Bill Text: MI SB0840 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Use tax; rate; general amendments; provide for. Amends secs. 3a, 4, 4a, 4d, 4k & 9a of 1937 PA 94 (MCL 205.93a et seq.).
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2009-09-17 - Referred To Committee On Finance [SB0840 Detail]
Download: Michigan-2009-SB0840-Introduced.html
SENATE BILL No. 840
September 17, 2009, Introduced by Senator SWITALSKI and referred to the Committee on Finance.
A bill to amend 1937 PA 94, entitled
"Use tax act,"
by amending sections 3a, 4, 4a, 4d, 4k, and 9a (MCL 205.93a,
205.94, 205.94a, 205.94d, 205.94k, and 205.99a), sections 3a and 4d
as amended by 2008 PA 439, section 4 as amended by 2008 PA 314,
section 4a as amended by 2004 PA 172, section 4k as amended by 2006
PA 18, and section 9a as amended by 2007 PA 104.
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, fixed wireless service, 800 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 or
international 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,
private communications service, fixed wireless service, 800
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, and
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
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 direct production costs
and indirect production costs of the product affixed to the real
estate 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
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 sum of the materials cost of the
property and the cost of labor to manufacture, fabricate, or
assemble the property, but not the cost of labor to cut, bend,
assemble, or attach the property at the site for affixation to real
estate.
(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.
Sec. 4. (1) The following are exempt from the tax levied under
this act, subject to subsection (2):
(a) Property sold in this state on which transaction a tax is
paid under the general sales tax act, 1933 PA 167, MCL 205.51 to
205.78, if the tax was due and paid on the retail sale to a
consumer.
(b) Property, the storage, use, or other consumption of which
this state is prohibited from taxing under the constitution or laws
of the United States, or under the constitution of this state.
(c) All of the following:
(i) Property purchased for resale. Property purchased for
resale includes promotional merchandise transferred pursuant to a
redemption offer to a person located outside this state or any
packaging material, other than promotional merchandise, acquired
for use in fulfilling a redemption offer or rebate to a person
located outside this state.
(ii) Property purchased for lending or leasing to a public or
parochial school offering a course in automobile driving except
that a vehicle purchased by the school shall be certified for
driving education and shall not be reassigned for personal use by
the school's administrative personnel.
(iii) Property purchased for demonstration purposes. For a new
vehicle dealer selling a new car or truck, exemption for
demonstration purposes shall be determined by the number of new
cars and trucks sold during the current calendar year or the
immediately preceding calendar year, without regard to specific
make or style, according to the following schedule but not to
exceed 25 cars and trucks in 1 calendar year for demonstration
purposes:
(A) 0 to 25, 2 units.
(B) 26 to 100, 7 units.
(C) 101 to 500, 20 units.
(D) 501 or more, 25 units.
(iv) Motor vehicles purchased for resale purposes by a new
vehicle dealer licensed under section 248(8)(a) of the Michigan
vehicle code, 1949 PA 300, MCL 257.248.
(d) Property that is brought into this state by a nonresident
person for storage, use, or consumption while temporarily within
this state, except if the property is used in this state in a
nontransitory business activity for a period exceeding 15 days.
(e) Property the sale or use of which was already subjected to
a sales tax or use tax equal to, or in excess of, that imposed by
this act under the law of any other state or a local governmental
unit within a state if the tax was due and paid on the retail sale
to the consumer and the state or local governmental unit within a
state in which the tax was imposed accords like or complete
exemption on property the sale or use of which was subjected to the
sales or use tax of this state. If the sale or use of property was
already subjected to a tax under the law of any other state or
local governmental unit within a state in an amount less than the
tax imposed by this act, this act shall apply, but at a rate
measured by the difference between the rate provided in this act
and the rate by which the previous tax was computed.
(f) Property sold to a person engaged in a business enterprise
and using and consuming the property in the tilling, planting,
caring for, or harvesting of the things of the soil or in the
breeding, raising, or caring for livestock, poultry, or
horticultural products, including transfers of livestock, poultry,
or horticultural products for further growth. This exemption
includes machinery that is capable of simultaneously harvesting
grain or other crops and biomass and machinery used for the purpose
of harvesting biomass. This exemption includes agricultural land
tile, which means fired clay or perforated plastic tubing used as
part of a subsurface drainage system for land used in the
production of agricultural products as a business enterprise and
includes a portable grain bin, which means a structure that is used
or is to be used to shelter grain and that is designed to be
disassembled without significant damage to its component parts.
This exemption does not include transfers of food, fuel, clothing,
or similar tangible personal property for personal living or human
consumption. This exemption does not include tangible personal
property permanently affixed to and becoming a structural part of
real estate. As used in this subdivision, "biomass" means crop
residue used to produce energy or agricultural crops grown
specifically for the production of energy.
(g) Property or services sold to the United States, an
unincorporated agency or instrumentality of the United States, an
incorporated agency or instrumentality of the United States wholly
owned by the United States or by a corporation wholly owned by the
United States, the American red cross and its chapters or branches,
this state, a department or institution of this state, or a
political subdivision of this state.
(h) Property or services sold to a school, hospital, or home
for the care and maintenance of children or aged persons, operated
by an entity of government, a regularly organized church,
religious, or fraternal organization, a veterans' organization, or
a corporation incorporated under the laws of this state, if not
operated for profit, and if the income or benefit from the
operation does not inure, in whole or in part, to an individual or
private shareholder, directly or indirectly, and if the activities
of the entity or agency are carried on exclusively for the benefit
of the public at large and are not limited to the advantage,
interests, and benefits of its members or a restricted group. The
tax levied does not apply to property or services sold to a parent
cooperative preschool. As used in this subdivision, "parent
cooperative preschool" means a nonprofit, nondiscriminatory
educational institution, maintained as a community service and
administered by parents of children currently enrolled in the
preschool that provides an educational and developmental program
for children younger than compulsory school age, that provides an
educational program for parents, including active participation
with children in preschool activities, that is directed by
qualified preschool personnel, and that is licensed pursuant to
1973 PA 116, MCL 722.111 to 722.128.
(i) Property or services sold to a regularly organized church
or house of religious worship except the following:
(i) Sales in which the property is used in activities that are
mainly commercial enterprises.
(ii) Sales of vehicles licensed for use on the public highways
other than a passenger van or bus with a manufacturer's rated
seating capacity of 10 or more that is used primarily for the
transportation of persons for religious purposes.
(j) A vessel designed for commercial use of registered tonnage
of 500 tons or more, if produced upon special order of the
purchaser, and bunker and galley fuel, provisions, supplies,
maintenance, and repairs for the exclusive use of a vessel of 500
tons or more engaged in interstate commerce.
(k) Property purchased for use in this state where actual
personal possession is obtained outside this state, the purchase
price or actual value of which does not exceed $10.00 during 1
calendar month.
(l) A newspaper or periodical classified under
federal postal
laws and regulations effective September 1, 1985 as second-class
mail matter or as a controlled circulation publication or qualified
to accept legal notices for publication in this state, as defined
by law, or any other newspaper or periodical of general
circulation, established at least 2 years, and published at least
once a week, and a copyrighted motion picture film or, before
October 1, 2007, a periodical classified under federal postal laws
and regulations effective September 1, 1985 as second-class mail
matter. Tangible personal property used or consumed in producing a
copyrighted motion picture film, a newspaper published more than 14
times per year, or a periodical published more than 14 times per
year, and not becoming a component part of that film, newspaper, or
periodical is subject to the tax levied under this act. After
December 31, 1993, tangible personal property used or consumed in
producing a newspaper published 14 times or less per year or a
periodical published 14 times or less per year and that portion or
percentage of tangible personal property used or consumed in
producing an advertising supplement that becomes a component part
of a newspaper or periodical is exempt from the tax under this
subdivision. A claim for a refund for taxes paid before January 1,
1999 under this subdivision shall be made before June 30, 1999. For
purposes of this subdivision, tangible personal property that
becomes a component part of a newspaper or periodical and
consequently not subject to tax, includes an advertising supplement
inserted into and circulated with a newspaper or periodical that is
otherwise exempt from tax under this subdivision, if the
advertising supplement is delivered directly to the newspaper or
periodical by a person other than the advertiser, or the
advertising supplement is printed by the newspaper or periodical.
(m) Property purchased by persons licensed to operate a
commercial radio or television station if the property is used in
the origination or integration of the various sources of program
material for commercial radio or television transmission. This
subdivision does not include a vehicle licensed and titled for use
on public highways or property used in the transmitting to or
receiving from an artificial satellite.
(n) A person who is a resident of this state who purchases an
automobile in another state while in the military service of the
United States and who pays a sales tax in the state where the
automobile is purchased.
(o) A vehicle for which a special registration is secured in
accordance with section 226(9) of the Michigan vehicle code, 1949
PA 300, MCL 257.226.
(p) The sale of a prosthetic device, durable medical
equipment, or mobility enhancing equipment.
(q) Water when delivered through water mains, water sold in
bulk tanks in quantities of not less than 500 gallons, or the sale
of bottled water.
(r) A vehicle not for resale used by a nonprofit corporation
organized exclusively to provide a community with ambulance or fire
department services.
(s)
Tangible Before October 1, 2009, tangible personal
property purchased and installed as a component part of a water
pollution control facility for which a tax exemption certificate is
issued pursuant to part 37 of the natural resources and
environmental protection act, 1994 PA 451, MCL 324.3701 to
324.3708, or an air pollution control facility for which a tax
exemption certificate is issued pursuant to part 59 of the natural
resources and environmental protection act, 1994 PA 451, MCL
324.5901 to 324.5908.
(t) Tangible real or personal property donated by a
manufacturer, wholesaler, or retailer to an organization or entity
exempt pursuant to subdivision (h) or (i) or section 4a(1)(a) or
(b) of the general sales tax act, 1933 PA 167, MCL 205.54a.
(u) The storage, use, or consumption of an aircraft by a
domestic air carrier for use solely in the transport of air cargo,
passengers, or a combination of air cargo and passengers, that has
a maximum certificated takeoff weight of at least 6,000 pounds. For
purposes of this subdivision, the term "domestic air carrier" is
limited to a person engaged primarily in the commercial transport
for hire of air cargo, passengers, or a combination of air cargo
and passengers as a business activity. The state treasurer shall
estimate on January 1 each year the revenue lost by this act from
the school aid fund and deposit that amount into the school aid
fund from the general fund.
(v) The storage, use, or consumption of an aircraft by a
person who purchases the aircraft for subsequent lease to a
domestic air carrier operating under a certificate issued by the
federal aviation administration under 14 CFR part 121, for use
solely in the regularly scheduled transport of passengers.
(w) Property or services sold to an organization not operated
for profit and exempt from federal income tax under section
501(c)(3) or 501(c)(4) of the internal revenue code, 26 USC 501; or
to a health, welfare, educational, cultural arts, charitable, or
benevolent organization not operated for profit that has been
issued before June 13, 1994 an exemption ruling letter to purchase
items exempt from tax signed by the administrator of the sales,
use, and withholding taxes division of the department. The
department shall reissue an exemption letter after June 13, 1994 to
each of those organizations that had an exemption letter that shall
remain in effect unless the organization fails to meet the
requirements that originally entitled it to this exemption. The
exemption does not apply to sales of tangible personal property and
sales of vehicles licensed for use on public highways, that are not
used primarily to carry out the purposes of the organization as
stated in the bylaws or articles of incorporation of the exempt
organization.
(x) The use or consumption of services described in section
3a(1)(a) or (b) or 3b by means of a prepaid telephone calling card,
a prepaid authorization number for telephone use, or a charge for
internet access.
(y) The purchase, lease, use, or consumption of the following
by an industrial laundry after December 31, 1997:
(i) Textiles and disposable products including, but not limited
to, soap, paper, chemicals, tissues, deodorizers and dispensers,
and all related items such as packaging, supplies, hangers, name
tags, and identification tags.
(ii) Equipment, whether owned or leased, used to repair and
dispense textiles including, but not limited to, roll towel
cabinets, slings, hardware, lockers, mop handles and frames, and
carts.
(iii) Machinery, equipment, parts, lubricants, and repair
services used to clean, process, and package textiles and related
items, whether owned or leased.
(iv) Utilities such as electric, gas, water, or oil.
(v) Production washroom equipment and mending and packaging
supplies and equipment.
(vi) Material handling equipment including, but not limited to,
conveyors, racks, and elevators and related control equipment.
(vii) Wastewater pretreatment equipment and supplies and
related maintenance and repair services.
(2) The property or services under subsection (1) are exempt
only to the extent that the property or services are used for the
exempt purposes if one is stated in subsection (1). The exemption
is limited to the percentage of exempt use to total use determined
by a reasonable formula or method approved by the department.
Sec. 4a. The following are exempt from the tax under this act:
(a) Rental receipts if the tangible personal property rented
or leased was previously subject to 1 of the following when
purchased by the lessor:
(i) This act.
(ii) The general sales tax act, 1933 PA 167, MCL 205.51 to
205.78.
(b) Rental receipts if the tangible personal property rented
or leased was previously taxed under a sales or use tax act of
another state or a political subdivision of another state levied at
a rate of 6% or more.
(c) Specific charges for technical support or for adapting or
modifying prewritten computer software programs to a purchaser's
needs or equipment if those charges are separately stated and
identified.
(d) The sale of computer software originally designed for the
exclusive use and special needs of the purchaser.
(e) The sale of a commercial advertising element if the
commercial advertising element is used to create or develop a
print, radio, television, or other advertisement, the commercial
advertising element is discarded or returned to the provider after
the advertising message is completed, and the commercial
advertising element is custom developed by the provider for the
purchaser. As used in this subdivision, "commercial advertising
element" means a negative or positive photographic image, an
audiotape or videotape master, a layout, a manuscript, writing of
copy, a design, artwork, an illustration, retouching, and
mechanical or keyline instructions. This exemption does not include
black and white or full color process separation elements, an
audiotape reproduction, or a videotape reproduction.
(f) The sale of oxygen for human use dispensed pursuant to a
prescription.
(g) The sale of insulin for human use.
(h)
A Before October 1, 2009, a meal provided free of
charge
or at a reduced rate to an employee during work hours by a food
service
establishment licensed by the department of agriculture
under the food law of 2000, 2000 PA 92, MCL 289.1101 to 289.8111.
(i) The sale of diesel fuel to a person who is an interstate
motor carrier for use in a qualified commercial motor vehicle.
Sec. 4d. (1) The following are exempt from the tax under this
act:
(a) Sales of drugs for human use that can only be legally
dispensed by prescription or food or food ingredients, except
prepared food intended for immediate human consumption and, after
October 1, 2009, food and food ingredients sold from a vending
machine.
(b) The deposit on a returnable container for a beverage or
the deposit on a carton or case that is used for returnable
containers.
(c) Food or tangible personal property purchased under the
federal food stamp program or meals sold by a person exempt from
the tax under this act eligible to be purchased under the federal
food stamp program.
(d) Fruit or vegetable seeds and fruit or vegetable plants if
purchased at a place of business authorized to accept food stamps
by the food and nutrition service of the United States department
of agriculture or a place of business that has made a complete and
proper application for authorization to accept food stamps but has
been denied authorization and provides proof of denial to the
department of treasury.
(e) Live animals purchased with the intent to be slaughtered
for human consumption.
(2)
Food Before October 1, 2009, food or drink heated or
cooled mechanically, electrically, or by other artificial means to
an average temperature above 75 degrees Fahrenheit or below 65
degrees Fahrenheit before sale and sold from a vending machine,
except milk, nonalcoholic beverages in a sealed container, and
fresh fruit, is subject to the tax under this act. The tax due
under this act on the sale of food or drink from a vending machine
selling both taxable items and items exempt under this subsection
shall be calculated under this act after December 31, 1994 based on
1 of the following as determined by the taxpayer:
(a) Actual gross proceeds from sales at retail.
(b) Forty-five percent of proceeds from the sale of items
subject to tax under this act or exempt from the tax levied under
this act, other than from the sale of carbonated beverages.
(3) "Food and food ingredients" means substances, whether in
liquid, concentrated, solid, frozen, dried, or dehydrated form,
that are sold for ingestion or chewing by humans and are consumed
for their taste or nutritional value. Food and food ingredients do
not include alcoholic beverages and tobacco.
(4) "Prepared food" means the following:
(a) Food sold in a heated state or that is heated by the
seller.
(b) Two or more food ingredients mixed or combined by the
seller for sale as a single item.
(c) Food sold with eating utensils provided by the seller,
including knives, forks, spoons, glasses, cups, napkins, straws, or
plates, but not including a container or packaging used to
transport the food.
(5) Prepared food does not include the following:
(a) Food that is only cut, repackaged, or pasteurized by the
seller.
(b) Raw eggs, fish, meat, poultry, and foods containing those
raw items requiring cooking by the consumer in recommendations
contained in section 3-401.11 of part 3-4 of chapter 3 of the 2001
food code published by the food and drug administration of the
public health service of the department of health and human
services, to prevent foodborne illness.
(c) Food sold in an unheated state by weight or volume as a
single item, without eating utensils.
(d) Bakery items, including bread, rolls, buns, biscuits,
bagels, croissants, pastries, doughnuts, danish, cakes, tortes,
pies, tarts, muffins, bars, cookies, and tortillas, sold without
eating utensils.
(6) "Prepared food intended for immediate human consumption"
means prepared food and, after October 1, 2009, food and food
ingredients sold from a vending machine.
Sec. 4k. (1) The tax levied under this act does not apply to
parts and materials, excluding shop equipment or fuel, affixed to
or to be affixed to an aircraft owned or used by a domestic air
carrier that is any of the following:
(a) An aircraft for use solely in the transport of air cargo
or a combination of air cargo and passengers that has a maximum
certificated takeoff weight of at least 12,500 pounds for taxes
levied before January 1, 1997 and at least 6,000 pounds for taxes
levied after December 31, 1996.
(b) An aircraft that is used solely in the regularly scheduled
transport of passengers.
(c) An aircraft other than an aircraft described in
subdivision (b), that has a maximum certificated takeoff weight of
at least 12,500 pounds for taxes levied before January 1, 1997 and
at least 6,000 pounds for taxes levied after December 31, 1996, and
that is designed to have a maximum passenger seating configuration
of more than 30 seats and is used solely in the transport of
passengers.
(2) The tax levied under this act does not apply to the sale
of parts or materials, excluding shop equipment or fuel, affixed or
to be affixed to an aircraft that meets all of the following
conditions:
(a) The aircraft leaves this state within 15 days after the
sooner of the issuance of the final billing or authorized approval
for final return to service, completion of the maintenance record
entry, and completion of the test flight and ground test for
inspection as required under 14 CFR 91.407.
(b) The aircraft was not based in this state or registered in
this state before the parts or materials are affixed to the
aircraft and the aircraft is not based in this state or registered
in this state after the parts or materials are affixed to the
aircraft.
(3) The tax levied under this act does not apply to the sale
of an aircraft temporarily located in this state for the purpose of
prepurchase evaluation or the purpose of prepurchase evaluation and
postsale customization if all of the following conditions are
satisfied:
(a) The aircraft leaves this state within 15 days after
authorized approval for final return to service, completion of the
maintenance record entry, and completion of the test flight and
ground test for inspection as required under 14 CFR 91.407.
(b) The aircraft was not based in this state or registered in
this state before the prepurchase evaluation or prepurchase
evaluation and postsale customization are completed and the
aircraft is not based in this state or registered in this state
after the prepurchase evaluation or prepurchase evaluation and
postsale customization are completed.
(4) For taxes levied after December 31, 1992 and before
October 1, 2009, the tax levied under this act does not apply to
the storage, use, or consumption of rolling stock used in
interstate commerce and purchased, rented, or leased by an
interstate fleet motor carrier. A refund for taxes paid before
January 1, 1997 shall not be paid under this subsection if the
refund claim is made after June 30, 1997.
(5) For taxes levied after December 31, 1996 and before May 1,
1999, the tax levied under this act does not apply to the product
of the out-of-state usage percentage and the price otherwise
taxable under this act of a qualified truck or a trailer designed
to be drawn behind a qualified truck, purchased, rented, or leased
in this state by an interstate fleet motor carrier and used in
interstate commerce.
(6) As used in this section:
(a) "Based in this state" means hangared or stored in this
state for not less than 10 days in not less than 3 nonconsecutive
months during the immediately preceding 12-month period.
(b) "Domestic air carrier" means a person engaged primarily in
the commercial transport for hire of air cargo, passengers, or a
combination of air cargo and passengers as a business activity.
(c) "Interstate fleet motor carrier" means a person engaged in
the business of carrying persons or property, other than
themselves, their employees, or their own property, for hire across
state lines, whose fleet mileage was driven at least 10% outside of
this state in the immediately preceding tax year.
(d) "Out-of-state usage percentage" is a fraction, the
numerator of which is the number of miles driven outside of this
state in the immediately preceding tax year by qualified trucks
used by the taxpayer and the denominator of which is the total
miles driven in the immediately preceding tax year by qualified
trucks used by the taxpayer. Miles driven by qualified trucks used
solely in intrastate commerce shall not be included in calculating
the out-of-state usage percentage.
(e) "Prepurchase evaluation" means an examination of an
aircraft to provide a potential purchaser with information relevant
to the potential purchase.
(f) "Postsale customization" means any improvement,
maintenance, or repair that is performed on an aircraft following a
transfer of ownership of the aircraft.
(g) "Qualified truck" means a commercial motor vehicle power
unit that has 2 axles and a gross vehicle weight rating in excess
of 10,000 pounds or a commercial motor vehicle power unit that has
3 or more axles.
(h) "Registered in this state" means an aircraft registered
with the state transportation department, bureau of aeronautics or
registered with the federal aviation administration to an address
located in this state.
(i) "Rolling stock" means a qualified truck, a trailer
designed to be drawn behind a qualified truck, and parts affixed to
either a qualified truck or a trailer designed to be drawn behind a
qualified truck.
Sec. 9a. (1) In computing the amount of tax levied under this
act for any month prior to October 1, 2009, a seller may deduct the
amount of bad debts from his or her gross sales, rentals, or
services used for the computation of the tax. In computing the
amount of tax levied under this act for any month after September
30, 2009, a taxpayer may deduct 80% of the amount of bad debts from
his or her gross proceeds used for the computation of the tax. The
amount of gross sales, rentals, or services deducted must be
charged off as uncollectible on the books and records of the seller
at the time the debt becomes worthless and deducted on the return
for the period during which the bad debt is written off as
uncollectible in the claimant's books and records and must be
eligible to be deducted for federal income tax purposes. For
purposes of this section, a claimant who is not required to file a
federal income tax return may deduct a bad debt on a return filed
for the period in which the bad debt becomes worthless and is
written off as uncollectible in the claimant's books and records
and would be eligible for a bad debt deduction for federal income
tax purposes if the claimant was required to file a federal income
tax return. If a consumer or other person pays all or part of a bad
debt with respect to which a seller claimed a deduction under this
section, the seller is liable for the amount of taxes deducted in
connection with that portion of the debt for which payment is
received and shall remit these taxes in his or her next payment to
the department. Any payments made on a bad debt shall be applied
proportionally first to the taxable price of the property and the
tax on the property and second to any interest, service, or other
charge.
(2) Any claim for a bad debt deduction under this section
shall be supported by that evidence required by the department. The
department shall review any change in the rate of taxation
applicable to any taxable sales, rentals, or services by a seller
claiming a deduction pursuant to this section and shall ensure that
the deduction on any bad debt does not result in the seller
claiming the deduction recovering any more or less than the taxes
imposed on the sale, rental, or service that constitutes the bad
debt.
(3) After September 30, 2009, if a taxpayer who reported the
tax and a lender execute and maintain a written election
designating which party may claim the deduction, a claimant is
entitled to a deduction or refund of the tax related to a sale at
retail that was previously reported and paid if all of the
following conditions are met:
(a) No deduction or refund was previously claimed or allowed
on any portion of the account receivable.
(b) The account receivable has been found worthless and
written off by the taxpayer that made the sale or the lender on or
after September 30, 2009.
(4) If a certified service provider assumed filing
responsibility under the streamlined sales and use tax
administration act, 2004 PA 174, MCL 205.801 to 205.833, the
certified service provider may claim, on behalf of the seller, any
bad debt allowable to the seller and shall credit or refund that
amount of bad debt allowed or refunded to the seller.
(5) If the books and records of a seller under the streamlined
sales and use tax agreement under the streamlined sales and use tax
administration act, 2004 PA 174, MCL 205.801 to 205.833, that
claims a bad debt allowance support an allocation of the bad debts
among member states of that agreement, the seller may allocate the
bad debts.
(6) As used in this section:
(a) "Bad debt" means any portion of a debt resulting from a
seller's collection of the use tax under this act on the purchase
of tangible personal property or services that is not otherwise
deductible or excludable and that is eligible to be claimed, or
could be eligible to be claimed if the seller kept accounts on an
accrual basis, as a deduction pursuant to section 166 of the
internal revenue code, 26 USC 166. A bad debt does not include any
of the following:
(i) Interest, finance charge, or use tax on the purchase price.
(ii) Uncollectible amounts on property that remains in the
possession of the seller until the full purchase price is paid.
(iii) Expenses incurred in attempting to collect any account
receivable or any portion of the debt recovered.
(iv) Any accounts receivable that have been sold to and remain
in the possession of a third party for collection.
(v) Repossessed property.
(b) Except as provided in subdivision (c), "lender" includes
any of the following:
(i) Any person who holds or has held an account receivable
which that person purchased directly from a taxpayer who reported
the tax.
(ii) Any person who holds or has held an account receivable
pursuant to that person's contract directly with the taxpayer who
reported the tax.
(iii) The issuer of the private label credit card.
(c) "Lender" does not include the issuer of a credit card or
instrument that can be used to make purchases from a person other
than the vendor whose name or logo appears on the card or
instrument or that vendor's affiliates.
(d) "Private label credit card" means any charge card, credit
card, or other instrument serving a similar purpose that carries,
refers to, or is branded with the name or logo of a vendor and that
can only be used for purchases from the vendor.
(e) "Seller" means a person who has remitted use tax directly
to the department on the specific sales, rental, or service
transaction for which the bad debt is recognized for federal income
tax purposes or, after September 30, 2009, a lender holding the
account receivable for which the bad debt is recognized, or would
be recognized if the claimant were a corporation, for federal
income tax purposes.
Enacting section 1. This amendatory act takes effect October
1, 2009.
