HB-5146, As Passed Senate, August 15, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HOUSE BILL No. 5146

 

November 3, 2011, Introduced by Reps. MacGregor, Haveman, Roy Schmidt and Lyons and referred to the Committee on Tax Policy.

 

     A bill to amend 1937 PA 94, entitled

 

"Use tax act,"

 

by amending section 3a (MCL 205.93a), as amended by 2008 PA 439.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 3a. (1) The use or consumption of the following services

 

is taxed under this act in the same manner as tangible personal

 

property is taxed under this act:

 

     (a) Except as provided in section 3b, intrastate

 

telecommunications services that both originate and terminate in

 

this state, including, but not limited to, intrastate private

 

communications services, ancillary services, conference bridging

 

service, 900 service, pay telephone service other than coin-

 

operated telephone service, and value-added nonvoice data service,

 

but excluding 800 service, coin-operated telephone service, fixed


 

wireless service, 1-way paging service, prepaid calling service,

 

telecommunications nonrecurring charges, and directory advertising

 

proceeds.

 

     (b) Rooms or lodging furnished by hotelkeepers, motel

 

operators, and other persons furnishing accommodations that are

 

available to the public on the basis of a commercial and business

 

enterprise, irrespective of whether or not membership is required

 

for use of the accommodations, except rooms and lodging rented for

 

a continuous period of more than 1 month. As used in this act,

 

"hotel" or "motel" means a building or group of buildings in which

 

the public may obtain accommodations for a consideration,

 

including, without limitation, such establishments as inns, motels,

 

tourist homes, tourist houses or courts, lodging houses, rooming

 

houses, nudist camps, apartment hotels, resort lodges and cabins,

 

camps operated by other than nonprofit organizations but not

 

including those licensed under 1973 PA 116, MCL 722.111 to 722.128,

 

and any other building or group of buildings in which

 

accommodations are available to the public, except accommodations

 

rented for a continuous period of more than 1 month and

 

accommodations furnished by hospitals or nursing homes.

 

     (c) Except as provided in section 3b, interstate

 

telecommunications services that either originate or terminate in

 

this state and for which the charge for the service is billed to a

 

service address in this state or phone number by the provider

 

either within or outside this state including, but not limited to,

 

ancillary services, conference bridging service, 900 service, pay

 

telephone service other than coin-operated telephone service, and


 

value-added nonvoice data services, but excluding interstate

 

private communications service, 800 service, coin-operated

 

telephone service, fixed wireless service, 1-way paging service,

 

prepaid calling service, telecommunications nonrecurring charges,

 

and international telecommunications service.

 

     (d) The laundering or cleaning of textiles under a sale,

 

rental, or service agreement with a term of at least 5 days. This

 

subdivision does not apply to the laundering or cleaning of

 

textiles used by a restaurant or retail sales business. As used in

 

this subdivision, "restaurant" means a food service establishment

 

defined and licensed under the food law of 2000, 2000 PA 92, MCL

 

289.1101 to 289.8111.

 

     (e) The transmission and distribution of electricity, whether

 

the electricity is purchased from the delivering utility or from

 

another provider, if the sale is made to the consumer or user of

 

the electricity for consumption or use rather than for resale.

 

     (f) For a manufacturer who affixes its product to real estate

 

in this state and maintains an inventory of its product that is

 

available for sale to others or who makes its product available for

 

sale to others by publication or price list, the price is the

 

direct production costs and indirect production costs of the

 

product affixed to the real estate in this state that are incident

 

to and necessary for production or manufacturing operations or

 

processes, as defined by the department.

 

     (g) For a manufacturer who affixes its product to real estate

 

in this state but does not maintain an inventory of its product

 

available for sale to others or make its product available for sale


 

to others by publication or price list, the price is the sum of the

 

materials cost of the property and the cost of labor to

 

manufacture, fabricate, or assemble the property affixed to the

 

real estate in this state, but not the cost of labor to cut, bend,

 

assemble, or attach the property at the site for affixation to real

 

estate in this state.

 

     (2) If charges for intrastate telecommunications services or

 

telecommunications services between this state and another state

 

and other billed services not subject to the tax under this act are

 

aggregated with and not separately stated from charges for

 

telecommunications services that are subject to the tax under this

 

act, the nontaxable telecommunications services and other

 

nontaxable billed services are subject to the tax under this act

 

unless the service provider can reasonably identify charges for

 

telecommunications services not subject to the tax under this act

 

from its books and records that are kept in the regular course of

 

business.

 

     (3) If charges for intrastate telecommunications services or

 

telecommunications services between this state and another state

 

and other billed services not subject to the tax under this act are

 

aggregated with and not separately stated from telecommunications

 

services that are subject to the tax under this act, a customer may

 

not rely upon the nontaxability of those telecommunications

 

services and other billed services unless the customer's service

 

provider separately states the charges for nontaxable

 

telecommunications services and other nontaxable billed services

 

from taxable telecommunications services or the service provider


 

elects, after receiving a written request from the customer in the

 

form required by the provider, to provide verifiable data based

 

upon the service provider's books and records that are kept in the

 

regular course of business that reasonably identify the nontaxable

 

services.

 

     (4) All of the following apply in the case of a bundled

 

transaction that includes telecommunications service, ancillary

 

service, internet access, or audio or video programming:

 

     (a) If the purchase price is attributable to products that are

 

taxable and products that are nontaxable, the portion of the

 

purchase price attributable to the nontaxable products may be

 

subject to tax unless the provider can identify by reasonable and

 

verifiable standards that portion from its books and records that

 

are kept in the regular course of business for other purposes,

 

including, but not limited to, nontax purposes.

 

     (b) The provisions of this subsection apply unless otherwise

 

provided by federal law.

 

     (5) As used in this section:

 

     (a) "Ancillary services" means services that are associated

 

with or incidental to the provision of telecommunications services,

 

including, but not limited to, detailed telecommunications billing,

 

directory assistance, vertical service, and voice mail services.

 

     (b) "Bundled transaction" means the purchase of 2 or more

 

distinct and identifiable products, except real property and

 

services to real property, where the products are sold for a single

 

nonitemized price. A bundled transaction does not include the sale

 

of any products in which the sales price varies, or is negotiable,


 

based on the selection by the purchaser of the products included in

 

the transaction. As used in this subdivision:

 

     (i) "Distinct and identifiable products" does not include any

 

of the following:

 

     (A) Packaging, such as containers, boxes, sacks, bags, and

 

bottles or other materials such as wrapping, labels, tags, and

 

instruction guides, that accompany the purchase of the products and

 

are incidental or immaterial to the purchase of the products,

 

including grocery sacks, shoeboxes, dry cleaning garment bags, and

 

express delivery envelopes and boxes.

 

     (B) A product provided free of charge with the required

 

purchase of another product. A product is provided free of charge

 

if the sales price of the product purchased does not vary depending

 

on the inclusion of the product provided free of charge.

 

     (C) Items included in purchase price.

 

     (ii) "Purchase price" means the price paid by the seller for

 

the property.

 

     (iii) "Sales price" means that term as defined in section 1 of

 

the general sales tax act, 1933 PA 167, MCL 205.51.

 

     (iv) "Single nonitemized price" does not include a price that

 

is separately identified by product on binding sales or other

 

supporting sales-related documentation made available to the

 

purchaser in paper or electronic form, including, but not limited

 

to, an invoice, bill of sale, receipt, contract, service agreement,

 

lease agreement, periodic notice of rates and services, rate card,

 

or price list.

 

     (v) Bundled transaction does not include any of the following:


 

     (A) The purchase of tangible personal property and a service

 

if the tangible personal property is essential to the use of the

 

service and is provided exclusively in connection with the service

 

and the true object of the transaction is the service.

 

     (B) The purchase of services if 1 service is provided that is

 

essential to the use or receipt of a second service and the first

 

service is provided exclusively in connection with the second

 

service and the true object of the transaction is the second

 

service.

 

     (C) A transaction that includes taxable and nontaxable

 

products and the purchase price of the taxable products is de

 

minimis. As used in this sub-subparagraph, "de minimis" means the

 

seller's purchase price or sales price of the taxable products is

 

10% or less of the total purchase price or sales price of the

 

products. A seller shall use the full term of a service contract to

 

determine if the taxable products are de minimis. A seller shall

 

use either the purchase price or the sales price of the products to

 

determine if the taxable products are de minimis. A seller shall

 

not use a combination of the purchase price and sales price of the

 

products to determine if the taxable products are de minimis.

 

     (D) The retail sale of exempt tangible personal property and

 

taxable tangible personal property if all of the following

 

conditions are satisfied:

 

     (I) The transaction includes food and food ingredients,

 

prescription or over-the-counter drugs, durable medical equipment,

 

mobility enhancing equipment, medical supplies, or prosthetic

 

devices.


 

     (II) Where the seller's purchase price or sales price of the

 

taxable tangible personal property is 50% or less of the total

 

purchase price or sales price of the bundled tangible personal

 

property. A seller may not use a combination of the purchase price

 

and sales price of the tangible personal property when making the

 

50% determination for a transaction.

 

     (c) "Coin-operated telephone service" means a

 

telecommunications service paid for by inserting money into a

 

telephone that accepts direct deposits of money to operate.

 

     (d) "Conference bridging service" means an ancillary service

 

that links 2 or more participants of an audio or video conference

 

call and may include the provision of a telephone number, but does

 

not include the telecommunications services used to reach the

 

conference bridge.

 

     (e) "Detailed telecommunications billing service" means an

 

ancillary service of separately stating information pertaining to

 

individual calls on a customer's billing statement.

 

     (f) "Directory assistance" means an ancillary service of

 

providing telephone number information or address information.

 

     (g) "Fabricate" means to modify or prepare tangible personal

 

property for affixation or assembly.

 

     (h) "Fixed wireless service" means a telecommunications

 

service that provides radio communication between fixed points.

 

     (i) "International" means a telecommunications service that

 

originates or terminates in the United States and terminates or

 

originates outside the United States, respectively. United States

 

includes the District of Columbia and any possession or territory


 

of the United States.

 

     (j) "Interstate" means a telecommunications service that

 

originates in 1 United States state, territory, or possession and

 

terminates in a different United States state, territory, or

 

possession.

 

     (k) "Intrastate" means a telecommunications service that

 

originates in a United States state, territory, or possession and

 

terminates in the same United States state, territory, or

 

possession.

 

     (l) "Manufacture" means to convert or condition tangible

 

personal property by changing the form, composition, quality,

 

combination, or character of the property.

 

     (m) "Manufacturer" means a person who manufactures,

 

fabricates, or assembles tangible personal property.

 

     (n) "Paging service" means a telecommunications service that

 

provides transmission of coded radio signals for the purpose of

 

activating specific pagers, which may include messages or sounds.

 

     (o) "Pay telephone service" means a telecommunications service

 

provided through any pay telephone.

 

     (p) "Prepaid calling service" means the right to access

 

exclusively telecommunications services that must be paid for in

 

advance and that enables the origination of calls using an access

 

number or authorization code, whether manually or electronically

 

dialed, and that is sold in predetermined units or dollars that

 

decline with use in a known amount.

 

     (q) "Private communications service" means a

 

telecommunications service that entitles the customer to exclusive


 

or priority use of a communications channel or group of channels

 

between or among termination points, regardless of the manner in

 

which that channel or group of channels are connected, and includes

 

switching capacity, extension lines, stations, and any other

 

associated services that are provided in connection with the use of

 

that channel or group of channels.

 

     (r) "Telecommunications nonrecurring charges" means an amount

 

billed for the installation, connection, change, or initiation of

 

telecommunications service received by the customer.

 

     (s) "Telecommunications service" means the electronic

 

transmission, conveyance, or routing of voice, data, audio, video,

 

or any other information or signals to a point, or between or among

 

points, including a transmission, conveyance, or routing in which

 

computer processing applications are used to act on the form, code,

 

or protocol of the content for purposes of transmission,

 

conveyance, or routing without regard to whether that service is

 

referred to as voice over internet protocol services or is

 

classified by the federal communications commission as enhanced or

 

value added. Telecommunications service does not include any of the

 

following:

 

     (i) Data processing and information services that allow data to

 

be generated, acquired, stored, processed, or retrieved and

 

delivered by an electronic transmission to a purchaser where the

 

purchaser's primary purpose for the underlying transaction is the

 

processed data or information.

 

     (ii) Installation or maintenance of wiring or equipment on a

 

customer's premises.


 

     (iii) Tangible personal property.

 

     (iv) Advertising, including, but not limited to, directory

 

advertising.

 

     (v) Billing and collection services provided to third parties.

 

     (vi) Internet access service.

 

     (vii) Radio and television audio and video programming

 

services, including, but not limited to, cable service as defined

 

in 47 USC 522(6) and audio and video programming services delivered

 

by commercial mobile radio service providers as defined in 47 CFR

 

20.3, regardless of the medium, including the furnishing of

 

transmission, conveyance, and routing of those services by the

 

programming service provider.

 

     (viii) Ancillary services.

 

     (ix) Answering services, if the primary purpose of the

 

transaction is the answering service rather than message

 

transmission.

 

     (x) Digital products delivered electronically, including, but

 

not limited to, software, music, video, reading materials, or ring

 

tones.

 

     (t) "Value-added nonvoice data service" means a

 

telecommunications service in which computer processing

 

applications are used to act on the form, content, code, or

 

protocol of the information or data primarily for a purpose other

 

than transmission, conveyance, or routing.

 

     (u) "Vertical service" means an ancillary service that is

 

offered in connection with 1 or more telecommunications services

 

that offers advanced calling features that allow customers to


 

identify callers and to manage multiple calls and call connections,

 

including conference bridging services.

 

     (v) "Voice mail service" means an ancillary service that

 

enables the customer to store, send, or receive recorded messages,

 

but does not include any vertical services that the customer may be

 

required to have in order to utilize the voice mail service.

 

     (w) "800 service" means a telecommunications service that

 

allows a caller to dial a toll-free number without incurring a

 

charge for the call, typically marketed under the designation

 

"800", "855", "866", "877", or "888" toll-free calling, or any

 

subsequent number designated by the federal communications

 

commission.

 

     (x) "900 service" means an inbound toll telecommunications

 

service purchased by a subscriber that allows the subscriber's

 

customers to call in to the subscriber's prerecorded announcement

 

or live service, typically marketed under the designation "900"

 

service, and any subsequent number designated by the federal

 

communications commission, but does not include a charge for

 

collection services provided by the seller of the

 

telecommunications services to the subscriber, or the service or

 

product sold by the subscriber to the subscriber's customer.

 

     Enacting section 1. This amendatory act is retroactive and is

 

effective January 1, 2006.