HB-4561, As Passed House, June 6, 2017

SUBSTITUTE FOR

HOUSE BILL NO. 4561

     A bill to amend 1933 PA 167, entitled

"General sales tax act,"

by amending section 4a (MCL 205.54a), as amended by 2016 PA 431.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 4a. (1) Subject to subsection (2), the following are

exempt from the tax under this act:

     (a) A sale of tangible personal property not for resale to a

nonprofit school, nonprofit hospital, or nonprofit 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 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 any restricted

group. A sale of tangible personal property to a parent cooperative

preschool is exempt from taxation under this act. 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.

     (b) A sale of tangible personal property 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 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.

     (c) The sale of food to bona fide enrolled students by a

school or other educational institution not operated for profit.

     (d) The sale of a vessel designated 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 the

vessel engaged in interstate commerce.

     (e) A sale of tangible personal property to persons a person

engaged in a business enterprise and using or consuming that uses

or consumes the tangible personal property in the tilling,

planting, draining, 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 in the

direct gathering of fish, by net, line, or otherwise only by an

owner-operator of the business enterprise, not including a charter

fishing business enterprise. 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, and subsurface irrigation pipe, if the

land tile or irrigation pipe is used in the production of

agricultural products as a business enterprise. This exemption

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 also includes grain drying equipment and the fuel or

energy source that powers that equipment for agricultural purposes.

This exemption also includes tangible personal property affixed to

or to be affixed to and directly used in the operation of either a

portable grain bin or grain drying equipment. This exemption

includes a sale of agricultural land tile, subsurface irrigation

pipe, portable grain bins, and grain drying equipment to a person

in the business of constructing, altering, repairing, or improving

real estate for others to the extent that it is affixed to or made

a structural part of real estate and is used for a purpose exempt

under this subsection. This exemption does not include transfers of

food, fuel, clothing, or any similar tangible personal property for

personal living or human consumption. Except for agricultural land

tile, subsurface irrigation pipe, portable grain bins, and grain

drying equipment, this exemption does not include tangible personal

property permanently affixed 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.for either the tilling, planting,

draining, caring for, or harvesting of things of the soil for

agricultural purposes or the breeding, raising, or caring for

livestock, poultry, or horticultural products, including the

transfers of livestock, poultry, or horticultural products for

further growth. Except as otherwise provided under subsection (3),

this exemption includes the sale of any of the following to a

person described in this subdivision:

     (i) Machinery that is capable of simultaneously harvesting

grain or other crops and biomass and machinery used for the purpose

of harvesting biomass.

     (ii) Agricultural land tile and subsurface irrigation pipe.

     (iii) Portable grain bins, including tangible personal

property affixed or to be affixed to portable grain bins and

directly used in the operation of a portable grain bin.

     (iv) Grain drying equipment and the fuel or energy source that

powers that equipment, including tangible personal property affixed

or to be affixed to that equipment and directly used in the

operation of grain drying equipment.

     (f) The sale of agricultural land tile, subsurface irrigation

pipe, portable grain bins, and grain drying equipment to a person

in the business of constructing, altering, repairing, or improving

real estate for others to the extent that it is affixed to and made

a structural part of real estate for others and is used for an

exempt purpose described under subdivision (e).

     (g) The sale of tangible personal property used in the direct

gathering of fish, by net, line, or otherwise, by an owner-operator

of a business enterprise, not including a charter fishing business

enterprise.

(h) (f) The sale of a copyrighted motion picture film or a

newspaper or periodical admitted 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 not less than 2 years, and published not less than once

a week. 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. 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. 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.

(i) (g) A sale of tangible personal property to persons

licensed to operate commercial radio or television stations 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

transmission to or receiving from an artificial satellite.

(j) (h) The sale of a prosthetic device, durable medical

equipment, or mobility enhancing equipment.

(k) (i) The sale of a vehicle not for resale to a Michigan

nonprofit corporation organized exclusively to provide a community

with ambulance or fire department services.

(l) (j) Before October 1, 2012, a sale of tangible personal

property to inmates in a penal or correctional institution

purchased with scrip or its equivalent issued and redeemed by the

institution.

(m) (k) A sale of textbooks sold by a public or nonpublic

school to or for the use of students enrolled in any part of a

kindergarten through twelfth grade program.

(n) (l) A sale of tangible personal property 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.

(o) (m) The sale or lease of the following 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 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.

(p) (n) A sale of tangible personal property 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 that that 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

a reasonable formula or method approved by the department.

     (3) The exemptions under subsection (1)(e), (f), and (g) do

not include either of the following:

     (a) The transfers of food, fuel, clothing, or any similar

tangible personal property for personal living or human

consumption.

     (b) Except for agricultural land tile, subsurface irrigation

pipe, portable grain bins, and grain drying equipment, tangible

personal property permanently affixed to and becoming a structural

part of real estate.

     (4) As used in this section:

     (a) "Agricultural land tile" means fired clay or perforated

plastic tubing used as part of a subsurface drainage system for

land.

     (b) "Biomass" means crop residue used to produce energy or

agricultural crops grown specifically for the production of energy.

     (c) "Portable grain bin" 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.

     Enacting section 1. This amendatory act clarifies the original

intent of the legislature that the exemption provided for by

section 4a(1)(e) of the general sales tax act, 1933 PA 167, MCL

205.54a, in regard to the tilling, planting, draining, caring for,

or harvesting of things of the soil is only applicable when these

activities are performed in a business enterprise that constitutes

an agricultural purpose.