HOUSE BILL No. 4282
February 11, 1997, Introduced by Reps. Jellema, Green, Byl, DeVuyst, Fitzgerald, LeTarte, Gernaat, Dalman, Cropsey, Hammerstrom, Sikkema, Lowe, McNutt, McBryde, Goschka, Brewer, Oxender, Kelly, Richner, Agee and Perricone and referred to the Committee on Tax Policy. A bill to amend 1937 PA 94, entitled "Use tax act," by amending section 4 (MCL 205.95), as amended by 1996 PA 53. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 4. The tax levied does not apply to the following: 2 (a) Property sold in this state on which transaction a tax 3 is paid under the general sales tax act, Act No. 167 of the 4 Public Acts of 1933, being sections 205.51 to 205.78 of the 5 Michigan Compiled Laws 1993 PA 167, MCL 205.51 TO 205.78, if the 6 tax was due and paid on the retail sale to a consumer. 7 (b) Property, the storage, use, or other consumption of 8 which, this state is prohibited from taxing under the constitu- 9 tion or laws of the United States, or under the constitution of 10 this state. 00220'97 CSC 2 1 (c) Property purchased for resale, demonstration purposes, 2 or lending or leasing to a public or parochial school offering a 3 course in automobile driving except that a vehicle purchased by 4 the school shall be certified for driving education and shall not 5 be reassigned for personal use by the school's administrative 6 personnel. For a dealer selling a new car or truck, exemption 7 for demonstration purposes shall be determined by the number of 8 new cars and trucks sold during the current calendar year or the 9 immediately preceding year without regard to specific make or 10 style according to the following schedule of 0 to 25, 2 units; 26 11 to 100, 7 units; 101 to 500, 20 units; 501 or more, 25 units; but 12 not to exceed 25 cars and trucks in 1 calendar year for demon- 13 stration purposes. For tax years beginning after December 31, 14 1987, property PROPERTY purchased for resale includes promo- 15 tional merchandise transferred pursuant to a redemption offer to 16 a person located outside this state. 17 (d) Property that is brought into this state by a nonresi- 18 dent person for storage, use, or consumption while temporarily 19 within this state, except if the property is used in this state 20 in a nontransitory business activity for a period exceeding 15 21 days. 22 (e) Property the sale or use of which was already subjected 23 to a sales tax or use tax equal to, or in excess of, that imposed 24 by this act under the law of any other state or a local govern- 25 mental unit within a state if the tax was due and paid on the 26 retail sale to the consumer and the state or local governmental 27 unit within a state in which the tax was imposed accords like or 00220'97 3 1 complete exemption on property the sale or use of which was 2 subjected to the sales or use tax of this state. If the sale or 3 use of property was already subjected to a tax under the law of 4 any other state or local governmental unit within a state in an 5 amount less than the tax imposed by this act, this act shall 6 apply, but at a rate measured by the difference between the rate 7 provided in this act and the rate by which the previous tax was 8 computed. 9 (f) Property sold to a person engaged in a business enter- 10 prise and using and consuming the property in the tilling, plant- 11 ing, caring for, or harvesting of the things of the soil or in 12 the breeding, raising, or caring for livestock, poultry, or 13 horticultural products, including transfers of livestock, poul- 14 try, or horticultural products for further growth. At the time 15 of the transfer of that tangible personal property, the trans- 16 feree shall sign a statement, in a form approved by the depart- 17 ment, stating that the property is to be used or consumed in con- 18 nection with the production of horticultural or agricultural pro- 19 ducts as a business enterprise. The statement shall be accepted 20 by the courts as prima facie evidence of the exemption. This 21 exemption includes agricultural land tile, which means fired clay 22 or perforated plastic tubing used as part of a subsurface drain- 23 age system for land used in the production of agricultural pro- 24 ducts as a business enterprise and includes a portable grain bin, 25 which means a structure that is used or is to be used to shelter 26 grain and that is designed to be disassembled without significant 27 damage to its component parts. This exemption does not include 00220'97 4 1 transfers of food, fuel, clothing, or similar tangible personal 2 property for personal living or human consumption. This exemp- 3 tion does not include tangible personal property permanently 4 affixed and becoming a structural part of real estate. 5 (g) Property sold to the following: 6 (i) An industrial processor for use or consumption in indus- 7 trial processing. Property used or consumed in industrial pro- 8 cessing does not include tangible personal property permanently 9 affixed and becoming a structural part of real estate; office 10 furniture, office supplies, and administrative office equipment; 11 or vehicles licensed and titled for use on public highways other 12 than a specially designed vehicle, together with parts, used to 13 mix and agitate materials added at a plant or jobsite in the con- 14 crete manufacturing process. Industrial processing does not 15 include receipt and storage of raw materials purchased or 16 extracted by the user or consumer, or the preparation of food and 17 beverages by a retailer for retail sale. As used in this subdi- 18 vision, "industrial processor" means a person who transforms, 19 alters, or modifies tangible personal property by changing the 20 form, composition, or character of the property for ultimate sale 21 at retail or sale to another industrial processor to be further 22 processed for ultimate sale at retail. Sales to a person per- 23 forming a service who does not act as an industrial processor 24 while performing the service may not be excluded under this sub- 25 division, except as provided in subparagraph (ii). 26 (ii) A person, whether or not the person is an industrial 27 processor, when the property is a computer used in operating 00220'97 5 1 industrial processing equipment; equipment used in a computer 2 assisted manufacturing system; equipment used in a computer 3 assisted design or engineering system integral to an industrial 4 process; or a subunit or electronic assembly comprising a compo- 5 nent in a computer integrated industrial processing system. 6 (h) Property or services sold to the United States, an unin- 7 corporated agency or instrumentality of the United States, an 8 incorporated agency or instrumentality of the United States 9 wholly owned by the United States or by a corporation wholly 10 owned by the United States, the American red cross and its chap- 11 ters or branches, this state, a department or institution of this 12 state, or a political subdivision of this state. 13 (i) Property or services sold to a school, hospital, or home 14 for the care and maintenance of children or aged persons, oper- 15 ated by an entity of government, a regularly organized church, 16 religious, or fraternal organization, a veterans' organization, 17 or a corporation incorporated under the laws of this state, if 18 not operated for profit, and if the income or benefit from the 19 operation does not inure, in whole or in part, to an individual 20 or private shareholder, directly or indirectly, and if the activ- 21 ities of the entity or agency are carried on exclusively for the 22 benefit of the public at large and are not limited to the advan- 23 tage, interests, and benefits of its members or a restricted 24 group. The tax levied shall not apply to property or services 25 sold to a parent cooperative preschool. As used in this subdivi- 26 sion, "parent cooperative preschool" means a nonprofit, 27 nondiscriminatory educational institution, maintained as a 00220'97 6 1 community service and administered by parents of children 2 currently enrolled in the preschool that provides an educational 3 and developmental program for children younger than compulsory 4 school age, that provides an educational program for parents, 5 including active participation with children in preschool activi- 6 ties, that is directed by qualified preschool personnel, and that 7 is licensed by the department of social services pursuant to 8 Act No. 116 of the Public Acts of 1973, being sections 722.111 9 to 722.128 of the Michigan Compiled Laws 1973 PA 116, MCL 10 722.111 TO 722.128. 11 (j) Property or services sold to a regularly organized 12 church or house of religious worship except: 13 (i) Sales in which the property is used in activities that 14 are mainly commercial enterprises. 15 (ii) Sales of vehicles licensed for use on the public high- 16 ways other than a passenger van or bus with a manufacturer's 17 rated seating capacity of 10 or more that is used primarily for 18 the transportation of persons for religious purposes. 19 (k) A vessel designed for commercial use of registered ton- 20 nage of 500 tons or more, if produced upon special order of the 21 purchaser, and bunker and galley fuel, provisions, supplies, 22 maintenance, and repairs for the exclusive use of a vessel of 500 23 tons or more engaged in interstate commerce. 24 (l) Property purchased by a person engaged in the business 25 of constructing, altering, repairing, or improving real estate 26 for others to the extent the property is affixed to and made a 27 structural part of the real estate of a nonprofit hospital or a 00220'97 7 1 nonprofit housing entity qualified as exempt pursuant to section 2 15a of the state housing development authority act of 1966, Act 3 No. 346 of the Public Acts of 1966, being section 125.1415a of 4 the Michigan Compiled Laws 1966 PA 346, MCL 125.1415A, OR TO A 5 NONPROFIT SCHOOL. A nonprofit hospital or nonprofit housing 6 includes only the property of a nonprofit hospital or the homes 7 or dwelling places constructed by a nonprofit housing entity, the 8 income or property of which does not directly or indirectly inure 9 to the benefit of an individual, private stockholder, or other 10 private person. 11 (m) Property purchased for use in this state where actual 12 personal possession is obtained outside this state, the purchase 13 price or actual value of which does not exceed $10.00 during 1 14 calendar month. 15 (n) A newspaper or periodical classified under federal 16 postal laws and regulations effective September 1, 1985 as second 17 class mail matter or as a controlled circulation publication or 18 qualified to accept legal notices for publication in this state, 19 as defined by law, or any other newspaper or periodical of gen- 20 eral circulation, established at least 2 years, and published at 21 least once a week, and a copyrighted motion picture film. 22 Tangible personal property used or consumed, and not becoming a 23 component part of a copyrighted motion picture film, newspaper or 24 periodical, except that portion or percentage of tangible per- 25 sonal property used or consumed in producing an advertising sup- 26 plement that becomes a component part of a newspaper or 27 periodical is subject to tax. For purposes of this subdivision, 00220'97 8 1 tangible personal property that becomes a component part of a 2 newspaper or periodical and consequently not subject to tax, 3 includes an advertising supplement inserted into and circulated 4 with a newspaper or periodical that is otherwise exempt from tax 5 under this subdivision, if the advertising supplement is deliv- 6 ered directly to the newspaper or periodical by a person other 7 than the advertiser, or the advertising supplement is printed by 8 the newspaper or periodical. 9 (o) Property purchased by persons licensed to operate a com- 10 mercial radio or television station if the property is used in 11 the origination or integration of the various sources of program 12 material for commercial radio or television transmission. This 13 subdivision does not include a vehicle licensed and titled for 14 use on public highways or property used in the transmitting to or 15 receiving from an artificial satellite. 16 (p) A person who is a resident of this state who purchases 17 an automobile in another state while in the military service of 18 the United States and who pays a sales tax in the state where the 19 automobile is purchased. 20 (q) A vehicle for which a special registration is secured in 21 accordance with section 226(12) of the Michigan vehicle code, 22 Act No. 300 of the Public Acts of 1949, being section 257.226 of 23 the Michigan Compiled Laws 1949 PA 300, MCL 257.226. 24 (r) A hearing aid, contact lenses if prescribed for a spe- 25 cific disease which THAT precludes the use of eyeglasses, or 26 any other apparatus, device, or equipment used to replace or 27 substitute for any part of the human body, or used to assist the 00220'97 9 1 disabled person to lead a reasonably normal life when the 2 tangible personal property is purchased on a written prescription 3 or order issued by a health professional as defined by section 4 4 of former Act No. 264 of the Public Acts of 1974 1974 PA 264, 5 or section 21005 of the public health code, Act No. 368 of the 6 Public Acts of 1978, being section 333.21005 of the Michigan 7 Compiled Laws 1978 PA 368, MCL 333.21005, or eyeglasses pre- 8 scribed or dispensed to correct the person's vision by an oph- 9 thalmologist, optometrist, or optician. 10 (s) Water when delivered through water mains or in bulk 11 tanks in quantities of not less than 500 gallons. 12 (t) The purchase of machinery and equipment for use or con- 13 sumption in the rendition of a service, the use or consumption of 14 which is taxable under section 3a(a) except that this exception 15 is limited to the tangible personal property located on the 16 premises of the subscriber and the necessary exchange equipment. 17 (u) A vehicle not for resale used by a nonprofit corporation 18 organized exclusively to provide a community with ambulance or 19 fire department services. 20 (v) Tangible personal property purchased and installed as a 21 component part of a water pollution control facility for which a 22 tax exemption certificate is issued pursuant to part 37 (water 23 pollution control facilities; tax exemption) of the natural 24 resources and environmental protection act, Act No. 451 of the 25 Public Acts of 1994, being sections 324.3701 to 324.3708 of the 26 Michigan Compiled Laws 1994 PA 451, MCL 324.3701 TO 324.3708, or 27 an air pollution control facility for which a tax exemption 00220'97 10 1 certificate is issued pursuant to part 59 (air pollution control 2 facility; tax exemption) of Act No. 451 of the Public Acts of 3 1994, being sections 324.5901 to 324.5908 of the Michigan 4 Compiled Laws THE NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION 5 ACT, 1994 PA 451, MCL 324.5901 TO 324.5908. 6 (w) Tangible real or personal property donated by a manufac- 7 turer, wholesaler, or retailer to an organization or entity 8 exempt pursuant to subdivision (i) or (j) or section 4a(a) or (b) 9 of the general sales tax act, Act No. 167 of the Public Acts of 10 1933, being section 205.54a of the Michigan Compiled Laws 1933 11 PA 167, MCL 205.54A. 12 (x) The storage, use, or consumption by a domestic air car- 13 rier of an aircraft purchased after December 31, 1992 for use 14 solely in the transport of air cargo that has a maximum certifi- 15 cated takeoff weight of at least 12,500 pounds. For purposes of 16 this subdivision, the term "domestic air carrier" is limited to 17 entities engaged in the commercial transport for hire of cargo or 18 entities engaged in the commercial transport of passengers as a 19 business activity. 20 (y) The storage, use, or consumption by a domestic air car- 21 rier of an aircraft purchased after June 30, 1994 that is used 22 solely in the regularly scheduled transport of passengers. For 23 purposes of this subdivision, the term "domestic air carrier" is 24 limited to entities engaged in the commercial transport for hire 25 of cargo or entities engaged in the commercial transport of pas- 26 sengers as a business activity. 00220'97 11 1 (z) The storage, use, or consumption by a domestic air 2 carrier of an aircraft, other than an aircraft described under 3 subdivision (y), purchased after December 31, 1994, that has a 4 maximum certificated takeoff weight of at least 12,500 pounds and 5 that is designed to have a maximum passenger seating configura- 6 tion of more than 30 seats and used solely in the transport of 7 passengers. For purposes of this subdivision, the term "domestic 8 air carrier" is limited to entities engaged in the commercial 9 transport for hire of cargo or entities engaged in the commercial 10 transport of passengers as a business activity. 11 (aa) Property or services sold to a health, welfare, educa- 12 tional, cultural arts, charitable, or benevolent organization not 13 operated for profit that has been issued before June 13, 1994 an 14 exemption ruling letter to purchase items exempt from tax signed 15 by the administrator of the sales, use, and withholding taxes 16 division of the department. The department shall reissue an 17 exemption letter to each of those organizations after June 13, 18 1994 that shall remain in effect unless the organization fails to 19 meet the requirements that originally entitled it to this exemp- 20 tion; or to an organization not operated for profit and exempt 21 from federal income tax under section 501(c)(3) or 501(c)(4) of 22 the internal revenue code of 1986, 26 U.S.C. 501. The exemption 23 does not apply to sales of tangible personal property and sales 24 of vehicles licensed for use on public highways, that are not 25 used primarily to carry out the purposes of the organization as 26 stated in the bylaws or articles of incorporation of the exempt 27 organization. 00220'97