HB-5164, As Passed House, November 9, 2017
October 24, 2017, Introduced by Reps. Kahle and Alexander and referred to the Committee on Tax Policy.
A bill to amend 1937 PA 94, entitled
"Use tax act,"
by amending section 4 (MCL 205.94), as amended by 2016 PA 432.
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
(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.
(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
(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 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,
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, by 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 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 also
includes the sale or acquisition of agricultural land tile,
portable grain bins, and grain drying equipment purchased or
acquired by 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 used for
a purpose exempt under this subsection. This exemption does not
include transfers of food, fuel, clothing, or 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 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
(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
(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
(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
(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
(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.
(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.
Enacting section 1. This amendatory act is retroactive and
effective July 1, 2017.