SB-0907, As Passed Senate, June 12, 2018

SUBSTITUTE FOR

SENATE BILL NO. 907

A bill to amend 1937 PA 94, entitled

"Use tax act,"

by amending section 4 (MCL 205.94), as amended by 2018 PA 114.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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.

(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.

(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 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) Except as otherwise provided under subsection (3),

property sold to a person engaged in a business enterprise that

uses or consumes the property, directly or indirectly, for either

the tilling, planting, draining, caring for, maintaining, or

harvesting of things of the soil or the breeding, raising, or

caring for livestock, poultry, or horticultural products, including

the transfers of livestock, poultry, or horticultural products for

further growth.

(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

organization, 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~~

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.

(z) Property purchased or manufactured by a person engaged in

the business of constructing, altering, repairing, or improving

real estate for others, to the extent that the property is affixed

to and made a structural part of real estate located in another

state, regardless of whether sales or use tax was due and paid in

the state in which the property is affixed to real estate.

(aa) The sale of a dental prosthesis.

(bb) Except as otherwise provided under subsection (3), a sale

of any of the following to a person engaged in a business

enterprise that uses or consumes the following for purposes as

described in subdivision (f):

(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.

(v) Tangible personal property purchased and installed as a

component part of a structure such as a barn or shop, including,

but not limited to, a water supply system, heating and cooling

system, lighting system, milking system, or any other appurtenance

used for purposes described in this subdivision or subdivision (f),

including the maintenance or improvement of existing structures, to

the extent that it is not permanently affixed to and does not

become a structural part of real estate. For purposes of this

subparagraph and subsection (3), property installed as a component

part of a structure as provided in this subparagraph is not

permanently affixed to or a structural part of real estate if it is

assembled and installed in a manner that it can be disassembled

without affecting the physical structural functionality of the

original structure and reassembled and reused for any of the

purposes described in this subdivision or subdivision (f).

(vi) Greenhouses, including tangible personal property affixed

to or to be affixed to greenhouses and directly used in the

operation of a greenhouse. For purposes of subsection (3), a

greenhouse is not permanently affixed to or a structural part of

real estate if it is assembled and installed in a manner that it

can be disassembled and reassembled without affecting the

functionality of the greenhouse upon being reassembled.

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

pipe, portable grain bins, greenhouses, 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 (f) or

(bb).

(dd) 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.

(ee) A sale of tangible personal property that is specifically

designed for, and directly used in, the harvesting of aquatic

vegetation from the waters of the state, including parts and

materials used for repairs of that tangible personal property, to a

person engaged in a business enterprise of harvesting aquatic

vegetation and ultimately used for purposes described in

subdivision (f) or (bb). This exemption does not include a motor

vehicle licensed or required to be licensed for use on the public

roads or highways of this state or tangible personal property

permanently affixed to and becoming a structural part of real

estate.

(ff) The purchase or lease of a school bus or transportation-

related services, and parts or adaptive equipment affixed or to be

affixed to a school bus which are used in the repair, maintenance,

accommodation, or modification of a school bus, if the school bus

or services are primarily used in the performance of a contract

entered into with an authorized representative of a school for the

transportation of preprimary, primary, or secondary school pupils

to or from a school or school-related events authorized by the

administration of the school. However, if the school bus is used to

provide transportation-related services other than to or from a

school or school-related event authorized by the administration of

the school to a nonexempt entity, then the amount paid for those

services by the nonexempt entity is not exempt under this

subdivision. As used in this subdivision:

(i) "Lease" means any transfer of possession or control for a

fixed or indeterminate term for consideration and may include

future options to purchase or extend.

(ii) "School" means a public school or public school academy

as defined in section 5 of the revised school code, 1976 PA 451,

MCL 380.5.

(iii) "School bus" means that term as defined in section 7 of

the pupil transportation act, 1990 PA 187, MCL 257.1807.

(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.

(3) The exemptions under subsection (1)(f), (bb), (cc), and

(dd) do not include the transfers of food, fuel, clothing, or any

similar tangible personal property for personal living or human

consumption or tangible personal property permanently affixed to

and becoming a structural part of real estate unless it is

agricultural land tile, subsurface irrigation pipe, a portable

grain bin, or grain drying equipment.

(4) Subsections (1)(f), (bb), and (cc) as amended by ~~the~~

~~amendatory act that added this subsection~~ 2018 PA 114 are intended

to be retroactive and to apply to all periods open under section

27a of 1941 PA 122, MCL 205.27a, but do not apply to any refund

claims filed prior to April 9, 2018.

(5) 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) "Algae" means any of the group of nonvascular aquatic

plants which do not have stems, flowers, leaves, and roots, and

which are single-celled, colonial, or filamentous forms.

plants.

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

agricultural crops grown specifically for the production of energy.

(e) "Greenhouse" means a structure covered with transparent or

translucent materials for the purpose of admitting natural light

and controlling the atmosphere for growing horticultural products.

Greenhouse does not include a structure primarily used to grow

marihuana.

(f) "Higher aquatic plant" means any of the group of

vascularized plants which have true stems, flowers, leaves, and

roots, which live in water, and which belong to the class

Angiospermae.

(g) "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.

(h) "Waters of the state" means that term as defined in

section 3302 of the natural resources and environmental protection

act, 1994 PA 451, MCL 324.3302.