January 18, 2011, Introduced by Rep. Meadows and referred to the Committee on Tax Policy.
A bill to amend 1937 PA 94, entitled
"Use tax act,"
by amending sections 4 and 20 (MCL 205.94 and 205.110), section 4
as amended by 2008 PA 314 and section 20 as added by 2004 PA 172,
and by adding sections 3g and 4b.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 3g. (1) Except as otherwise provided in this act,
beginning on the effective date of the amendatory act that added
this section, the use or consumption of all services in this state
shall be taxed under this act in the same manner as tangible
personal property is taxed under this act.
(2) Services subject to the tax under this act as provided in
this section shall be sourced under section 20.
Sec. 4. (1) The following are exempt from the tax levied under
this act, subject to subsection (2):
(a) Property or services 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 or services, 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, 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 licensed under section 248(8)(a) 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 or services 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 or services 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 or services 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.
Sec. 4b. Beginning January 1, 2011, the sale of the following
services are exempt from the tax under this act:
(a) Services provided to a business entity.
(b) Educational services.
(c) Services provided by a nonprofit organization.
Sec. 20. (1) For sourcing a sale subject to tax under this
act, the following apply:
(a) If a product or service is received by the purchaser at a
business location of the seller, the sale is sourced to that
business location.
(b) If a product or service is not received by the purchaser
at a business location of the seller, the sale is sourced to the
location where the product or service is received by the purchaser
or the purchaser's designee, including the location indicated by
instructions for delivery to the purchaser, known to the seller.
(c) If subdivision (a) or (b) does not apply, the sale is
sourced to the location indicated by an address for the purchaser
available from the seller's business records maintained in the
ordinary course of the seller's business, provided use of the
address does not constitute bad faith.
(d) If subdivisions (a) through (c) do not apply, the sale is
sourced to the location indicated by an address for the purchaser
obtained at the completion of the sale, including the address of
the purchaser's payment instrument if no other address is
available, provided use of the address does not constitute bad
faith.
(e) If subdivisions (a) through (d) do not apply or the seller
has insufficient information to apply subdivisions (a) through (d),
the sale will be sourced to the location indicated by the address
from which the tangible personal property was shipped, from which
the service originated, or from which the computer software
delivered electronically was first available for transmission by
the seller.
(2) For sourcing the lease or rental of tangible personal
property, other than property included in subsection (3) or (4),
subject to tax under this act, the following apply:
(a) For a lease or rental requiring recurring periodic
payments, the first payment is sourced in the same manner provided
for a sale in subsection (1). Subsequent payments shall be sourced
to the primary property location for each period covered by the
payment as indicated by the address of the property provided by the
lessee and available to the lessor from the lessor's records
maintained in the ordinary course of business, when use of this
address does not constitute bad faith. The property location is not
considered altered by intermittent use at different locations such
as business property that accompanies employees on business trips
or service calls.
(b) For a lease or rental not requiring recurring periodic
payments, the payment is sourced in the same manner provided for a
sale in subsection (1).
(3) For sourcing the lease or rental of motor vehicles,
trailers, semitrailers, or aircraft that are not transportation
equipment, the following apply:
(a) For a lease or rental requiring recurring periodic
payments, each payment is sourced to the primary property location
as indicated by the address of the property provided by the lessee
and available to the lessor from the lessor's records maintained in
the ordinary course of business, when use of this address does not
constitute bad faith. The property location is not considered
altered by intermittent use at a different location.
(b) For a lease or rental not requiring recurring periodic
payments, the payment is sourced in the same manner provided for a
sale in subsection (1).
(4) The lease or rental of transportation equipment shall be
sourced in the same manner provided for a sale in subsection (1).
(5) Subsections (2) and (3) do not affect the imposition or
computation of the tax under the general sales tax act, 1933 PA
167, MCL 205.51 to 205.78, on leases or rentals based on a lump-sum
or accelerated basis or on the acquisition of property for lease.
(6) As used in this section:
(a) "Receive" and "receipt" mean 1 or more of the following
but exclude possession by a shipping company on behalf of the
purchaser:
(i) Taking possession of tangible personal property.
(ii) Making first use of services.
(b) "Transportation equipment" means 1 or more of the
following:
(i) Locomotives and railcars utilized for the carriage of
persons or property in interstate commerce.
(ii) Trucks and truck-tractors with a gross vehicle weight
rating of 10,001 pounds or greater, trailers, semitrailers, or
passenger buses, which are registered through the international
registration plan and operated under authority of a carrier
authorized and certificated by the United States department of
transportation or another federal authority to engage in the
carriage of persons or property in interstate commerce.
(iii) Aircraft operated by air carriers authorized and
certificated by the United States department of transportation or
other federal or foreign authority to transport air cargo or
passengers in interstate or foreign commerce.
(iv) Containers designed for use on or component parts attached
or secured to the equipment included in subparagraphs (i) to (iii).
(7) A person may deviate from the sourcing requirements under
this
section as provided in section 12 or 13.