June 23, 2009, Introduced by Reps. Melton, Kowall, Mayes, Coulouris, Angerer, Sheltrown, Roy Schmidt and Meadows and referred to the Committee on Tax Policy.
A bill to amend 1937 PA 94, entitled
"Use tax act,"
by amending sections 2 and 4 (MCL 205.92 and 205.94), section 2 as
amended by 2008 PA 439 and section 4 as amended by 2008 PA 314.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2. As used in this act:
(a) "Person" means an individual, firm, partnership, joint
venture, association, social club, fraternal organization,
municipal or private corporation whether or not organized for
profit, company, limited liability company, estate, trust,
receiver, trustee, syndicate, the United States, this state,
county, or any other group or combination acting as a unit, and the
plural as well as the singular number, unless the intention to give
a more limited meaning is disclosed by the context.
(b) "Use" means the exercise of a right or power over tangible
personal property incident to the ownership of that property
including transfer of the property in a transaction where
possession is given. Converting tangible personal property acquired
for a use exempt from the tax levied under this act to a use not
exempt from the tax levied under this act is a taxable use.
(c) "Storage" means a keeping or retention of property in this
state for any purpose after the property loses its interstate
character.
(d) "Seller" means the person from whom a purchase is made and
includes every person selling tangible personal property or
services for storage, use, or other consumption in this state. If,
in the opinion of the department, it is necessary for the efficient
administration of this act to regard a salesperson, representative,
peddler, or canvasser as the agent of a dealer, distributor,
supervisor, or employer under whom the person operates or from whom
he or she obtains tangible personal property or services sold by
him or her for storage, use, or other consumption in this state,
irrespective of whether or not he or she is making the sales on his
or her own behalf or on behalf of the dealer, 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 the purpose of this act.
(e) "Purchase" means to acquire for a consideration, whether
the acquisition is effected 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 is
effected; and whether consideration is a price or rental in money,
or by way of exchange or barter. Purchase includes converting
tangible personal property acquired for a use exempt from the tax
levied under this act to a use not exempt from the tax levied under
this act.
(f) "Purchase price" or "price" means the total amount of
consideration paid by the consumer to the seller, including cash,
credit, property, and services, for which tangible personal
property or services are sold, leased, or rented, valued in money,
whether received in money or otherwise, and applies to the measure
subject to use tax. Purchase price includes the following
subparagraphs (i) through (vii) and excludes subparagraphs (viii)
through (x):
(i) Seller's cost of the property sold.
(ii) Cost of materials used, labor or service cost, interest,
losses, costs of transportation to the seller, taxes imposed on the
seller other than taxes imposed by this act, and any other expense
of the seller.
(iii) Charges by the seller for any services necessary to
complete the sale, other than the following:
(A) An amount received or billed by the taxpayer for
remittance to the employee as a gratuity or tip, if the gratuity or
tip is separately identified and itemized on the guest check or
billed to the customer.
(B) Labor or service charges involved in maintenance and
repair work on tangible personal property of others if separately
itemized.
(iv) Delivery charges incurred or to be incurred before the
completion of the transfer of ownership of tangible personal
property subject to the tax levied under this act from the seller
to the purchaser.
(v) Installation charges incurred or to be incurred before the
completion of the transfer of ownership of tangible personal
property from the seller to the purchaser.
(vi) Credit for any trade-in.
(vii) Except as otherwise provided in subparagraph (x),
consideration received by the seller from third parties if all of
the following conditions are met:
(A) The seller actually receives consideration from a party
other than the purchaser and the consideration is directly related
to a price reduction or discount on the sale.
(B) The seller has an obligation to pass the price reduction
or discount through to the purchaser.
(C) The amount of the consideration attributable to the sale
is fixed and determinable by the seller at the time of the sale of
the item to the purchaser.
(D) One of the following criteria is met:
(I) The purchaser presents a coupon, certificate, or other
documentation to the seller to claim a price reduction or discount
where the coupon, certificate, or documentation is authorized,
distributed, or granted by a third party with the understanding
that the third party will reimburse any seller to whom the coupon,
certificate, or documentation is presented.
(II) The purchaser identifies himself or herself to the seller
as a member of a group or organization entitled to a price
reduction or discount. A preferred customer card that is available
to any patron does not constitute membership in a group or
organization.
(III) The price reduction or discount is identified as a third
party price reduction or discount on the invoice received by the
purchaser or on a coupon, certificate, or other documentation
presented by the purchaser.
(viii) Interest, financing, or carrying charges from credit
extended on the sale of personal property or services, if the
amount is separately stated on the invoice, bill of sale, or
similar document given to the purchaser.
(ix) Any taxes legally imposed directly on the consumer that
are separately stated on the invoice, bill of sale, or similar
document given to the purchaser.
(x) Beginning January 1, 2000, employee discounts that are
reimbursed by a third party on sales of motor vehicles.
(g) "Consumer" means the person who has purchased tangible
personal property or services for storage, use, or other
consumption in this state and includes, but is not limited to, 1 or
more of the following:
(i) A person acquiring tangible personal property if engaged in
the business of constructing, altering, repairing, or improving the
real estate of others.
(ii) A person who has converted tangible personal property or
services acquired for storage, use, or consumption in this state
that is exempt from the tax levied under this act to storage, use,
or consumption in this state that is not exempt from the tax levied
under this act.
(h) "Business" means all activities engaged in by a person or
caused to be engaged in by a person with the object of gain,
benefit, or advantage, either direct or indirect.
(i) "Department" means the department of treasury.
(j) "Tax" includes all taxes, interest, or penalties levied
under this act.
(k) "Tangible personal property" means personal property that
can be seen, weighed, measured, felt, or touched or that is in any
other manner perceptible to the senses and includes electricity,
water, gas, steam, and prewritten computer software.
(l) "Textiles" means goods that are made of or incorporate
woven or nonwoven fabric, including, but not limited to, clothing,
shoes, hats, gloves, handkerchiefs, curtains, towels, sheets,
pillows, pillowcases, 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.
(m) "Interstate motor carrier" means a person who operates or
causes to be operated a qualified commercial motor vehicle on a
public road or highway in this state and at least 1 other state or
Canadian province.
(n) "Qualified commercial motor vehicle" means that term as
defined in section 1(i), (j), and (k) of the motor carrier fuel tax
act, 1980 PA 119, MCL 207.211.
(o) "Diesel fuel" means that term as defined in section 2(p)
of the motor fuel tax act, 2000 PA 403, MCL 207.1002.
(p) "Sale" means a transaction by which tangible personal
property or services are purchased or rented for storage, use, or
other consumption in this state.
(q) "Convert" means putting a service or tangible personal
property acquired for a use exempt from the tax levied under this
act at the time of acquisition to a use that is not exempt from the
tax levied under this act, whether the use is in whole or in part,
or permanent or not permanent. A motor vehicle purchased for resale
by a new vehicle dealer or a used or secondhand vehicle dealer
licensed
under section 248(8)(a) 248(8)
of the Michigan vehicle
code, 1949 PA 300, MCL 257.248, and not titled in the name of the
dealer shall not be considered to be converted prior to sale or
lease by that dealer.
Sec. 4. (1) The following are exempt from the tax levied under
this act, subject to subsection (2):
(a) Property sold in this state on which transaction a tax is
paid under the general sales tax act, 1933 PA 167, MCL 205.51 to
205.78, if the tax was due and paid on the retail sale to a
consumer.
(b) Property, the storage, use, or other consumption of which
this state is prohibited from taxing under the constitution or laws
of the United States, or under the constitution of this state.
(c) All of the following:
(i) Property purchased for resale. Property purchased for
resale includes promotional merchandise transferred pursuant to a
redemption offer to a person located outside this state or any
packaging material, other than promotional merchandise, acquired
for use in fulfilling a redemption offer or rebate to a person
located outside this state.
(ii) Property purchased for lending or leasing to a public or
parochial school offering a course in automobile driving except
that a vehicle purchased by the school shall be certified for
driving education and shall not be reassigned for personal use by
the school's administrative personnel.
(iii) Property purchased for demonstration purposes. For a new
vehicle dealer selling a new car or truck or a used or secondhand
vehicle dealer selling a used or secondhand car or truck, exemption
for
demonstration purposes shall be determined by the number of new
cars and trucks sold during the current calendar year or the
immediately preceding calendar year, without regard to specific
make or style, according to the following schedule but not to
exceed 25 cars and trucks in 1 calendar year for demonstration
purposes:
(A) 0 to 25, 2 units.
(B) 26 to 100, 7 units.
(C) 101 to 500, 20 units.
(D) 501 or more, 25 units.
(iv) Motor vehicles purchased for resale purposes by a new
vehicle dealer or used or secondhand vehicle dealer licensed under
section
248(8)(a) 248(8) of the Michigan vehicle code, 1949 PA 300,
MCL 257.248.
(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 is used 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 use tax equal to, or in excess of, that imposed by
this act under the law of any other state or a local governmental
unit within a state if the tax was due and paid on the retail sale
to the consumer and the state or local governmental unit within a
state in which the tax was imposed accords like or complete
exemption on property the sale or use of which was subjected to the
sales or use tax of this state. If the sale or use of property was
already subjected to a tax under the law of any other state or
local governmental 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 rate provided 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 and consuming the property in the tilling, planting,
caring for, or harvesting of the things of the soil or in the
breeding, raising, or caring for livestock, poultry, or
horticultural products, including transfers of livestock, poultry,
or horticultural products for further growth. This exemption
includes machinery that is capable of simultaneously harvesting
grain or other crops and biomass and machinery used for the purpose
of harvesting biomass. This exemption includes agricultural land
tile, which means fired clay or perforated plastic tubing used as
part of a subsurface drainage system for land used in the
production of agricultural products as a business enterprise and
includes a portable grain bin, which means a structure that is used
or is to be used to shelter grain and that is designed to be
disassembled without significant damage to its component parts.
This exemption does not include transfers of food, fuel, clothing,
or similar tangible personal property for personal living or human
consumption. This exemption does not include tangible personal
property permanently affixed to and becoming a structural part of
real estate. As used in this subdivision, "biomass" means crop
residue used to produce energy or agricultural crops grown
specifically for the production of energy.
(g) Property or services sold to the United States, an
unincorporated agency or instrumentality of the United States, an
incorporated agency or instrumentality of the United States wholly
owned by the United States or by a corporation wholly owned 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 this state.
(h) Property or services sold to a school, hospital, or home
for the care and maintenance of children or aged persons, operated
by an entity of government, a regularly organized church,
religious, or fraternal organization, a veterans' organization, or
a corporation incorporated under the laws of this state, if not
operated 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, and if 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 its members or a restricted group. The
tax levied does not apply to property or services sold to a parent
cooperative preschool. As used in this subdivision, "parent
cooperative preschool" means a nonprofit, nondiscriminatory
educational institution, maintained as a community service and
administered by parents of children currently enrolled in the
preschool that provides an educational and developmental program
for children younger than compulsory school age, that provides an
educational program for parents, including active participation
with children in preschool activities, that is directed by
qualified preschool personnel, and that is licensed pursuant to
1973 PA 116, MCL 722.111 to 722.128.
(i) Property or services sold to a regularly organized church
or house of religious worship except the following:
(i) Sales in which the property is used in activities that are
mainly commercial enterprises.
(ii) Sales of vehicles licensed for use on the public highways
other than a passenger van or bus with a manufacturer's rated
seating capacity of 10 or more that is used primarily for the
transportation of persons for religious purposes.
(j) A vessel designed for commercial use of registered tonnage
of 500 tons or more, 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 500
tons or more engaged in interstate commerce.
(k) Property purchased for use in this state where actual
personal possession is obtained outside this state, the purchase
price or actual value of which does not exceed $10.00 during 1
calendar month.
(l) A newspaper or periodical classified under federal postal
laws and regulations effective September 1, 1985 as second-class
mail 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 of general
circulation, established at least 2 years, and published at least
once a week, and a copyrighted motion picture film. Tangible
personal property used or consumed in producing a copyrighted
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 a component part of that film, newspaper, or
periodical is subject to the tax. After December 31, 1993, tangible
personal property used or consumed in producing a newspaper
published 14 times or less per year or 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 that becomes a component part of a newspaper or
periodical is exempt from the tax under this subdivision. A claim
for a refund for taxes paid before January 1, 1999 under this
subdivision shall be made before June 30, 1999. For purposes of
this subdivision, tangible personal property that becomes a
component part of a newspaper or periodical and consequently not
subject to tax, includes an advertising supplement inserted into
and circulated with a newspaper or periodical that is otherwise
exempt from tax under this subdivision, if the advertising
supplement is delivered directly to the newspaper or periodical by
a person other than the advertiser, or the advertising supplement
is printed by the newspaper or periodical.
(m) Property purchased by persons licensed to operate a
commercial radio or television station if the property is used in
the origination or integration of the various sources of program
material for commercial radio or television transmission. This
subdivision does not include a vehicle licensed and titled for use
on public highways or property used in the transmitting to or
receiving from an artificial satellite.
(n) A person who is a resident of this state who purchases an
automobile in another state while in the military service of the
United States and who pays a sales tax in the state where the
automobile is purchased.
(o) A vehicle for which a special registration is secured in
accordance with section 226(9) of the Michigan vehicle code, 1949
PA 300, MCL 257.226.
(p) The sale of a prosthetic device, durable medical
equipment, or mobility enhancing equipment.
(q) Water when delivered through water mains, water sold in
bulk tanks in quantities of not less than 500 gallons, or the sale
of bottled water.
(r) A vehicle not for resale used by a nonprofit corporation
organized exclusively to provide a community with ambulance or fire
department services.
(s) Tangible personal property purchased and installed as a
component part of a water pollution control facility for which a
tax exemption certificate is issued pursuant to part 37 of the
natural resources and environmental protection act, 1994 PA 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 and environmental protection act, 1994 PA
451, MCL 324.5901 to 324.5908.
(t) Tangible real or personal property donated by a
manufacturer, wholesaler, or retailer to an organization or entity
exempt pursuant to subdivision (h) or (i) or section 4a(1)(a) or
(b) of the general sales tax act, 1933 PA 167, MCL 205.54a.
(u) The storage, use, or consumption of an aircraft by a
domestic air carrier for use solely in the transport of air cargo,
passengers, or a combination of air cargo and passengers, that has
a maximum certificated takeoff weight of at least 6,000 pounds. For
purposes of this subdivision, the term "domestic air carrier" is
limited to a person engaged primarily in the commercial transport
for hire of air cargo, passengers, or a combination of air cargo
and passengers as a business activity. The state treasurer shall
estimate on January 1 each year the revenue lost by this act from
the school aid fund and deposit that amount into the school aid
fund from the general fund.
(v) The storage, use, or consumption of an aircraft by a
person who purchases the aircraft for subsequent lease to a
domestic air carrier operating under a certificate issued by the
federal aviation administration under 14 CFR part 121, for use
solely in the regularly scheduled transport of passengers.
(w) Property or services sold to an organization not operated
for profit and exempt from federal income tax under section
501(c)(3) or 501(c)(4) of the internal revenue code, 26 USC 501; or
to a health, welfare, educational, cultural arts, charitable, or
benevolent organization not operated for profit that has been
issued before June 13, 1994 an exemption ruling letter to purchase
items exempt from tax signed by the administrator of the sales,
use, and withholding taxes division of the department. The
department shall reissue an exemption letter after June 13, 1994 to
each of those organizations that had an exemption letter that shall
remain in effect unless the organization fails to meet the
requirements that originally entitled it to this exemption. The
exemption does not apply to sales of tangible personal property and
sales of vehicles licensed for use on public highways, that are not
used primarily to carry out the purposes of the organization as
stated in the bylaws or articles of incorporation of the exempt
organization.
(x) The use or consumption of services described in section
3a(1)(a) or (b) or 3b by means of a prepaid telephone calling card,
a prepaid authorization number for telephone use, or a charge for
internet access.
(y) The purchase, lease, use, or consumption of the following
by 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 as packaging, supplies, hangers, name
tags, and identification tags.
(ii) Equipment, whether owned or leased, used to repair and
dispense textiles including, but not limited to, roll towel
cabinets, slings, hardware, lockers, mop handles 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 and 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
related maintenance and repair services.
(2) The property or services under subsection (1) are exempt
only to the extent that the property or services are used for the
exempt purposes if one is stated in subsection (1). The exemption
is limited to the percentage of exempt use to total use determined
by a reasonable formula or method approved by the department.
Enacting section 1. This amendatory is retroactive and is
effective September 30, 2002.