Bill Text: MI HB4223 | 2023-2024 | 102nd Legislature | Introduced

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Bill Title: Use tax: exemptions; use tax holiday for back-to-school clothing and school supplies; provide for. Amends 1937 PA 94 (MCL 205.91 - 205.111) by adding secs. 4kk & 20a.

Spectrum: Partisan Bill (Democrat 12-0)

Status: (Introduced) 2023-03-09 - Bill Electronically Reproduced 03/09/2023 [HB4223 Detail]

Download: Michigan-2023-HB4223-Introduced.html

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HOUSE BILL NO. 4223

A bill to amend 1937 PA 94, entitled

"Use tax act,"

(MCL 205.91 to 205.111) by adding sections 4kk and 20a.

The people of the state of michigan enact:

Sec. 4kk. (1) Subject to subsection (2), the tax under this act does not apply to the purchase of any of the following items if the purchase is made between 12:01 a.m. on the third Saturday of August and 11:59 p.m. on the third Sunday of August each year:

(a) Clothing if the purchase price of each individual item is not greater than $100.00.

(b) School supplies if the purchase price of each individual item is not greater than $20.00.

(c) A computer purchased for noncommercial home or personal use, if the purchase price, less any manufacturer's rebate, of each individual computer is not greater than $1,000.00.

(d) A school computer supply purchased for noncommercial home or personal use, if the purchase price, less any manufacturer's rebate, of each individual school computer supply is not greater than $500.00.

(2) The exemption in subsection (1) does not apply to any of the following:

(a) Clothing accessories or equipment.

(b) Sport or recreational equipment.

(c) Protective equipment.

(d) Any item sold for use in a trade or business.

(e) Furniture.

(3) As used in this section:

(a) "Clothing" means, except as otherwise provided in subdivision (b), all human wearing apparel suitable for general use, including, but not limited to, the following:

(i) Aprons, household and shop.

(ii) Athletic supporters.

(iii) Baby receiving blankets.

(iv) Bathing suits and caps.

(v) Beach capes and coats.

(vi) Belts and suspenders.

(vii) Boots.

(viii) Coats and jackets.

(ix) Costumes.

(x) Diapers, children and adult, including disposable diapers.

(xi) Ear muffs.

(xii) Footlets.

(xiii) Formal wear.

(xiv) Garters and garter belts.

(xv) Girdles.

(xvi) Gloves and mittens for general use.

(xvii) Hats and caps.

(xviii) Hosiery.

(xix) Insoles for shoes.

(xx) Lab coats.

(xxi) Neckties.

(xxii) Overshoes.

(xxiii) Pantyhose.

(xxiv) Rainwear.

(xxv) Rubber pants.

(xxvi) Sandals.

(xxvii) Scarves.

(xxviii) Shoes and shoe laces.

(xxix) Slippers.

(xxx) Sneakers.

(xxxi) Socks and stockings.

(xxxii) Steel-toed shoes.

(xxxiii) Underwear.

(xxxiv) Uniforms, athletic and nonathletic.

(xxxv) Wedding apparel.

(b) Clothing does not include any of the following:

(i) Belt buckles sold separately.

(ii) Costume masks sold separately.

(iii) Patches and emblems sold separately.

(iv) Sewing equipment and supplies, including, but not limited to, knitting needles, patterns, pins, scissors, sewing machines, sewing needles, tape measures, and thimbles.

(v) Sewing materials that become part of clothing, including, but not limited to, buttons, fabric, lace, thread, yarn, and zippers.

(c) "Clothing accessories or equipment" means incidental items worn on the person or in conjunction with clothing, including, but not limited to, the following:

(i) Briefcases.

(ii) Cosmetics.

(iii) Hair notions, including, but not limited to, barrettes, hair bows, and hair nets.

(iv) Handbags.

(v) Handkerchiefs.

(vi) Jewelry.

(vii) Sun glasses, nonprescription.

(viii) Umbrellas.

(ix) Wallets.

(x) Watches.

(xi) Wigs and hair pieces.

(d) "Computer" means an electronic device that accepts information in a digital or similar form and manipulates it for a result based on a sequence of instructions.

(e) "Protective equipment" means items for human wear and designed as protection of the wearer against injury or disease or as protections against damage or injury of other persons or property but not suitable for general use. Protective equipment includes, but is not limited to, the following:

(i) Breathing masks.

(ii) Clean room apparel and equipment.

(iii) Ear and hearing protectors.

(iv) Face shields.

(v) Hard hats.

(vi) Helmets.

(vii) Paint or dust respirators.

(viii) Protective gloves.

(ix) Safety glasses and goggles.

(x) Safety belts.

(xi) Tool belts.

(xii) Welder's gloves and masks.

(f) "School computer supply" means an item commonly used by a student in a course of study in which a computer is used and includes only the following items:

(i) Computer storage media, including diskettes and compact disks.

(ii) Handheld electronic schedulers, except devices that are cellular phones.

(iii) Personal digital assistants, except devices that are cellular phones.

(iv) Computer printers.

(v) Printer supplies for computers, including printer paper and printer ink.

(g) "School supplies" means items commonly used by a student in a course of study and includes only the following items:

(i) Binders.

(ii) Book bags.

(iii) Calculators.

(iv) Cellophane tape.

(v) Blackboard chalk.

(vi) Compasses.

(vii) Composition books.

(viii) Crayons.

(ix) Erasers.

(x) Folders, including expandable, pocket, plastic, and manila.

(xi) Glue, paste, and paste sticks.

(xii) Highlighters.

(xiii) Index cards.

(xiv) Index card boxes.

(xv) Legal pads.

(xvi) Lunch boxes.

(xvii) Markers.

(xviii) Notebooks.

(xix) Paper, including loose-leaf ruled notebook paper, copy paper, graph paper, tracing paper, manila paper, colored paper, poster board, and construction paper.

(xx) Pencil boxes and other school supply boxes.

(xxi) Pencil sharpeners.

(xxii) Pencils.

(xxiii) Pens.

(xxiv) Protractors.

(xxv) Rulers.

(xxvi) Scissors.

(xxvii) Writing tablets.

(h) "Sport or recreational equipment" means items designed for human use and worn in conjunction with an athletic or recreational activity that are not suitable for general use. Sport or recreational equipment includes, but is not limited to, the following:

(i) Ballet and tap shoes.

(ii) Cleated or spiked athletic shoes.

(iii) Gloves, including, but not limited to, baseball, bowling, boxing, hockey, and golf.

(iv) Goggles.

(v) Hand and elbow guards.

(vi) Life preservers and vests.

(vii) Mouth guards.

(viii) Roller and ice skates.

(ix) Shin guards.

(x) Shoulder pads.

(xi) Ski boots.

(xii) Waders.

(xiii) Wetsuits and fins.

Sec. 20a. (1) The department shall provide notice of a use tax holiday under this act not less than 60 days before the first day of the calendar month in which the exemption period will begin.

(2) A purchase of eligible property under a layaway sale qualifies for a use tax holiday exemption if either of the following applies:

(a) Final payment on a layaway order is made by, and the property is given to, the purchaser during the exemption period.

(b) The purchaser selects the property and the retailer accepts the order for the item during the exemption period, for immediate delivery upon full payment, even if delivery is made after the exemption period.

(3) If the seller offers a discount on eligible property, the discount reduces the purchase price of the property and the discounted purchase price determines whether the purchase price is within a use tax holiday price threshold. If a discount applies to the total amount paid by a purchaser rather than to the purchase price of a particular item and the purchaser has purchased both eligible property and taxable property, the seller must allocate the discount based on the total purchase prices of the taxable property compared to the total purchase prices of all property sold in that same transaction.

(4) A coupon that reduces the purchase price is treated as a discount under subsection (3) if the seller is not reimbursed for the coupon amount by a third party.

(5) Articles normally sold as a single unit must continue to be sold as a single unit during a use tax holiday. Such articles must not be priced separately and sold as individual items in order to obtain a use tax holiday exemption.

(6) Eligible property that a customer purchases during the exemption period with the use of a rain check qualifies for the use tax holiday exemption regardless of when the rain check was issued. Issuance of a rain check during the exemption period does not qualify eligible property for the use tax holiday exemption if the property is actually purchased after the exemption period.

(7) All of the following provisions apply to an exchange made in regard to a use tax holiday:

(a) If a customer purchases an item of eligible property during the exemption period, but later exchanges the item for a similar eligible item, even if a different size, different color, or different with respect to another feature, no additional tax is due even if the exchange is made after the exemption period.

(b) If a customer purchases an item of eligible property during the exemption period, but after the exemption period has ended, the customer returns the item and receives credit on the purchase of a different item, the appropriate use tax is due on the purchase of the newly purchased item.

(c) If a customer purchases an item of eligible property before the exemption period, but during the exemption period the customer returns the item and receives credit on the purchase of a different item of eligible property, no use tax is due on the purchase of the new item if the new item is purchased during the exemption period.

(8) For purposes of determining a use tax holiday price threshold, if all the property in a shipment qualifies as eligible property and the purchase price for each item in the shipment is within the use tax holiday price threshold, then the seller does not have to allocate the delivery, handling, or service charge to determine if the price threshold is exceeded and the shipment is considered a purchase of eligible products. If the shipment includes eligible property and taxable property, including an eligible item with a purchase price in excess of the price threshold, the seller must allocate the delivery charge by using 1 of the following methods and tax the delivery charge allocated to the taxable property:

(a) A percentage based on the total purchase prices of the taxable property compared to the total purchase prices of all property in the shipment.

(b) A percentage based on the total weight of the taxable property compared to the total weight of all property in the shipment.

(9) For the purpose of a use tax holiday, eligible property qualifies for exemption if either of the following requirements is met:

(a) The item is both delivered to and paid for by the customer during the exemption period.

(b) The customer orders and pays for the item and the seller accepts the order during the exemption period for immediate shipment, even if delivery is made after the exemption period. The seller accepts an order when the seller has taken action to fill the order for immediate shipment. Actions to fill an order include placement of an "in date" stamp on a mail order or assignment of an "order number" to a telephone order. An order is for immediate shipment if the customer does not request delayed shipment. An order is for immediate shipment notwithstanding that the shipment may be delayed because of a backlog of orders or because stock is currently unavailable to, or on back order by, the seller.

(10) For a 60-day period immediately after a use tax holiday exemption period, if a customer returns an item that would qualify for the exemption, no credit for or refund of use tax shall be given unless the customer provides a receipt or invoice that shows that use tax was paid, or the seller has sufficient documentation to show that use tax was paid on the specific item. The 60-day period under this subsection is set solely for the purpose of designating a time period during which the customer must provide documentation that shows that use tax was paid on returned merchandise. The 60-day period under this subsection does not change a seller's policy on the time period during which the seller will accept returns.

(11) The time zone of the seller's location determines the authorized time period for a use tax holiday when the purchaser is located in one time zone and a seller is located in another.

(12) As used in this section:

(a) "Eligible property" means an item of a type that qualifies for a use tax holiday exemption under this act.

(b) "Layaway sale" means a transaction in which property is set aside for future delivery to a customer who makes a deposit, agrees to pay the balance of the purchase price over a period of time, and, at the end of the payment period, receives the property. An order is accepted for layaway by the seller when the seller removes the property from normal inventory or clearly identifies the property as sold to the purchaser.

(c) "Rain check" means the seller allows a customer to purchase an item at a certain price at a later time because the particular item was out of stock.