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