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HB-5254, As Passed House, September 24, 2007

SUBSTITUTE FOR

HOUSE BILL NO. 5254

A bill to amend 1937 PA 94, entitled

"Use tax act,"

by amending sections 3a, 4, 4a, 4d, 4k, and 9a (MCL 205.93a,

205.94, 205.94a, 205.94d, 205.94k, and 205.99a), sections 3a, 4,

4a, 4d, and 9a as amended by 2004 PA 172 and section 4k as amended

by 2006 PA 18.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 3a. (1) The use or consumption of the following is taxed

under this act in the same manner as tangible personal property is

taxed under this act:

(a) Except as provided in section 3b, intrastate telephone,

telegraph, leased wire, and other similar communications, including

local telephone exchange and long distance telephone service that

both originates and terminates in Michigan, and telegraph, private

line, and teletypewriter service between places in Michigan, but

before October 1, 2007 excluding telephone service by coin-operated

installations, switchboards, concentrator-identifiers, interoffice

circuitry and their accessories for telephone answering service,

and directory advertising proceeds.

(b) Rooms or lodging furnished by hotelkeepers, motel

operators, and other persons furnishing accommodations that are

available to the public on the basis of a commercial and business

enterprise, irrespective of whether or not membership is required

for use of the accommodations, except rooms and lodging rented for

a continuous period of more than 1 month. As used in this act,

"hotel" or "motel" means a building or group of buildings in which

the public may obtain accommodations for a consideration,

including, without limitation, such establishments as inns, motels,

tourist homes, tourist houses or courts, lodging houses, rooming

houses, nudist camps, apartment hotels, resort lodges and cabins,

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 group of buildings in which

accommodations are available to the public, except accommodations

rented for a continuous period of more than 1 month and

accommodations furnished by hospitals or nursing homes.

communications that either originate or terminate in this state and

for which the charge for the service is billed to a Michigan

House Bill No. 5254 (H-1) as amended September 24, 2007

service address or phone number by the provider either within or

outside this state, including calls between this state and any

place within or without the United States of America outside of

this state. ~~However, if the tax under this act is levied at a rate~~

~~of 6%~~ This subdivision does not apply to an 800 prefix service or

similar type service. Before [OCTOBER] 1, 2007, this subdivision does

not apply to a wide area telecommunication service or a similar

type service, ~~an 800 prefix service or similar type service,~~ an

interstate private network and related usage charges, or an

international call either inbound or outbound. Beginning [OCTOBER] 1,

2007, a wide area telecommunication service or a similar type

service, an interstate private network and related usage charges,

or an international call either inbound or outbound is taxed under

this act in the same manner as interstate telephone communications.

(d) The laundering or cleaning of textiles under a sale,

rental, or service agreement with a term of at least 5 days. This

subdivision does not apply to the laundering or cleaning of

textiles used by a restaurant or retail sales business. As used in

this subdivision, "restaurant" means a food service establishment

defined and licensed under the food law of 2000, 2000 PA 92, MCL

289.1101 to 289.8111.

(e) The transmission and distribution of electricity, whether

the electricity is purchased from the delivering utility or from

another provider, if the sale is made to the consumer or user of

the electricity for consumption or use rather than for resale.

(f) For a manufacturer who affixes its product to real estate

and maintains an inventory of its product that is available for

sale to others by publication or price list, the direct production

costs and indirect production costs of the product affixed to the

real estate that are incident to and necessary for production or

manufacturing operations or processes, as defined by the

department.

(g) For a manufacturer who affixes its product to real estate

but does not maintain an inventory of its product available for

sale to others or make its product available for sale to others by

publication or price list, the sum of the materials cost of the

property and the cost of labor to manufacture, fabricate, or

assemble the property, but ~~does~~ not ~~include~~ the cost of labor to

cut, bend, assemble, or attach the property at the site for

affixation to real estate.

(2) If charges for intrastate telecommunications services or

telecommunications services between this state and another state

and other billed services not subject to the tax under this act are

aggregated with and not separately stated from charges for

telecommunications services that are subject to the tax under this

act, the nontaxable telecommunications services and other

nontaxable billed services are subject to the tax under this act

unless the service provider can reasonably identify charges for

telecommunications services not subject to the tax under this act

from its books and records that are kept in the regular course of

business.

(3) If charges for intrastate telecommunications services or

telecommunications services between this state and another state

and other billed services not subject to the tax under this act are

aggregated with and not separately stated from telecommunications

services that are subject to the tax under this act, a customer may

not rely upon the nontaxability of those telecommunications

services and other billed services unless the customer's service

provider separately states the charges for nontaxable

telecommunications services and other nontaxable billed services

from taxable telecommunications services or the service provider

elects, after receiving a written request from the customer in the

form required by the provider, to provide verifiable data based

upon the service provider's books and records that are kept in the

regular course of business that reasonably identify the nontaxable

services.

(4) As used in this section:

(a) "Fabricate" means to modify or prepare tangible personal

property for affixation or assembly.

(b) "Manufacture" means to convert or condition tangible

personal property by changing the form, composition, quality,

combination, or character of the property.

fabricates, or assembles tangible personal property.

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.

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. For a 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 year without regard to specific make or style

according to the following schedule of 0 to 25, 2 units; 26 to 100,

7 units; 101 to 500, 20 units; 501 or more, 25 units; but not to

exceed 25 cars and trucks in 1 calendar year for demonstration

purposes. 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.

(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 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.

(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 ~~by the~~

~~department of consumer and industry services~~ 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 or, before

October 1, 2007, a periodical classified under federal postal laws

and regulations effective September 1, 1985 as second-class mail

matter. 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 levied under this act. 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(12) 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~~ Before October 1, 2007, 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(a)~~ 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(a)~~ 3a(1)(a) or (c) 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. 4a. The following are exempt from the tax under this act:

(a) Rental receipts if the tangible personal property rented

or leased was previously subject to 1 of the following when

purchased by the lessor:

(i) This act.

(ii) The general sales tax act, 1933 PA 167, MCL 205.51 to

205.78.

(b) Rental receipts if the tangible personal property rented

or leased was previously taxed under a sales or use tax act of

another state or a political subdivision of another state levied at

a rate of 6% or more.

modifying prewritten computer software programs to a purchaser's

needs or equipment if those charges are separately stated and

identified.

(d) The sale of computer software originally designed for the

exclusive use and special needs of the purchaser.

(e) The sale of a commercial advertising element if the

commercial advertising element is used to create or develop a

print, radio, television, or other advertisement, the commercial

advertising element is discarded or returned to the provider after

the advertising message is completed, and the commercial

advertising element is custom developed by the provider for the

purchaser. As used in this subdivision, "commercial advertising

element" means a negative or positive photographic image, an

audiotape or videotape master, a layout, a manuscript, writing of

copy, a design, artwork, an illustration, retouching, and

mechanical or keyline instructions. This exemption does not include

black and white or full color process separation elements, an

audiotape reproduction, or a videotape reproduction.

(f) The sale of oxygen for human use dispensed pursuant to a

prescription.

(g) The sale of insulin for human use.

(h) A Before October 1, 2007, a meal provided free of charge

or at a reduced rate to an employee during work hours by a food

service establishment licensed ~~by the department of agriculture~~

under the food law of 2000, 2000 PA 92, MCL 289.1101 to 289.8111.

(i) The sale of diesel fuel to a person who is an interstate

motor carrier for use in a qualified commercial motor vehicle.

Sec. 4d. (1) The following are exempt from the tax under this

act:

(a) Sales of drugs for human use that can only be legally

dispensed by prescription or food or food ingredients, except

House Bill No. 5254 (H-1) as amended September 24, 2007

prepared food intended for immediate human consumption and, after

[OCTOBER] 1, 2007, food and food ingredients sold from a vending

machine.

(b) The deposit on a returnable container for a beverage or

the deposit on a carton or case that is used for returnable

containers.

federal food stamp program or meals eligible to be purchased under

the federal food stamp program.

(d) Fruit or vegetable seeds and fruit or vegetable plants if

purchased at a place of business authorized to accept food stamps

by the food and nutrition service of the United States department

of agriculture or a place of business that has made a complete and

proper application for authorization to accept food stamps but has

been denied authorization and provides proof of denial to the

department of treasury.

(e) Live animals purchased with the intent to be slaughtered

for human consumption.

(2) ~~Food~~ Before October 1, 2007, food or drink heated or

cooled mechanically, electrically, or by other artificial means to

an average temperature above 75 degrees Fahrenheit or below 65

degrees Fahrenheit before sale and sold from a vending machine,

except milk, nonalcoholic beverages in a sealed container, and

fresh fruit, is subject to the tax under this act. The tax due

under this act on the sale of food or drink from a vending machine

selling both taxable items and items exempt under this subsection

shall be calculated under this act after December 31, 1994 based on

1 of the following as determined by the taxpayer:

(a) Actual gross proceeds from sales at retail.

(b) Forty-five percent of proceeds from the sale of items

subject to tax under this act or exempt from the tax levied under

this act, other than from the sale of carbonated beverages.

(3) "Food and food ingredients" means substances, whether in

liquid, concentrated, solid, frozen, dried, or dehydrated form,

that are sold for ingestion or chewing by humans and are consumed

for their taste or nutritional value. Food and food ingredients do

not include alcoholic beverages and tobacco.

(4) "Prepared food" means the following:

(a) Food sold in a heated state or that is heated by the

seller.

(b) Two or more food ingredients mixed or combined by the

seller for sale as a single item.

including knives, forks, spoons, glasses, cups, napkins, straws, or

plates, but not including a container or packaging used to

transport the food.

(5) Prepared food does not include the following:

(a) Food that is only cut, repackaged, or pasteurized by the

seller.

(b) Raw eggs, fish, meat, poultry, and foods containing those

raw items requiring cooking by the consumer in recommendations

contained in section 3-401.11 of part 3-4 of chapter 3 of the 2001

food code published by the food and drug administration of the

public health service of the department of health and human

services, to prevent foodborne illness.

single item, without eating utensils.

(d) Bakery items, including bread, rolls, buns, biscuits,

bagels, croissants, pastries, doughnuts, danish, cakes, tortes,

pies, tarts, muffins, bars, cookies, and tortillas, sold without

eating utensils.

(6) "Prepared food intended for immediate human consumption"

means prepared food and, after October 1, 2007, food and food

ingredients sold from a vending machine.

Sec. 4k. (1) ~~The~~ Before October 1, 2007, the tax levied under

this act does not apply to parts and materials, excluding shop

equipment or fuel, affixed to or to be affixed to an aircraft owned

or used by a domestic air carrier that is any of the following:

(a) An aircraft for use solely in the transport of air cargo

or a combination of air cargo and passengers that has a maximum

certificated takeoff weight of at least 12,500 pounds for taxes

levied before 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 of passengers.

subdivision (b), that has a maximum certificated takeoff weight of

at least 12,500 pounds for taxes levied before January 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 more than 30 seats and is used solely in the transport of

passengers.

(2) ~~The~~ Before October 1, 2007, the tax levied under this act

does not apply to the sale of parts or materials, excluding shop

equipment or fuel, affixed or to be affixed to an aircraft that

meets all of the following conditions:

(a) The aircraft leaves this state within 15 days after the

sooner of the issuance of the final billing or authorized approval

for final return to service, completion of the maintenance record

entry, and completion of the test flight and ground test for

inspection as required under 14 CFR 91.407.

(b) The aircraft was not based in this state or registered in

this state before the parts or materials are affixed to the

aircraft and the aircraft is not based in this state or registered

in this state after the parts or materials are affixed to the

aircraft.

(3) The tax levied under this act does not apply to the sale

of an aircraft temporarily located in this state for the purpose of

prepurchase evaluation or the purpose of prepurchase evaluation and

postsale customization if all of the following conditions are

satisfied:

(a) The aircraft leaves this state within 15 days after

authorized approval for final return to service, completion of the

maintenance record entry, and completion of the test flight and

ground test for inspection as required under 14 CFR 91.407.

(b) The aircraft was not based in this state or registered in

this state before the prepurchase evaluation or prepurchase

evaluation and postsale customization are completed and the

aircraft is not based in this state or registered in this state

after the prepurchase evaluation or prepurchase evaluation and

postsale customization are completed.

(4) For taxes levied after December 31, 1992, the tax levied

under this act does not apply to the storage, use, or consumption

of rolling stock used in interstate commerce and purchased, rented,

or leased by an interstate fleet motor carrier. A refund for taxes

paid before January 1, 1997 shall not be paid under this subsection

if the refund claim is made after June 30, 1997.

(5) For taxes levied after December 31, 1996 and before May 1,

1999, the tax levied under this act does not apply to the product

of the out-of-state usage percentage and the price otherwise

taxable under this act of a qualified truck or a trailer designed

to be drawn behind a qualified truck, purchased, rented, or leased

in this state by an interstate fleet motor carrier and used in

interstate commerce.

(6) As used in this section:

(a) "Based in this state" means hangared or stored in this

state for not less than 10 days in not less than 3 nonconsecutive

months during the immediately preceding 12-month period.

(b) "Domestic air carrier" means 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 business of carrying persons 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

this state in the immediately preceding tax year.

(d) "Out-of-state usage percentage" is a fraction, the

numerator of which is the number of miles driven outside of this

state in the immediately preceding tax year by qualified trucks

used by the taxpayer and the denominator of which is the total

miles driven in the immediately preceding tax year by qualified

trucks used by the taxpayer. Miles driven by qualified trucks used

solely in intrastate commerce shall not be included in calculating

the out-of-state usage percentage.

(e) "Prepurchase evaluation" means an examination of an

aircraft to provide a potential purchaser with information relevant

to the potential purchase.

(f) "Postsale customization" means any improvement,

maintenance, or repair that is performed on an aircraft following a

transfer of ownership of the aircraft.

(g) "Qualified truck" means a commercial motor vehicle power

unit that has 2 axles and a gross vehicle weight rating in excess

of 10,000 pounds or a commercial motor vehicle power unit that has

3 or more axles.

(h) "Registered in this state" means an aircraft registered

with the state transportation department, bureau of aeronautics or

registered with the federal aviation administration to an address

located in this state.

(i) "Rolling stock" means a qualified truck, a trailer

designed to be drawn behind a qualified truck, and parts affixed to

either a qualified truck or a trailer designed to be drawn behind a

qualified truck.

Sec. 9a. (1) In computing the amount of tax levied under this

act for any month, before October 1, 2007, a seller may deduct the

amount of bad debts from his or her gross sales, rentals, or

services used for the computation of the tax. The amount of gross

sales, rentals, or services deducted must be charged off as

uncollectible on the books and records of the seller at the time

the debt becomes worthless and deducted on the return for the

period during which the bad debt is written off as uncollectible in

the claimant's books and records and must be eligible to be

deducted for federal income tax purposes. For purposes of this

section, before October 1, 2007, a claimant who is not required to

file a federal income tax return may deduct a bad debt on a return

filed for the period in which the bad debt becomes worthless and is

written off as uncollectible in the claimant's books and records

and would be eligible for a bad debt deduction for federal income

tax purposes if the claimant was required to file a federal income

tax return. If a consumer or other person pays all or part of a bad

debt with respect to which a seller claimed a deduction under this

section, the seller is liable for the amount of taxes deducted in

connection with that portion of the debt for which payment is

received and shall remit these taxes in his or her next payment to

the department. Any payments made on a bad debt shall be applied

proportionally first to the taxable price of the property and the

tax on the property and second to any interest, service, or other

charge.

(2) Any claim for a bad debt deduction under this section

shall be supported by that evidence required by the department. The

department shall review any change in the rate of taxation

applicable to any taxable sales, rentals, or services by a seller

claiming a deduction pursuant to this section and shall ensure that

the deduction on any bad debt does not result in the seller

claiming the deduction recovering any more or less than the taxes

imposed on the sale, rental, or service that constitutes the bad

debt.

(3) If a certified service provider assumed filing

responsibility under the streamlined sales and use tax

administration act, the certified service provider may, before

October 1, 2007, claim, on behalf of the seller, any bad debt

allowable to the seller and shall credit or refund that amount of

bad debt allowed or refunded to the seller.

(4) If the books and records of a seller under the streamlined

sales and use tax ~~act~~ agreement under the streamlined sales and use

tax act, 2004 PA 174, MCL 205.801 to 205.833, that claims a bad

debt allowance support an allocation of the bad debts among member

states of that agreement, the seller may allocate the bad debts.

(5) As used in this section, "bad debt" means any portion of a

debt resulting from a seller's collection of the use tax under this

act on the purchase of tangible personal property or services that

is not otherwise deductible or excludable and that is eligible to

be claimed, or could be eligible to be claimed if the seller kept

accounts on an accrual basis, as a deduction pursuant to section

166 of the internal revenue code, 26 USC 166. A bad debt does not

include any of the following:

(a) Interest, finance charge, or use tax on the purchase

price.

(b) Uncollectible amounts on property that remains in the

possession of the seller until the full purchase price is paid.

receivable or any portion of the debt recovered.

(d) Any accounts receivable that have been sold to and remain

in the possession of a third party for collection.

(e) Repossessed property.