HOUSE BILL No. 4971 June 19, 2001, Introduced by Reps. Voorhees, Ehardt, Birkholz, Kuipers, Drolet, Gosselin, Pappageorge, Tabor, Vander Veen, Kooiman and Shackleton 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 2000 PA 200. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 4. (1) The tax levied under this act does not apply to 2 the following, subject to subsection (2): 3 (a) Property sold in this state on which transaction a tax 4 is paid under the general sales tax act, 1933 PA 167, MCL 205.51 5 to 205.78, if the tax was due and paid on the retail sale to a 6 consumer. 7 (b) Property, the storage, use, or other consumption of 8 which this state is prohibited from taxing under the constitution 9 or laws of the United States, or under the constitution of this 10 state. 03806'01 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. Property purchased for resale includes promo- 14 tional merchandise transferred pursuant to a redemption offer to 15 a person located outside this state or any packaging material, 16 other than promotional merchandise, acquired for use in fulfill- 17 ing a redemption offer or rebate to a person located outside this 18 state. 19 (d) Property that is brought into this state by a nonresi- 20 dent person for storage, use, or consumption while temporarily 21 within this state, except if the property is used in this state 22 in a nontransitory business activity for a period exceeding 15 23 days. 24 (e) Property the sale or use of which was already subjected 25 to a sales tax or use tax equal to, or in excess of, that imposed 26 by this act under the law of any other state or a local 27 governmental unit within a state if the tax was due and paid on 03806'01 3 1 the retail sale to the consumer and the state or local 2 governmental unit within a state in which the tax was imposed 3 accords like or complete exemption on property the sale or use of 4 which was subjected to the sales or use tax of this state. If 5 the sale or use of property was already subjected to a tax under 6 the law of any other state or local governmental unit within a 7 state in an amount less than the tax imposed by this act, this 8 act shall apply, but at a rate measured by the difference between 9 the rate provided in this act and the rate by which the previous 10 tax was computed. 11 (f) Property sold to a person engaged in a business enter- 12 prise and using and consuming the property in the tilling, plant- 13 ing, caring for, or harvesting of the things of the soil or in 14 the breeding, raising, or caring for livestock, poultry, or 15 horticultural products, including transfers of livestock, poul- 16 try, or horticultural products for further growth. At the time 17 of the transfer of that tangible personal property, the trans- 18 feree shall sign a statement, in a form approved by the depart- 19 ment, stating that the property is to be used or consumed in con- 20 nection with the production of horticultural or agricultural pro- 21 ducts as a business enterprise. The statement shall be accepted 22 by the courts as prima facie evidence of the exemption. This 23 exemption includes agricultural land tile, which means fired clay 24 or perforated plastic tubing used as part of a subsurface drain- 25 age system for land used in the production of agricultural pro- 26 ducts as a business enterprise and includes a portable grain bin, 27 which means a structure that is used or is to be used to shelter 03806'01 4 1 grain and that is designed to be disassembled without significant 2 damage to its component parts. This exemption does not include 3 transfers of food, fuel, clothing, or similar tangible personal 4 property for personal living or human consumption. This exemp- 5 tion does not include tangible personal property permanently 6 affixed and becoming a structural part of real estate. 7 (g) Property or services sold to the United States, an unin- 8 corporated agency or instrumentality of the United States, an 9 incorporated agency or instrumentality of the United States 10 wholly owned by the United States or by a corporation wholly 11 owned by the United States, the American red cross and its chap- 12 ters or branches, this state, a department or institution of this 13 state, or a political subdivision of this state. 14 (h) Property or services sold to a school, hospital, or home 15 for the care and maintenance of children or aged persons, oper- 16 ated by an entity of government, a regularly organized church, 17 religious, or fraternal organization, a veterans' organization, 18 or a corporation incorporated under the laws of this state, if 19 not operated for profit, and if the income or benefit from the 20 operation does not inure, in whole or in part, to an individual 21 or private shareholder, directly or indirectly, and if the activ- 22 ities of the entity or agency are carried on exclusively for the 23 benefit of the public at large and are not limited to the advan- 24 tage, interests, and benefits of its members or a restricted 25 group. The tax levied does not apply to property or services 26 sold to a parent cooperative preschool. As used in this 27 subdivision, "parent cooperative preschool" means a nonprofit, 03806'01 5 1 nondiscriminatory educational institution, maintained as a 2 community service and administered by parents of children cur- 3 rently enrolled in the preschool that provides an educational and 4 developmental program for children younger than compulsory school 5 age, that provides an educational program for parents, including 6 active participation with children in preschool activities, that 7 is directed by qualified preschool personnel, and that is 8 licensed by the department of consumer and industry services pur- 9 suant to 1973 PA 116, MCL 722.111 to 722.128. 10 (i) Property or services sold to a regularly organized 11 church or house of religious worship except the following: 12 (i) Sales in which the property is used in activities that 13 are mainly commercial enterprises. 14 (ii) Sales of vehicles licensed for use on the public high- 15 ways other than a passenger van or bus with a manufacturer's 16 rated seating capacity of 10 or more that is used primarily for 17 the transportation of persons for religious purposes. 18 (j) A vessel designed for commercial use of registered ton- 19 nage of 500 tons or more, if produced upon special order of the 20 purchaser, and bunker and galley fuel, provisions, supplies, 21 maintenance, and repairs for the exclusive use of a vessel of 500 22 tons or more engaged in interstate commerce. 23 (k) Property purchased for use in this state where actual 24 personal possession is obtained outside this state, the purchase 25 price or actual value of which does not exceed $10.00 during 1 26 calendar month. 03806'01 6 1 (l) A newspaper or periodical classified under federal 2 postal laws and regulations effective September 1, 1985 as 3 second-class mail matter or as a controlled circulation publica- 4 tion or qualified to accept legal notices for publication in this 5 state, as defined by law, or any other newspaper or periodical of 6 general circulation, established at least 2 years, and published 7 at least once a week, and a copyrighted motion picture film. 8 Tangible personal property used or consumed in producing a copy- 9 righted motion picture film, a newspaper published more than 14 10 times per year, or a periodical published more than 14 times per 11 year, and not becoming a component part of that film, newspaper, 12 or periodical is subject to the tax. After December 31, 1993, 13 tangible personal property used or consumed in producing a news- 14 paper published 14 times or less per year or a periodical pub- 15 lished 14 times or less per year and that portion or percentage 16 of tangible personal property used or consumed in producing an 17 advertising supplement that becomes a component part of a newspa- 18 per or periodical is exempt from the tax under this subdivision. 19 A claim for a refund for taxes paid before January 1, 1999 under 20 this subdivision shall be made before June 30, 1999. For pur- 21 poses of this subdivision, tangible personal property that 22 becomes a component part of a newspaper or periodical and conse- 23 quently not subject to tax, includes an advertising supplement 24 inserted into and circulated with a newspaper or periodical that 25 is otherwise exempt from tax under this subdivision, if the 26 advertising supplement is delivered directly to the newspaper or 27 periodical by a person other than the advertiser, or the 03806'01 7 1 advertising supplement is printed by the newspaper or 2 periodical. 3 (m) Property purchased by persons licensed to operate a com- 4 mercial radio or television station if the property is used in 5 the origination or integration of the various sources of program 6 material for commercial radio or television transmission. This 7 subdivision does not include a vehicle licensed and titled for 8 use on public highways or property used in the transmitting to or 9 receiving from an artificial satellite. 10 (n) A person who is a resident of this state who purchases 11 an automobile in another state while in the military service of 12 the United States and who pays a sales tax in the state where the 13 automobile is purchased. 14 (o) A vehicle for which a special registration is secured in 15 accordance with section 226(12) of the Michigan vehicle code, 16 1949 PA 300, MCL 257.226. 17 (p) A hearing aid, contact lenses if prescribed for a spe- 18 cific disease that precludes the use of eyeglasses, or any other 19 apparatus, device, or equipment used to replace or substitute for 20 any part of the human body, or used to assist the disabled person 21 to lead a reasonably normal life when the tangible personal prop- 22 erty is purchased on a written prescription or order issued by a 23 health professional as defined by section 4 of former 1974 PA 24 264, or section21005 of the public health code, 1978 PA 368,25MCL 333.210053501 OF THE INSURANCE CODE OF 1956, 1956 PA 218, 26 MCL 500.3501, or eyeglasses prescribed or dispensed to correct 03806'01 8 1 the person's vision by an ophthalmologist, optometrist, or 2 optician. 3 (q) Water when delivered through water mains or in bulk 4 tanks in quantities of not less than 500 gallons. 5 (r) A vehicle not for resale used by a nonprofit corporation 6 organized exclusively to provide a community with ambulance or 7 fire department services. 8 (s) Tangible personal property purchased and installed as a 9 component part of a water pollution control facility for which a 10 tax exemption certificate is issued pursuant to part 37 of the 11 natural resources and environmental protection act, 1994 PA 451, 12 MCL 324.3701 to 324.3708, or an air pollution control facility 13 for which a tax exemption certificate is issued pursuant to part 14 59 of the natural resources and environmental protection act, 15 1994 PA 451, MCL 324.5901 to 324.5908. 16 (t) Tangible real or personal property donated by a manufac- 17 turer, wholesaler, or retailer to an organization or entity 18 exempt pursuant to subdivision (h) or (i) or section 4a(a) or (b) 19 of the general sales tax act, 1933 PA 167, MCL 205.54a. 20 (u) The storage, use, or consumption by a domestic air car- 21 rier of an aircraft purchased after December 31, 1992 but before 22 October 1, 1996 for use solely in the transport of air cargo that 23 has a maximum certificated takeoff weight of at least 12,500 24 pounds. For purposes of this subdivision, the term "domestic air 25 carrier" is limited to entities engaged in the commercial trans- 26 port for hire of cargo or entities engaged in the commercial 27 transport of passengers as a business activity. 03806'01 9 1 (v) The storage, use, or consumption by a domestic air 2 carrier of an aircraft purchased after June 30, 1994 but before 3 October 1, 1996 that is used solely in the regularly scheduled 4 transport of passengers. For purposes of this subdivision, the 5 term "domestic air carrier" is limited to entities engaged in the 6 commercial transport for hire of cargo or entities engaged in the 7 commercial transport of passengers as a business activity. 8 (w) The storage, use, or consumption by a domestic air car- 9 rier of an aircraft, other than an aircraft described under 10 subdivision (v), purchased after December 31, 1994 but before 11 October 1, 1996, that has a maximum certificated takeoff weight 12 of at least 12,500 pounds and that is designed to have a maximum 13 passenger seating configuration of more than 30 seats and used 14 solely in the transport of passengers. For purposes of this sub- 15 division, the term "domestic air carrier" is limited to entities 16 engaged in the commercial transport for hire of cargo or entities 17 engaged in the commercial transport of passengers as a business 18 activity. 19 (x) The storage, use, or consumption of an aircraft by a 20 domestic air carrier after September 30, 1996 for use solely in 21 the transport of air cargo, passengers, or a combination of air 22 cargo and passengers, that has a maximum certificated takeoff 23 weight of at least 6,000 pounds. For purposes of this subdivi- 24 sion, the term "domestic air carrier" is limited to a person 25 engaged primarily in the commercial transport for hire of air 26 cargo, passengers, or a combination of air cargo and passengers 27 as a business activity. The state treasurer shall estimate on 03806'01 10 1 January 1 each year the revenue lost by this act from the school 2 aid fund and deposit that amount into the school aid fund from 3 the general fund. 4 (y) Property or services sold to an organization not oper- 5 ated for profit and exempt from federal income tax under section 6 501(c)(3) or 501(c)(4) of the internal revenue code of 1986, 26 7 U.S.C. 501; or to a health, welfare, educational, cultural arts, 8 charitable, or benevolent organization not operated for profit 9 that has been issued before June 13, 1994 an exemption ruling 10 letter to purchase items exempt from tax signed by the adminis- 11 trator of the sales, use, and withholding taxes division of the 12 department. The department shall reissue an exemption letter 13 after June 13, 1994 to each of those organizations that had an 14 exemption letter that shall remain in effect unless the organiza- 15 tion fails to meet the requirements that originally entitled it 16 to this exemption. The exemption does not apply to sales of tan- 17 gible personal property and, EXCEPT AS PROVIDED IN THIS 18 SUBDIVISION, sales of vehicles licensed for use on public high- 19 ways, that are not used primarily to carry out the purposes of 20 the organization as stated in the bylaws or articles of incorpo- 21 ration of the exempt organization. THIS EXEMPTION DOES APPLY TO 22 A MOTOR VEHICLE DONATED TO A NONPROFIT ORGANIZATION FOR THE PUR- 23 POSE OF BEING RAFFLED OFF IN A FUND-RAISING EVENT FOR THE BENEFIT 24 OF THE NONPROFIT ORGANIZATION. 25 (z) The use or consumption of services described in 26 section 3a(a) or (c) by means of a prepaid telephone calling 03806'01 11 1 card, a prepaid authorization number for telephone use, or a 2 charge for internet access. 3 (aa) The purchase, lease, use, or consumption of the follow- 4 ing by an industrial laundry after December 31, 1997: 5 (i) Textiles and disposable products including, but not 6 limited to, soap, paper, chemicals, tissues, deodorizers and dis- 7 pensers, and all related items such as packaging, supplies, hang- 8 ers, name tags, and identification tags. 9 (ii) Equipment, whether owned or leased, used to repair and 10 dispense textiles including, but not limited to, roll towel cabi- 11 nets, slings, hardware, lockers, mop handles and frames, and 12 carts. 13 (iii) Machinery, equipment, parts, lubricants, and repair 14 services used to clean, process, and package textiles and related 15 items, whether owned or leased. 16 (iv) Utilities such as electric, gas, water, or oil. 17 (v) Production washroom equipment and mending and packaging 18 supplies and equipment. 19 (vi) Material handling equipment including, but not limited 20 to, conveyors, racks, and elevators and related control 21 equipment. 22 (vii) Wastewater pretreatment equipment and supplies and 23 related maintenance and repair services. 24 (2) The property or services under subsection (1) are exempt 25 only to the extent that the property or services are used for the 26 exempt purposes if one is stated in subsection (1). The 27 exemption is limited to the percentage of exempt use to total use 03806'01 12 1 determined by a reasonable formula or method approved by the 2 department. 03806'01 Final page. CSC