyrighted motion picture film, a newspaper published more than 14 times per year,or a periodical published more than 14 times per year, and not becoming acomponent part of that film, newspaper or periodical is subject to the tax. AfterDecember 31, 1993, tangible personal property used or consumed in producing anewspaper published 14 times or less per year or a periodical published 14 times orless per year and that portion or percentage of tangible personal property used orconsumed in producing an advertising supplement that becomes a component part of


a newspaper or periodical is exempt from the tax under this subdivision. A claim for arefund for taxes paid before January 1, 1999 under this subdivision shall be madebefore June 30, 1999. For purposes of this subdivision, tangible personal propertythat becomes a component part of a newspaper or periodical and consequently notsubject to tax, includes an advertising supplement inserted into and circulated with anewspaper or periodical that is otherwise exempt from tax under this subdivision, ifthe advertising supplement is delivered directly to the newspaper or periodical by aperson other than the advertiser, or the advertising supplement is printed by thenewspaper or periodical.

(m) Property purchased by persons licensed to operate a commercial radio ortelevision station if the property is used in the origination or integration of thevarious sources of program material for commercial radio or television transmission.This subdivision does not include a vehicle licensed and titled for use on publichighways or property used in the transmitting to or receiving from an artificialsatellite.

(n) A person who is a resident of this state who purchases an automobile inanother state while in the military service of the United States and who pays a salestax in the state where the automobile is purchased.

(o) A vehicle for which a special registration is secured in accordance withsection 226(12) of the Michigan vehicle code, 1949 PA 300, MCL 257.226.

(p) A hearing aid, contact lenses if prescribed for a specific disease that precludesthe use of eyeglasses, or any other apparatus, device, or equipment used to replaceor substitute for any part of the human body, or used to assist the disabled person tolead a reasonably normal life when the tangible personal property is purchased on awritten prescription or order issued by a health professional as defined by section 4of former 1974 PA 264, or section 3501 of the insurance code of 1956, 1956 PA 218,MCL 500.3501 or eyeglasses prescribed or dispensed to correct the person’s vision byan ophthalmologist, optometrist, or optician.

(q) Water when delivered through water mains or in bulk tanks in quantities ofnot less than 500 gallons.

(r) A vehicle not for resale used by a nonprofit corporation organized exclusivelyto provide a community with ambulance or fire department services.

(s) Tangible personal property purchased and installed as a component part of awater pollution control facility for which a tax exemption certificate is issuedpursuant to part 37 of the natural resources and environmental protection act, 1994PA 451, MCL 324.3701 to 324.3708, or an air pollution control facility for which a tax


exemption certificate is issued pursuant to part 59 of the natural resources andenvironmental protection act, 1994 PA 451, MCL 324.5901 to 324.5908.

(t) Tangible real or personal property donated by a manufacturer, wholesaler, orretailer to an organization or entity exempt pursuant to subdivision (h) or (i) orsection 4a(a) or (b) of the general sales tax act, 1933 PA 167, MCL 205.54a.

(u) The storage, use, or consumption by a domestic air carrier of an aircraftpurchased after December 31, 1992 but before October 1, 1996 for use solely in thetransport of air cargo that has a maximum certificated takeoff weight of at least12,500 pounds. For purposes of this subdivision, the term “domestic air carrier” islimited to entities engaged in the commercial transport for hire of cargo or entitiesengaged in the commercial transport of passengers as a business activity.

(v) The storage, use, or consumption by a domestic air carrier of an aircraftpurchased after June 30, 1994 but before October 1, 1996 that is used solely in theregularly scheduled transport of passengers. For purposes of this subdivision, theterm “domestic air carrier” is limited to entities engaged in the commercial transportfor hire of cargo or entities engaged in the commercial transport of passengers as abusiness activity.

(w) The storage, use, or consumption by a domestic air carrier of an aircraft,other than an aircraft described under subdivision (v), purchased after December 31,1994 but before October 1, 1996 that has a maximum certificated takeoff weight of atleast 12,500 pounds and that is designed to have a maximum passenger seatingconfiguration of more than 30 seats and used solely in the transport of passengers.For purposes of this subdivision, the term “domestic air carrier” is limited to entitiesengaged in the commercial transport for hire of cargo or entities engaged in thecommercial transport of passengers as a business activity.

(x) The storage, use, or consumption of an aircraft by a domestic air carrier afterSeptember 30, 1996 for use solely in the transport of air cargo, passengers, or acombination of air cargo and passengers, that has a maximum certificated takeoffweight of at least 6,000 pounds. For purposes of this subdivision, the term “domesticair carrier” is limited to a person engaged primarily in the commercial transport forhire of air cargo, passengers, or a combination of air cargo and passengers as abusiness activity. The state treasurer shall estimate on January 1 each year therevenue lost by this act from the school aid fund and deposit that amount into theschool aid fund from the general fund.

(y) The storage, use, or consumption of an aircraft by a person who purchasesthe aircraft for subsequent lease to a domestic air carrier operating under acertificate issued by the federal aviation administration under 14 C.F.R. part 121, foruse solely in the regularly schedules transport of passengers.


(z) Property or services sold to an organization not operated for profit andexempt from federal income tax under section 501(c)(3) or 501(c)(4) of the internalrevenue code of 1986; or to a health, welfare, educational, cultural arts, charitable,or benevolent organization not operated for profit that has been issued before June13, 1994 an exemption ruling letter to purchase items exempt from tax signed by theadministrator of the sales, use, and withholding taxes division of the department.The department shall reissue an exemption letter after June 13, 1994 to each ofthose organizations that had an exemption letter that shall remain in effect unlessthe organization fails to meet the requirements that originally entitled it to thisexemption. The exemption does not apply to sales of tangible personal property andsales of vehicles licensed for use on public highways, that are not used primarily tocarry out the purposes of the organization as stated in the bylaws or articles ofincorporation of the exempt organization.

(aa) The use or consumption of services described in section 3a(a) or (c) or 3b bymeans of a prepaid telephone calling card, a prepaid authorization number fortelephone use, or a charge for internet access.

(bb) The purchase, lease, use, or consumption of the following by an industriallaundry after December 31, 1997:

(i) Textiles and disposable products including, but not limited to, soap,paper, chemicals, tissues, deodorizers and dispensers, and all related items suchas packaging, supplies, hangers, name tags, and identification tags.

(ii) Equipment, whether owned or leased, used to repair and dispense textilesincluding, but not limited to, roll towel cabinets, slings, hardware, lockers, mophandles and frames, and carts.

(iii) Machinery, equipment, parts, lubricants, and repair services used toclean, process, and package textiles and related items, whether owned or leased.

(iv) Utilities such as electric, gas, water, or oil.

(v) Production washroom equipment and mending and packaging suppliesand equipment.

(vi) Material handling equipment including, but not limited to, conveyors,racks, and elevators and related control equipment.

(vii) Wastewater pretreatment equipment and supplies and relatedmaintenance and repair services.


(2) The property or services under subsection (1) are exempt only to the extent thatthe property or services are used for the exempt purposes of one is stated insubsection (1). The exemption is limited to the percentage of exempt use to total usedetermined by a reasonable formula or method approved by the department.


Amended by HB 5304, 2-25-1996.

Amended by P.A. 194, 12-30-1997.

Amended by P.A. 336, 10-20-1998.

Amended by P.A. 452, 12-29-1998.

Amended by P.A. 491, 12-31-1998.


Amended by Act 200, 6-26-2000; effective immediately.



Sec. 205.94a. Exemptions of property affixed to real estate under certaincontracts

The use of material purchased by persons engaged in the business of constructing,altering, repairing or improving real estate for others when the material so purchasedby such persons is affixed and made a structural part of real estate or used andcompletely consumed in the fulfillment of a single contract, when the contract iseither at a fixed price not subject to change or modification or entered into pursuantto the obligation of a formal written bid which cannot be altered or withdrawn,which contract was entered into or which bid was made before September 1, 1959,shall be exempt from the additional tax imposed by Act No. 263 of the Public Acts of1959 from September 1, 1959, or in the case of contracts with the state of Michigan,its departments or institutions, if the contract was entered into or the bid was madebefore January 1, 1960, shall be exempt from the tax imposed by this amendatoryact.


Sec. 205.94b. Exemptions of property affixed to real estate under certaincontracts

The use of material purchased by persons engaged in the business of constructing,altering, repairing or improving real estate for others when the material so purchasedby such persons is affixed and made a structural part of real estate or used andcompletely consumed in the fulfillment of a single contract, when the contract iseither at a fixed price not subject to change or modification or entered into pursuantto the obligation of a formal written bid which cannot be altered or withdrawn,which contract was entered into or which bid was made before December 13, 1960,shall be exempt from the additional tax imposed by Act No. 2 of the Public Acts ofthe Second Extra Session of 1960 from January 1, 1961.

Sec. 205.94c. Previously exempt bona fide contracts

The tax levied by this amendatory act shall not apply to bona fide contractspreviously exempt under the provisions of section 4(m) if the contracts were enteredinto or bids were made and accepted before January 1, 1970.

Sec. 205.94d. Exemption; prescription drugs, food, returnable containers, foodor tangible personal property purchased with federal food stamps, or fruit orvegetable seeds or plants

(1) The tax levied under this act does not apply to a purchase of a prescription drugfor human use or food for human consumption; to the deposit on a returnablecontainer for a beverage or the deposit on a carton or case that is used for returnablecontainers; to nonalcoholic beverages and prepared food intended for immediateconsumption provided during work hours for free or at a reduced rate to employeesof food service establishments licensed by the Michigan department of agriculture; tofood or tangible personal property purchased with federal food stamps; or to fruit orvegetable seeds and fruit or vegetable plants if purchased at a place of businessauthorized to accept food stamps by the food and nutrition service of the UnitedStates department of agriculture or a place of business that has made a complete andproper application for authorization to accept food stamps but has been deniedauthorization and provides proof of denial to the department of treasury.

(2) “Prescription drug for human use” means insulin or a drug dispensed by alicensed pharmacist pursuant to a written prescription prescribed by a licensedphysician or other health professional as defined in section 21005 of the publichealth code, 1978 PA 368, MCL 333.21005, for the use of a designated person, oroxygen dispensed pursuant to a written prescription or order issued by a licensedphysician or other health professional as defined in section 21005 of the publichealth code, 1978 PA 368, MCL 333.21005.


(3) “Food for human consumption” means all food or drink items, including bottledwater, primarily intended for human consumption except a beverage with analcoholic content of 1/2 of 1% or more by volume, tobacco, or tobacco products.

(4) “Food service establishment” means that term as defined in section 1107 of thefood law of 2000, 2000 PA 92, MCL 289.1107.

Amended by Act 328, 12-4-2000; effective 10-1-2001.

Sec. 205.94e. Property purchased to construct, alter, repair, or improve realestate for others

The use of tangible personal property purchased by persons engaged in the businessof constructing, altering, repairing, or improving real estate for others is exemptfrom the tax imposed at the additional rate of 2% if the tangible personal property ispurchased, manufactured, fabricated, or assembled by those persons and is affixedand made a structural part of real estate or used and completely consumed, in thefulfillment of a single contract that is either a fixed price contract offered beforeMarch 15, 1994, accepted before June 15, 1994, and not subject to change ormodification or a contract entered into pursuant to the obligation of a formal writtenbid made before March 15, 1994 and accepted before June 15, 1994 that cannot bealtered or withdrawn. The tax imposed at the additional rate of 2% also does notapply to a bona fide sales or lease agreement made before March 15, 1994 if theagreement cannot be withdrawn or altered, or contains a fixed price not subject tochange or modification of greater than 15%.

Sec. 205.94f. Deductions; estimated returns and annual periodic reconciliations

(1) In computing the amount of tax payments required for any month of a seller notsubject to section 6(2) or (3) who collects the tax from the purchaser under theprovisions of this act, the seller who collects the tax from a purchaser may deductthe amount provided by subdivision (a) or (b), whichever is greater:

(a) If the tax that accrued to the state from the purchase of tangible personalproperty or services during the preceding month is remitted to the department on orbefore the seventh day of the month in which remittance is due, 0.75% of the taxcollected at a rate of 4% for the preceding monthly period, but not to exceed$20,000.00 of the tax collected for that month. If the tax that accrued to the statefrom the purchase of tangible personal property or services during the precedingmonth is remitted to the department after the seventh day of the month and on orbefore the fifteenth day of the month in which remittance is due, 0.50% of the taxcollected at a rate of 4% for the preceding monthly period, but not to exceed$15,000.00 of the tax collected for that month.


(b) The tax collected at a rate of 4% on $150.00 of taxable purchase price for thepreceding monthly period or a prorated portion of $150.00 of the taxable purchaseprice for the preceding month if the seller engaged in business for less than a month.

(2) Before January 1, 1999, in computing the amount of tax levied under this act forany month, a seller who collects the tax from the purchaser under this act and whois subject to section 6(2) may deduct the amount provided in this subsection. If thetax that is due to the state from the purchase of tangible personal property orservices is remitted to the department on or before the eleventh day of the month inwhich remittance is due, 0.75% of the tax due at a rate of 4% but not to exceed$20,000.00 of the tax due for that month may be deducted. If the tax that is due tothe state from the purchase of tangible personal property or services is remitted tothe department after the eleventh day and on or before the eighteenth day of themonth in which remittance is due, 0.50% of the tax due at a rate of 4% but not toexceed $15,000.00 of the tax due for that month may be deducted.

(3) Beginning January, 1999, in computing the amount of tax levied under this actfor any month, a seller who collects the tax from the purchaser under this act andwho is subject to section 6(3) may deduct from the amount of the tax paid 0.50% ofthe tax due at a rate of 4%.

(4) A deduction is not allowed under this section for payments of taxes made to thedepartment after the day the person is required to pay the tax imposed by this actpursuant to section 6.

(5) If, pursuant to section 6(3), the commissioner of revenue prescribes the filing ofreturns and the payment of the tax for periods in excess of 1 month, a seller whocollects the tax from the purchaser is entitled to a deduction from the tax collectionsremitted to the department for the extended payment period that is equivalent tothe deduction allowed under subsection (1), (2), or (3) for monthly periods.

(6) The commissioner may prescribe the filing of estimated returns and annualperiodic reconciliations as necessary to carry out the purposes of this section.

Amended by H.B. 5313, 7-15-98.

Sec. 205.94g. Exemption; property from purchase or transfer of business

(1) The tax levied shall not apply to property purchased from a seller or transferor ifthe property is part of the purchase or transfer of a business.

(2) The exemption provided by this section shall not apply to all of the following:


(a) The purchase or transfer of tangible personal property that is stock-in-tradeor other property of a kind which would properly be included in the inventory of theseller or transferor if on hand at the close of the seller’s or transferor’s tax period orproperty held by the seller or transferor for sale to customers in the ordinary courseof its trade or business.

(b) The purchase or transfer of a motor vehicle, ORV, mobile home, aircraft,snowmobile, or watercraft.

(3) As used in this section, “purchase or transfer of a business” means 1 or more ofthe following:

(a) The purchaser or transferee has acquired and intends to use the seller’s ortransferor’s trade name or good will.

(b) The purchaser or transferee intends to continue all or part of the business ofthe seller or transferor at the same location or at another location.

(c) The purchaser or transferee acquired at least 75% of the seller’s or transferor’stangible personal property at 1 or more of the seller’s or transferor’s businesslocations.

Sec. 205.94h. Exemptions; tangible property used in qualified business activity

The tax levied shall not apply to tangible real or personal property for use in aqualified business activity of the purchaser. As used in this section, “qualifiedbusiness activity” means that term as defined in the enterprise zone act, 1985 PA224, MCL 125.2101 to 125.2123.


Sec. 205.94i. Exemption; drop shipments

(1) A seller required to collect the tax under this act shall be exempt from collectingthe tax on sales of tangible personal property if the tangible personal property is partof a drop shipment and if the taxpayer complies with the requirements of subsection(3).

(2) As used in this section, “drop shipment” means the direct delivery of tangiblepersonal property to a purchaser in Michigan by a person who has sold the propertyto another person not licensed under this act but possessing a resale or exemptioncertificate or other written evidence of exemption authorized by another state, forresale to the Michigan purchaser.


(3) For each transaction for which an exemption is claimed under subsection (1), thetaxpayer shall provide the following information to the department annually in anyreasonable form:

(a) The name, address, and, if readily available, the federal taxpayeridentification number of the person to whom the property is sold for resale.

(b) The name, address, and, if readily available, the federal taxpayeridentification number of the person to whom the property is shipped in Michigan.

(4) A person making a drop shipment is a seller.

Sec. 205.94j. Exemptions; abandoned or abandoned scrap vehicles

(1) The tax levied under this act does not apply to a motor vehicle acquired by atowing company from a police agency as satisfaction for towing and storage chargesif the motor vehicle was impounded by the police agency or determined to be anabandoned vehicle or an abandoned scrap vehicle by the police agency.


(a) “Abandoned vehicle” means a vehicle that has remained on public property orany other place open to travel by the public without the consent of the local policeagency for a period of 48 hours after a police agency has affixed a written notice tothe vehicle.

(b) “Abandoned scrap vehicle” means a vehicle that meets all of the followingrequirements:

(i) Is on public property or any other place open to travel by the public.

(ii) Is 7 or more years old.

(iii) Is apparently inoperable or is extensively damaged to the extent that thecost of repairing the vehicle so that it is operational and safe would exceed thefair market value of that vehicle.

(iv) Is not currently registered pursuant to the Michigan vehicle code, ActNo. 300 of the Public Acts of 1949, being sections 257.1 to 257.923 of theMichigan Compiled Laws.

(v) Is not removed within 48 hours after a police agency has affixed a writtennotice to the vehicle.


Sec. 205.94k. Application of tax; application of section

(1) The tax levied under this act does not apply to parts and materials, excludingshop equipment or fuel, affixed to or to be affixed in this state to an aircraft ownedor used by a domestic air carrier that is any of the following:

(a) An aircraft for use solely in the transport of air cargo and passengers that hasa maximum certificated takeoff weight of at least 12,500 pounds for taxes leviedbefore January 1, 1997 and at least 6,000 pounds for taxes levied after December 31,1996.

(b) An aircraft that is used solely in the regularly scheduled transport ofpassengers.

(c) An aircraft other than an aircraft described in subdivision (b), that has amaximum certificated takeoff weight of at least 12,500 pounds for taxes levied beforeJanuary 1, 1997 and at least 6,000 pounds for taxes levied after December 31, 1996,and that is designed to have a maximum passenger seating configuration of morethan 30 seats and used solely in the transport of passengers.

(2) For taxes levied after December 31, 1992, the tax levied under this act does notapply to the storage, use, or consumption of rolling stock used in interstatecommerce and purchased, rented, or leased outside of this state by an interstatemotor carrier. A refund for taxes paid before January 1, 1997 shall not be paid underthis subsection if the refund claim is made after June 30, 1997.

(3) For taxes levied after December 31, 1996 and before May 1, 1999, the tax leviedunder this act does not apply to the product of the out-of-state usage percentageand the price otherwise taxable under this act of a qualified truck or a trailerdesigned to be drawn behind a qualified truck, purchased, rented, or leased in thisstate by an interstate motor carrier and used in interstate commerce.


(a) “Domestic air carrier” means a person engaged in the commercial transportfor hire of cargo or engaged in the commercial transport of passengers as a businessactivity.

(b) “Interstate motor carrier” means a person engaged in the business of carryingpersons or property, other than themselves, their employees, or their own property,for hire across state lines, whose fleet mileage was driven at least 10% outside of thisstate in the immediately preceding tax year.


(c) “Out-of-state usage percentage” is a fraction, the numerator of which is thenumber of miles driven outside of this state in the immediately preceding tax year byqualified trucks used by the taxpayer and the denominator of which is the total milesdriven in the immediately preceding tax year by qualified trucks used by thetaxpayer. Miles driven by qualified trucks used solely in intrastate commerce shallnot be included in calculating the out-of-state usage percentage.

(d) “Qualified truck” means a commercial motor vehicle power unit that has 2axles and a gross vehicle weight rating in excess of 10,000 pounds or a commercialmotor vehicle power unit that has 3 or more axles.

(e) “Rolling stock” means a qualified truck, a trailer designed to be drawn behinda qualified truck, and parts affixed to either a qualified truck or trailer designed tobe drawn behind a qualified truck.


Amended by Chapter 70, 6-25-1999; effective for taxes levied after April 30, 1999.

Amended by Act 200, 6-26-2000; effective immediately.

Sec. 205.94l. Storage, use, or consumption of certain railroad property;exemption

The tax levied under this act does not apply to the storage, use, or consumption ofrail freight or passenger cars, locomotives or other rolling stock, roadway machinesand work equipment primarily of a flanged wheel nature, accessories, attachmentsincluding parts and materials used for repair, lubricants, or fuel, used in railoperations. This exemption does not include vehicles licensed and titled for use onpublic highways.

Sec. 205.94m. Personal property affixed to or made structural part of sanctuary;applicability of tax; “regularly organized church or house of religious worship”or “sanctuary” defined. [M.S.A. 7.555(4m)]

(1) The tax levied under this act does not apply to tangible personal propertyacquired by a person engaged in the business of constructing, altering, repairing, orimproving real estate for others if the property is to be affixed to or made astructural part of a sanctuary.


(a) “Regularly organized church or house of religious worship” means a religiousorganization qualified under section 501(c)(3) of the internal revenue code of 1986.


(b) “Sanctuary” means only that portion of a building that is owned andoccupied by a regularly organized church or house of religious worship that is usedpredominantly and regularly for public worship. Sanctuary includes a sanctuary to beconstructed that will be owned and occupied by a regularly organized church orhouse of religious worship and that will be used predominantly and regularly forpublic worship.

Added by P.A. 275, 7-22-1998.

Sec. 205.94n. Exemption; consumption of electricity, natural gas, and homeheating fuels for residential use

The consumption of electricity, natural gas, and home heating fuels for residentialuse is exempt from the use tax at the additional rate of 2% approved by the electorson March 15, 1994.

Sec. 205.94o. Exemptions; limitation; industrial processing; definitions.

(1) The tax levied under this act does not apply to property sold to the followingafter March 30, 1999, subject to subsection (2):

(a) An industrial processor for use or consumption in industrial processing.

(b) A person, whether or not the person is an industrial processor, if the tangiblepersonal property is intended for ultimate use in and is used in industrial processingby an industrial processor.

(c) A person, whether or not the person is an industrial processor, if the tangiblepersonal property is used by that person to perform an industrial processing activityfor or on behalf of an industrial processor.

(d) A person, whether or not the person is an industrial processor, if the tangiblepersonal property is 1 of the following:

(i) A computer used in operating industrial processing equipment.

(ii) Equipment used in a computer assisted manufacturing system.

(iii) Equipment used in a computer assisted design or engineering system integralto an industrial process.

(iv) A subunit or electronic assembly comprising a component in a computerintegrated industrial processing system.


(v) Computer equipment used in connection with the computer assistedproduction, storage, and transmission of data if the equipment would have beenexempt had the data transfer been made using tapes, disks, CD-ROMs, or similarmedia by a company whose business includes publishing doctoral dissertations andinformation archiving, and that sells the majority of the company’s products tononprofit organizations exempt under section 4(1)(x).

(vi) Equipment used in the production of computer software that is offered forgeneral sale to the public or software modified or adapted to the user’s needs orequipment by the seller, only if the software is available for sale from a seller ofsoftware on an as-is basis or as an end product without modification or adaption.

(2) The property under subsection (1) is exempt only to the extent that the propertyis used for the exempt purpose stated in this section. The exemption is limited to thepercentage of exempt use to total use determined by a reasonable formula or methodapproved by the department.

(3) Industrial processing includes the following activities:

(a) Production or assembly.

(b) Research or experimental activities.

(c) Engineering related to industrial processing.

(d) Inspection, quality control, or testing to determine whether particular unitsof materials or products or processes conform to specified parameters at any timebefore materials or products first come to rest in finished goods inventory storage.

(e) Planning, scheduling, supervision, or control of production or other exemptactivities.

(f) Design, construction, or maintenance of production or other exemptmachinery, equipment, and tooling.

(g) Remanufacturing.

(h) Processing of production scrap and waste up to the point it is stored forremoval from the plant of origin.

(i) Recycling of used materials for ultimate sale at retail or reuse.

(j) Production material handling.


(k) Storage of in-process materials.

(4) Property that is eligible for an industrial processing exemption includes thefollowing:

(a) Property that becomes an ingredient or component part of the finishedproduct to be sold ultimately at retail.

(b) Machinery, equipment, tools, dies, patterns, foundations for machinery orequipment, or other processing equipment used in an industrial processing activityand in their repair and maintenance.

(c) Property that is consumed or destroyed or that loses its identity in anindustrial processing activity.

(d) Tangible personal property, not permanently affixed and not becoming astructural part of real estate, that becomes a part of, or is used and consumed ininstallation and maintenance of, systems used for an industrial processing activity.

(e) Fuel or energy used or consumed for an industrial processing activity.

(f) Machinery, equipment, or materials used within a plant site or between plantsites operated by the same person for movement of tangible personal property in theprocess of production.

(g) Office equipment, including data processing equipment, used for an industrialprocessing activity.

(5) Property that is not eligible for an industrial processing exemption includes thefollowing:

(a) Tangible personal property permanently affixed and becoming a structuralpart of real estate including building utility systems such as heating, airconditioning, ventilating, plumbing, lighting, and electrical distribution, to the pointof the last transformer, switch, valve, or other device at which point usable power,water, gas, steam, or air is diverted from distribution circuits for use in industrialprocessing.

(b) Office equipment, including data processing equipment used for nonindustrialprocessing purposes.

(c) Office furniture or office supplies.

(d) An industrial processor’s own product or finished good that it uses orconsumes for purposes other than industrial processing.


(e) Tangible personal property used for receiving and storage of materials,supplies, parts, or components purchased by the user or consumer.

(f) Tangible personal property used for receiving or storage of natural resourcesextracted by the user or consumer.

(g) Vehicles, including special bodies or attachments, required to display avehicle permit or license plate to operate on public highways, except for a vehiclebearing a manufacturer’s plate or a specially designed vehicle, together with parts,used to mix and agitate materials at a plant or job site in the concrete manufacturingprocess.

(h) Tangible personal property used for the preparation of food or beverages by aretailer for ultimate sale at retail through its own locations.

(i) Tangible personal property used or consumed for the preservation ormaintenance of a finished good once it first comes to rest in finished goodsinventory storage.

(j) Returnable shipping containers or materials, except as provided in subsection(4)(f).

(k) Tangible personal property used in the production of computer softwareoriginally designed for the exclusive use and special needs of the purchaser.

(6) Industrial processing does not include the following activities:

(a) Purchasing, receiving, or storage of raw materials.

(b) Sales, distribution, warehousing, shipping, or advertising activities.

(c) Administrative, accounting, or personnel services.

(d) Design, engineering, construction, or maintenance of real property andnonprocessing equipment.

(e) Plant security, fire prevention, or medical or hospital services.


(a) “Industrial processing” means the activity of converting or conditioningtangible personal property by changing the form, composition, quality, combination,or character of the property for ultimate sale at retail or for use in the manufacturingof a product to be ultimately sold at retail. Industrial processing begins when


tangible personal property begins movement from raw materials storage to beginindustrial processing and ends when finished goods first come to rest in finishedgoods inventory storage.

(b) “Industrial processor” means a person who performs the activity of convertingor conditioning tangible personal property for ultimate sale at retail or use in themanufacturing of a product to be ultimately sold at retail.

(c) “Product”, as used in subdivision (e), includes, but is not limited to, aprototype, pilot model, process, formula, invention, technique, patent, or similarproperty, whether intended to be used in a trade or business or to be sold,transferred, leased, or licensed.

(d) “Remanufacturing” means the activity of overhauling, retrofitting,fabricating, or repairing a product or its component parts for ultimate sale at retail.

(e) “Research or experimental activity” means activity incident to thedevelopment, discovery, or modification of a product or a product related process.Research or experimental activity also includes activity necessary for a product tosatisfy a government standard or to receive government approval. Research orexperimental activity does not include the following:

(i) Ordinary testing or inspection of materials or products for quality controlpurposes.

(ii) Efficiency surveys.

(iii) Management surveys.

(iv) Market or consumer surveys.

(v) Advertising or promotions.

(vi) Research in connection with literacy, historical, or similar projects.

Added by HB 4744, 7-14-1999; retroactively effective 3-31-1995.

Sec. 205.94p. Extractive operations; exemption; limitation; eligible property;definitions.

(1) The tax under this act does not apply to property sold to an extractive operatorfor use or consumption in extractive operations.


(2) The property under subsection (1) is exempt only to the extent that the propertyis used for the exempt purposes stated in this section. The exemption is limited tothe percentage of exempt use to total use determined by a reasonable formula ormethod approved by the department.

(3) Extractive operations include the actual production of oil, gas, brine, or othernatural resources. Property eligible for the exemption includes the following:

(a) Casing pipe or drive pipe.

(b) Tubing.

(c) Well-pumping equipment.

(d) Chemicals.

(e) Explosives or acids used in fracturing, acidizing, or shooting wells.

(f) Christmas trees, derricks, or other wellhead equipment.

(g) Treatment tanks.

(h) Piping, valves, or pumps used before movement or transportation of thenatural resource from the production area.

(i) Chemicals or acids used in the treatment of crude oil, gas, brine, or othernatural resources.

(j) Tangible personal property used or consumed in depositing tailings from hardrock mining processing.

(k) Tangible personal property used or consumed in extracting the lithologicunits necessary to process iron ore.

(4) The extractive operation exemption does not include the following:

(a) Tangible personal property consumed or used in the construction, alteration,improvement, or repair of buildings, storage tanks, and storage and housingfacilities.

(b) Tangible personal property consumed or used in transporting the productfrom the place of extraction, except for tangible personal property consumed or usedin transporting extracted materials from the extraction site to the place where theextracted materials first come to rest in finished goods inventory storage.


(c) Tangible personal property that is a product the extractive operator producesand that is consumed or used by the extractive operator for a purpose other than themanufacturing or producing of a product for ultimate sale. The extractor shallaccount for and remit the tax to the state based upon the product’s fair marketvalue.

(d) Equipment, materials, and supplies used in exploring, prospecting, or drillingfor oil, gas, brine, or other natural resources.

(e) Equipment, materials, and supplies used in the storing, withdrawing, ordistribution of oil, gas, or brine from a storage facility.

(f) Vehicles, including special bodies or attachments, required to display a vehiclepermit or license plate to operate on public highways.


(a) “Extractive operations” means the activity of taking or extracting for resaleore, oil, gas, coal, timber, stone, gravel, clay, minerals, or other natural resourcematerial. An extractive operation begins when contact is made with the actual typeof natural raw product being recovered. Extractive operations includes all necessaryprocessing operations and movement of the natural resource material until the pointat which the natural raw product being recovered first comes to rest in finishedgoods inventory storage at the extraction site.

(b) An extractive operator is a person who, either directly or by contract,performs extractive operations.


Sec. 205.94q. Central office equipment or wireless equipment; presumption

(1) The tax levied under this act does not apply to the purchase of machinery andequipment for use or consumption in the rendition of any combination of services,the use or consumption of which is taxable under section 3a(a) or (c) or 3(b) exceptthat this exemption is limited to the tangible personal property located on thepremises of the subscriber and to central office equipment or wireless equipment,directly used or consumed in transmitting, receiving, or switching, or in themonitoring of switching of a 2-way interactive communication. As used in thissubsection, central office equipment or wireless equipment does not includedistribution equipment including cable or wire facilities.

(2) Beginning April 1, 1999, the property under subsection (1) is exempt only to theextent that the property is used for the exempt purposes stated in this section. There


is an irrebuttable presumption that 90% of total use is for exempt purposes. Thispresumption is in effect until April 1, 2006, at which time the presumption shall bereviewed and redetermined by the department of treasury using nonexempt andexempt user information for the previous 12-month period. That redeterminedirrebuttable presumption shall be in effect for the following 7 years. The irrebuttablepresumption shall be reviewed and redetermined every 7 years after April 1, 2006 andapplied to the following 7 years.



Sec. 205.94r. Property used or consumed in industrial processing.Property usedor consumed in industrial processing.

(1) Subject to subsection (2), the tax levied under this act does not apply to propertysold to the following after March 30, 1995 but before March 31, 1999:

(a) An industrial processor for use or consumption in industrial processing.Property used or consumed in industrial processing does not include tangiblepersonal property permanently affixed and becoming a structural part of real estate;office furniture, office supplies, and administrative office equipment; or vehicleslicensed and titled for use on public highways other than a specially designedvehicle, together with parts, used to mix and agitate materials added at a plant orjobsite in the concrete manufacturing process. Industrial processing does not includereceipt and storage of raw materials purchased or extracted by the user or consumer,or the preparation of food and beverages by a retailer for retail sale. As used in thissubdivision, “industrial processor” means a person who transforms, alters, or modifiestangible personal property by changing the form, composition, or character of theproperty for ultimate sale at retail or sale to another industrial processor to befurther processed for ultimate sale at retail. Sales to a person performing a servicewho does not act as industrial processor while performing the service may not beexcluded under this subdivision, except as provided in subdivision (b).

(b) A person, whether or not the person is an industrial processor, when theproperty is a computer used in operating industrial processing equipment; equipmentused in a computer assisted manufacturing system; equipment used in a computerassisted design or engineering system integral to an industrial process; or a subunitor electronic assembly comprising a component in a computer integrated industrialprocessing system; or computer equipment used in connection with the computerassisted production, storage, and transmission of data if the equipment would havebeen exempt had the data transfer been made using tapes, disks, CD-ROMs, or similarmedia by a company whose business includes publishing doctoral dissertations and


information archiving, and that sells the majority of the company’s products tononprofit organizations exempt under section 4(1)(x).

(2) The property under subsection (1) is exempt only to the extent that the propertyis used for the exempt purposes stated in this section. The exemption is limited tothe percentage of exempt use to total use determined by a reasonable formula ormethod approved by the department.


Sec. 205.94s. Construction or improvement of property of nonprofit hospital orhousing.

(1) For taxes levied after June 30, 1999, the tax levied under this act does not applyto property purchased by a person engaged in the business of constructing, altering,repairing, or improving real estate for others to the extent that the property isaffixed to and made a structural part of a nonprofit hospital or nonprofit housingentity qualified as exempt under section 15a of the state housing developmentauthority act of 1966, 1966 PA 346, MCL 125.1415a.

(2) An exemption shall not be granted under this section for any portion of propertyotherwise qualifying for exemption under this section if income or a benefit inuresdirectly or indirectly to an individual, private stockholder, or other private personfrom the independent or nonessential operation of that portion of property.


(a) “Nonprofit hospital” means 1 of the following:

(i) That portion of a building to which 1 of the following applies:

(A) Is owned or operated by an entity exempt under section 501(c)(3) ofthe internal revenue code of 1986 that is licensed as a hospital under part215 of the public health code, 1978 PA 368, MCL 333.21501 to 333.21568.

(B) Is owned or operated by a governmental unit in which medicalattention is provided.

(C) Is owned or operated by an entity or entities exempt under section501(c)(2) or (3) of the internal revenue code of 1986 in which medicalattention is provided.

(ii) That portion of real property necessary and related to a buildingdescribed in subparagraph (i) in which medical attention is provided.


(iii) A county long-term medical care facility built after December 31, 1995.

(b) “Nonprofit hospital” does not include the following:

(i) A freestanding building or other real property of a nursing home or skillednursing facility licensed under part 217 of the public health code, 1978 PA 368,MCL 333.21701 to 333.21799e.

(ii) A hospice licensed under part 214 of the public health code, 1978 PA 368,MCL 333.21401 to 333.21421.

(iii) A home for the aged licensed under part 213 of the public health code,1978 PA 368, MCL 333.21301 to 333.21333.

(c) “Medical attention” means that level of medical care in which a physicianprovides acute care or active treatment of medical, surgical, obstetrical, psychiatric,chronic, or rehabilitative conditions, that require the observation, diagnosis, anddaily treatment by a physician.


Sec. 205.94u. Storage, use, or consumption of investment coins and bullion;applicability of tax; definitions.

(1) Beginning July 7, 1999, the tax under this act does not apply to the storage, use,or consumption of investment coins and bullion.


(a) “Bullion” means gold, silver, or platinum in a bulk state, where its valuedepends on its content rather than its form, with a purity of not less than 900 partsper 1,000.

(b) “Investment coins” means numismatic coins or other forms of money andlegal tender manufactured of gold, silver, platinum, palladium, or other metal andissued by the United States government or a foreign government with a fair marketvalue greater than the face value of the coins.

Added by P.A. 225, 12-28-1999.


Sec. 205.94v. Construction or improvement of building of nonprofit hospital.

(1) For taxes levied after December 31, 1990 and before July 1, 1999, the tax leviedunder this act does not apply to a claimed exemption of tangible personal propertyused in the construction, alteration, repair, or improvement of the real estate or isaffixed to and made a structural part of a building of a nonprofit hospital providedthe following criteria have been met:

(a) A nonprofit hospital is an entity described in section 4s(3)(a)(i).

(b) A binding contract had been entered into for the construction, alteration,repair, or improvement of the real estate or the affixation to the building before July1, 1999.

(c) The claimed exemption was made in good faith.

(2) The provisions of this section shall not be applied to affect any final decision of acourt.

(3) A claim for refund for an exemption under this section shall be filed not laterthan July 15, 1999. The approved refunds shall be paid without interest.


Sec. 205.95. Registration requirements; seller to collect tax from consumer;foreign corporations; dissolution or withdrawal of corporation.

(1) Except as otherwise provided in this sub-section, a person engaged in thebusiness of selling tangible personal property for storage, use, or other consumptionin this state shall register with the department and give the name and address ofeach agent operating in this state, the location of all distribution or sales houses oroffices or other places of business in this state, and any other information that thedepartment requires relevant to the enforcement of this act. However, a sellerholding a sales tax license obtained under the general sales tax act, 1933 PA 167,MCL 205.51 to 205.78, is not required to separately register with the department asprovided in under this act. Every seller shall collect the tax imposed by this act fromthe consumer.

(2) The corporation, securities, and land development bureau of the department ofconsumer and industry services shall not issue to any foreign corporation engaged inthe business of selling tangible personal property a certificate of authority to dobusiness in this state or approve and file the proposed articles of incorporationsubmitted to it by any domestic corporation authorizing or permitting thatcorporation to conduct any business of selling tangible personal property unless the


corporation submits with the application for the certificate of authority or proposedarticles of incorporation, an application for registration of the corporation under thisact or an application for a sales tax license under the provisions of the general salestax act, 1933 PA 167, MCL 205.51 to 205.78. The application shall be transmitted tothe department by the corporation, securities, and land development bureau.

(3) A domestic corporation or a foreign corporation authorized to transact business inthis state that submits a certificate of dissolution or requests a certificate of withdrawal from this state shall request a certificate from the department statingthat taxes are not due under section 27A of 1941 PA 122, MCL 205.27A, not more than 60 days after submitting the certificate of dissolution or requesting thecertificate of withdrawal. A corporation that does not request a certificate statingthat taxes are not due is subject to the same penalties under section 24 of 1941 PA122, MCL 205.24, that a taxpayer would be subject to for failure to file a return.

(4) A lessor may elect to pay use tax on receipts from the rental or lease of thetangible personal property in lieu of payment of sales or use tax on the full cost ofthe property at the time it is acquired. For tax years that begin after December 31,2001, in order to make a valid election under this subsection, a lessor of tangiblepersonal property that is an aircraft shall obtain a use tax registration by the earlierof the date set for the first payment of use tax under the lease or rental agreementor 90 days after the lessor first brings the aircraft into this state.



Sec. 205.96. Returns; contents; payment

(1) Every person storing, using, or consuming tangible personal property or services,the storage, use, or consumption of which is subject to the tax imposed by the actwhen the tax was not paid to a seller, and every seller collecting the tax from thepurchaser, unless otherwise prescribed by the department under the provisions ofsubsection (2), (3), or (4), on or before the fifteenth day of each calendar monthshall file with the department a return for the preceding calendar month, in a formprescribed by the department, showing the price of each purchase of tangiblepersonal property or services during the preceding month, and other information thedepartment considers necessary for the proper administration of this act. At the sametime each person shall pay to the department the amount of tax imposed by this actwith respect to the purchases covered by the return. A return shall be signed by theperson liable for the tax or his or her duly authorized agent. If the return is preparedby a person other than the taxpayer, the return shall also be signed by the personand show his or her address.


(2) Before January 1, 1999, each seller that had a total tax liability after subtractingthe tax payments made to the secretary of state under this act or the sales tax act,1933 PA 167, MCL 205.51 to 205.78, or after subtracting the tax credits availableunder section 6a of the general sales tax act, 1933 PA 167, MCL 205.6a, in theimmediately preceding calendar year of $720,000.00 or more on or before theeighteenth of each month shall remit to the department, by an electronic fundstransfer method approved by the commissioner of revenue, an amount equal to 95%of the taxpayer’s liability under this act for the same month in the immediatelypreceding calendar year, or 95% of the actual liability for the current month beingreported, plus a reconciliation payment equal to the difference between the taxliability determined for the immediately preceding month minus the amount of taxpreviously paid for that month.

(3) Beginning January 1, 1999, each seller that had a total tax liability aftersubtracting the tax payments made to the secretary of state under this act or thesales tax act, 1933 PA 167, MCL 205.51 to 205.78, or after subtracting the tax creditsavailable under section 6a of the general sales tax act, 1933 PA 167, MCL 205.56a, inthe immediately preceding calendar year of $720,000.00 or more shall remit to thedepartment, by an electronic funds transfer method approved by the commissioner ofrevenue on or before the fifteenth day of the month, an amount equal to 50% of thetaxpayer’s liability under this act for the same month in the immediately precedingcalendar year, or 50% of the actual liability for the month being reported, whicheveris less, plus a reconciliation payment equal to the difference between the tax liabilitydetermined for the immediately preceding month minus the amount of tax previouslypaid for that month. Additionally, the seller shall remit to the department, by anelectronic funds transfer method approved by the commissioner of revenue on orbefore the last day of the month, an amount equal to 50% of the taxpayer’s liabilityunder this act for the same month in the immediately preceding calendar year, or50% of the actual liability for the month being reported, whichever is less.

(4) If considered necessary to insure payment of the tax or to provide a moreefficient administration, the revenue commissioner may require and prescribe thefiling of returns and payment of the tax for other than monthly periods.

(5) If a corporation licensed under this act fails for any reason to file the requiredreturns or to pay the tax due, any of its officers having control or supervision of, orcharged with the responsibility for, making the returns and payments are personallyliable for the failure. The dissolution of a corporation does not discharge an officer’sliability for a prior failure of the corporation to make a return or remit the tax due.

Amended by H.B. 5313, 7-15-98.


Sec. 205.96a. Qualified athletic event; applicability of tax; repeal of section.

(1) Notwithstanding the provisions of section 2, the organizing entity of a qualifiedathletic event that sells corporate sponsor contracts for the event may apply the taxunder this act only to the amount charged for the rental of taxable tangible personalproperty or taxable services if all of the following criteria have been met:

(a) The organizing entity is exempt or is wholly owned by an entity exemptunder section 501(c)(6) of the internal revenue code of 1986.

(b) The organizing entity provided both of the following to the department atleast 180 days in advance of entering into the first corporate sponsor contract:

(i) Written notice of its intent to enter into corporate sponsor contracts.

(ii) An itemized schedule of the taxable tangible personal property andtaxable services that will be provided under each corporate sponsor contract.

(c) The department has given written approval to the organizing entity’sallocation of the tax.

(2) As used in this section, “qualified athletic event” means either of the following:

(a) A professional sporting competition in which individuals officiallyrepresenting at least 2 countries or nations compete.

(b) A professional football competition in which teams compete in a postseasonevent to determine the league champion.

(3) This section is repealed effective January 1, 2007.


Sec. 205.97. Liability of consumer for tax

Each consumer storing, using or otherwise consuming in this state tangible personalproperty or services purchased for or subsequently converted to such purpose orpurposes shall be liable for the tax imposed by this act, and such liability shall not beextinguished until the tax has been paid to the department. The payment to thedepartment of the tax, interest and any penalty assessed by the department shallrelieve the seller, who sold the property or services with regard to the storing, use orother consumption on which the tax was paid from the payment of the amount ofthe tax which he may be required under this act to collect from the purchaser.


Sec. 205.98. Direct payment authorization.

(1) The commissioner, in his or her discretion, may authorize a person to assume theobligation of self-accruing and remitting use tax due on purchases or leases directlyto the department under a direct payment authorization, if the following conditionsare met:

(a) The authorization is to be used for the purchase or lease of tangible personalproperty or services.

(b) The authorization is necessary because it is either impractical at the time ofacquisition to determine the manner in which the tangible personal property orservices will be used or it will facilitate improved compliance with the tax laws ofthis state.

(c) The person requesting authorization for direct payment maintains accurateand complete records of all purchases or leases and uses of tangible personal propertyor services purchased pursuant to the direct payment authorization in a formacceptable to the department.

(2) The commissioner has the authority to identify items that are not eligible for adirect payment authorization.

Section formerly repealed by P.A. 165, 1980; effective 9-17-1980.


Sec. 205.99. Personal liability of seller for failure to collect tax

In case any seller who is required or authorized to collect the tax fails to do so, heshall be liable personally for such amount as he failed to collect together withpenalty and interest thereon. In such case, the department shall have power to makean assessment against such seller, based upon any information in, or which shallcome into its possession. The department shall give to the seller written notice ofsuch assessment. Such notice may be served upon the seller personally or byregistered mail, addressed to his last known or business address.

Sec. 205.99a. Bad debt deduction.

(1) Beginning March 30, 1995, in computing the amount of tax levied under this actfor any month, a seller may deduct the amount of bad debts from his or her grosssales, rentals, or services used for the computation of the tax. The amount of grosssales, rentals, or services used for the computation of the tax. The amount of grosssales, rentals, or services deducted must be charged off as uncollectible on the books


of the seller. If the business consists of taxable and nontaxable transactions, thededuction equals the full amount of the bad debt if the bad debt is documented as ataxable transactions in the seller’s records. If documentation is not available, themaximum deduction from gross sales, rentals, or services for any bad debts equalsthe amount of the bad debt multiplied by the quotient resulting from dividing thesales, rentals, or services taxed under this act during the preceding calendar year byall sales, rentals, or services during the preceding calendar year, whether or nottaxed under this act. If a consumer or other person pays all or part of a bad debtwith respect to which a seller claimed a deduction under this section, the seller isliable for the amount of taxes deducted in connection with that portion of the debtfor which payment is received and shall remit these taxes in his or her next paymentto the department.

(2) Any claim for a bad debt deduction under this section shall be supported by thatevidence required by the department. The department shall review any change in therate of taxation applicable to any taxable sales, rentals, or services by a sellerclaiming a deduction pursuant to this section and shall ensure that the deduction onany bad debt does not result in the seller claiming the deduction recovering anymore or less than the taxes imposed on the sale, rental, or service that constitutesthe bad debt.

(3) As used in this section, “bad debt” means any portion of a debt resulting from aseller’s collection of the use tax on the purchase of tangible personal property orservices that is not otherwise deductible or excludable, that has become worthless oruncollectible in the time period between the date when taxes accrue to the state forthe seller’s preceding use tax return and the date when taxes accrue to the state forthe present return, and that is eligible to be claimed, or could be eligible to beclaimed if the seller kept accounts on an accrual basis, as a deduction pursuant tosection 166 of the internal revenue code. A bad debt does not include any of thefollowing:

(a) Interest or use tax on the purchase price.

(b) Uncollectible amounts on property that remains in the possession of theseller until the full purchase price is paid.

(c) Expenses incurred in attempting to collect any account receivable or anyportion of the debt recovered.

(d) Any accounts receivable that have been sold to a third party for collection.

(e) Repossessed property.



Sec. 205.100. Administration; rules; claims for refund

(1) The tax imposed by this act shall be administered by the revenue commissionerunder 1941 PA 122, MCL 205.1 to 205.31, and this act. If 1941 PA 122, MCL 205.1 to205.31, and this act conflict, the provisions of this act apply.

(2) Rules shall be promulgated to implement this act under the administrativeprocedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.

(3) Claims for refund pursuant to the 1988 amendatory act amending section 2 shallbe filed not later than March 31, 1989. The approved refunds shall be paid withoutinterest. The department shall not pay refunds totaling more than $1,000,000.00 inany 1 fiscal year, unless the single business tax act, 1975 PA 228, MCL 208.1 to208.145, is amended to impose a 1-year surcharge on the business activity ofcontract construction to recover the cost of the refunds.

(4) A claim for a refund pursuant to the final decision of the Michigan court ofappeals in the case of GTE Sprint Communications Corp. v Michigan Department ofTreasury, 179 Mich App 276, 1989, LV DEN 436 Mich 874, 1990, shall be filed notlater than January 1, 1994 by a person that paid the tax under this act for interstateaccess telephone services for the period beginning August 1, 1988 through January1, 1991. The approved refund shall be paid without interest. The department shallpay the refund in 12 equal installments commencing in the month that the personbegins applying the refunds to the billings of its current Michigan interstatesubscribers in a manner consistent with the requirements of the federalcommunications commission.

(5) A claim for a refund for the exemption provided by the 1998 amendatory act thatadded subdivision (cc) to section 4 shall be filed not later than 90 days after theeffective date of the amendatory act that added this subsection.

Amended by P.A. 336, 10-20-1998.

Sec. 205.101. Refund or credit for returned tangible personal property orservice.

(1) If a person liable for collection of the tax under this act refunds or provides acredit for all or a portion of the amount of the purchase price paid for returnedtangible personal property within the time period for returns stated in that person’srefund policy or 180 days after the initial sale, whichever is sooner, that person shallalso refund or provide a credit for the tax levied under this act that was added to allor that portion of the amount of the purchase price paid that is refunded or credited.(2) If a person liable for collection of the tax under this act refunds or provides acredit for all or a portion of an amount paid for a service taxable under this act


within the time period for returns stated in that person’s refund policy or 180 daysafter the initial sale, whichever is sooner, that person shall also refund or provide acredit for the tax paid under this act on all or that portion of the amount paid forservices that is refunded or credited.

Added by SB 585, 6-12-2000; effective 6-12-2000.

Sec. 205.101a. Persons liable for tax selling business or stock of goods orquitting business, final return; successors, withholding amount to cover taxes

If any person liable for a tax levied under this act sells a business or stock of goods,or quits the business, that person shall make a final return within 15 days after thedate of selling or quitting business. The person’s successor or succeeding successors,if any, shall withhold a sufficient amount of the purchase money to cover theamount of the taxes, interest, and penalties due and unpaid until the time theformer owner shall produce either a receipt from the department showing that thetaxes, interest, and penalties have been paid, or a certificate stating that taxes arenot due. If the purchaser or succeeding purchasers of a business or stock of goods failto withhold a portion of the purchase money as required by this section, that personshall be personally liable for the payment of the taxes, interest, and penaltiesaccrued and unpaid because of the operation of the business by the former owner.Unless the department files a lien for total tax liability at the register of deeds officein the county where the business or stock or goods are located, the purchaser shallnot be held liable for payment of the taxes, interest, and penalties accrued andunpaid by the former owner.





Sec. 205.104. Inventory and records; sale to unlicensed person; return

A person in the business of selling tangible personal property and liable for any taximposed under this act shall keep accurate and complete beginning and annualinventory and purchase records of additions to inventory, complete daily salesrecords, receipts, invoices, bills of lading, and any and all pertinent documents in aform the department may require. If an exemption from this tax is claimed by reasonof any of the exemptions or deductions granted under this act, a record shall be keptof the name and address of the person to whom the sale is made, the date of thesale, the article purchased, the use to be made of the article, and the amount of the


sale, and if that person has a sales tax license issued under the provisions of thegeneral sales tax act, Act No. 167 of the Public Acts of 1933, as amended, beingsections 205.51 to 205.78 of the Michigan Compiled Laws, that number shall also beincluded. Any person knowingly making a sale of tangible personal property for thepurpose of resale at retail to another person not licensed under Act No. 167 of thePublic Acts of 1933, as amended, shall be liable for the tax imposed by this act unlessthe transaction is exempt under the provisions of section 4h. These records must bekept for a period of 4 years after the tax imposed under this act to which the recordsapply is due or as otherwise provided by law. If the department considers itnecessary, the department may require any person, by notice served upon thatperson, to make a return, render under oath certain statements, or keep certainrecords the department considers sufficient to show whether or not that person isliable for tax under this act. If the taxpayer fails to file a return or to maintain orpreserve proper records as prescribed in this section, or the department has reason tobelieve that any records maintained or returns filed are inaccurate or incomplete andthat additional taxes are due, the department may assess the amount of the tax duefrom the taxpayer based on information that is available or that may becomeavailable to the department. That assessment shall be considered prima facie correctfor the purpose of this act and the burden of proof of refuting the assessment shallbe upon the taxpayer.

Sec. 205.105. Penalty; failure to register

Any seller who fails to register with the department as required under this act, shallbe deemed guilty of a misdemeanor and upon conviction thereof shall be fined thesum of $25.00 for each day such failure, neglect or refusal to so register continuesafter notice to such seller from the department that he is required to register underthis act.

Sec. 205.106. Penalty; seller’s failure to comply with act

Any seller who fails, neglects or refuses to collect the tax as required by this act, orfails, neglects or refuses to comply with the provisions of this act, or excepting asexpressly authorized pursuant to this act, refunds, remits or rebates to a consumer,either directly or indirectly and by whatsoever means, all or any part of the taxlevied by this act, or makes in any form of advertising, verbal or otherwise, anystatements which might imply he is absorbing the tax or paying the tax for theconsumer by an adjustment of prices or at a price including the tax, or in any othermanner whatsoever, shall be deemed guilty of a misdemeanor and upon convictionthereof shall be fined not less than $100.00 nor more than $500.00, and uponconviction for a second or subsequent offense shall be fined not less than $500.00nor more than $5,000.00, or imprisoned in the county jail not more than 1 year, orby both such fine and imprisonment in the discretion of the court.




Sec. 205.108. Penalty; consumer’s failure to comply with act, making falsestatement

Any consumer who refuses to pay the tax as required by this act, or refuses tocomply with the provisions of this act, or makes to the seller a false statement orcertificate indicating that the storage, use or consumption is not subject to the taxherein imposed, shall be deemed guilty of a misdemeanor and, upon convictionthereof, shall be fined not less than $500.00 nor more than $5,000.00, or imprisonedin the county jail not more than 1 year, or by both such fine and imprisonment inthe discretion of the court.





Sec. 205.111. Deposit of receipts; state school aid fund

(1) Except as provided in subsection (2), all money received and collected under theprovisions of this act shall be deposited by the department of treasury, in the statetreasury to the credit of the general fund, to be disbursed only by appropriations bythe legislature.

(2) The collections from the use tax imposed at the additional rate of 2% approved bythe electors March 15, 1994 shall be deposited in the state school aid fundestablished in section 11 of article IX of the state constitution of 1963.

EQUITABLE SALES AND USE TAX ADMINISTRATION ACT

Sec. 205.151. Repealed.Repealed by Act 122, effective 12-31-2002.

Sec. 205.152. Repealed.Repealed by Act 122, 2001; effective 12-31-2002.

















PUBLIC ACT NO. 301 OF 1939 REPEALED 1-1-1998

Documents

Michigan General Sales and Use Tax Acts - Wayne State University