November 8, 2012, Introduced by Rep. Nesbitt and referred to the Committee on Tax Policy.
A bill to amend 1933 PA 167, entitled
"General sales tax act,"
by amending section 18 (MCL 205.68), as amended by 2008 PA 438.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 18. (1) A person liable for any tax imposed under this
act shall keep accurate and complete beginning and annual inventory
and purchase records of additions to inventory, complete daily
sales records, receipts, invoices, bills of lading, and all
pertinent documents in a form the department requires. If an
exemption from the tax under this act is claimed by a person
because the sale is for resale at retail, a record shall be kept of
the sales tax license number if the person has a sales tax license.
These records shall be retained for a period of 4 years after the
tax imposed under this act to which the records apply is due or as
otherwise provided by law.
(2) If the department considers it necessary, the department
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 considers sufficient to show whether or not
that person is liable for the tax under this act.
(3) A person knowingly making a sale of tangible personal
property for the purpose of resale at retail to another person not
licensed under this act is liable for the tax under this act unless
the transaction is exempt under the provisions of section 4k.
(4) If the taxpayer fails to file a return or to maintain or
preserve proper records as prescribed in this section, or the
department has reason to believe that any records maintained or
returns filed are inaccurate or incomplete and that additional
taxes are due, the department may assess the amount of the tax due
from the taxpayer based on an indirect audit procedure or any other
information that is available or that may become available to the
department. That assessment is considered prima facie correct for
the purpose of this act and the burden of proof of refuting the
assessment is upon the taxpayer.
(5) If a taxpayer has filed all the required returns and has
maintained and preserved adequate records as required under this
section, the department shall not base a tax deficiency
determination or assessment on any indirect audit procedure unless
the department has a documented reason to believe that any records
maintained or returns filed are inaccurate or incomplete and that
additional taxes are due. An indirect audit of a taxpayer under
this subsection shall not be conducted in an arbitrary fashion and
shall include all of the following elements:
(a) A review of the taxpayer's books and records. The
department may use an indirect method to test the accuracy of the
taxpayer's books and records.
(b) A tax deficiency determination or an assessment of tax
deficiency shall not be based on a projection from a sample without
the written approval of the taxpayer.
(c) Both the credibility of the evidence and the
reasonableness of the conclusion shall be evaluated before any
determination of tax liability is made.
(d) The department may use any method to reconstruct income,
deductions, or expenses that is reasonable under the circumstances.
The department may use third-party records in the reconstruction.
(e) The department shall investigate all reasonable evidence
presented by the taxpayer refuting the computation.
(6) (5)
If all the information is
maintained as provided under
section 12, an exemption certificate is not required for an
exemption claim by the following:
(a) A person licensed by the Michigan liquor control
commission as a wholesaler for purposes of sales of alcoholic
liquor to another person licensed by the Michigan liquor control
commission. As used in this subsection, "alcoholic liquor",
"authorized distribution agent", and "wholesaler" mean those terms
as defined in the Michigan liquor control code of 1998, 1998 PA 58,
MCL 436.1101 to 436.2303.
(b) The Michigan liquor control commission or a person
certified by the commission as an authorized distribution agent for
purposes of the sale and distribution of alcoholic liquor to a
person licensed by the Michigan liquor control commission.
(7) (6)
For purposes of this act, a blanket
exemption claim
covers all exempt transfers between the taxpayer and the buyer for
a period of 4 years or for a period of less than 4 years as stated
on the blanket exemption claim if that period is agreed to by the
buyer and taxpayer. Renewal of a blanket exemption claim or an
update of exemption claim information or data elements is not
required if there is a recurring business relationship between the
seller and the purchaser. For purposes of this subsection, a
recurring business relationship exists when a period of not more
than 12 months elapses between sales transactions.
(8) As used in this section:
(a) "Circumstantial evidence" is evidence from which more than
1 logical conclusion can be reached.
(b) "Indirect audit procedure" is an audit method that
involves the use of circumstantial evidence to determine a
liability for the tax under this act based on omitted income,
overstated deductions or expenses, or both.