Bill Text: MI HB5354 | 2009-2010 | 95th Legislature | Introduced

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Bill Title: Sales tax; rate; general amendments; provide for. Amends secs. 2, 4a, 4g, 4i & 4x of 1933 PA 167 (MCL 205.52 et seq.).

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2009-09-15 - Printed Bill Filed 09/11/2009 [HB5354 Detail]

Download: Michigan-2009-HB5354-Introduced.html

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HOUSE BILL No. 5354

 

September 10, 2009, Introduced by Rep. Cushingberry and referred to the Committee on Tax Policy.

 

     A bill to amend 1933 PA 167, entitled

 

"General sales tax act,"

 

by amending sections 2, 4a, 4g, 4i, and 4x (MCL 205.52, 205.54a,

 

205.54g, 205.54i, and 205.54x), section 2 as amended by 2004 PA

 

173, section 4a as amended by 2008 PA 415, section 4g as amended by

 

2008 PA 438, section 4i as amended by 2007 PA 105, and section 4x

 

as amended by 2006 PA 17.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 2. (1) Except as provided in section 2a, there is levied

 

upon and there shall be collected from all persons engaged in the

 

business of making sales at retail, by which ownership of tangible

 

personal property is transferred for consideration, an annual tax

 

for the privilege of engaging in that business equal to 6% of the

 

gross proceeds of the business, plus the penalty and interest if

 

applicable as provided by law, less deductions allowed by this act.

 

     (2) The tax under subsection (1) also applies to the

 

following:

 

     (a) 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.

 

     (b) The sale of a prepaid telephone calling card or a prepaid

 

authorization number or code for telephone use, rather than for

 

resale, including the reauthorization of a prepaid telephone

 

calling card or a prepaid authorization number or code.

 

     (c) A conditional sale, installment lease sale, or other

 

transfer of property, if title is retained as security for the

 

purchase but is intended to be transferred later.

 

     (3) Any person engaged in the business of making sales at

 

retail who is at the same time engaged in some other kind of

 

business, occupation, or profession not taxable under this act

 

shall keep books to show separately the transactions used in

 

determining the tax levied by under this act. If the person fails

 

to keep separate books, there shall be levied upon him or her the

 

tax provided for in subsection (1) equal to 6% of the entire gross

 

proceeds of both or all of his or her businesses. The taxes levied

 

by this section are a personal obligation of the taxpayer.

 

     (4) 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 Michigan department of

 

agriculture under the food law of 2000, 2000 PA 92, MCL 289.1101 to

 

289.8111, for the convenience of the employer is not considered

 

transferred for consideration.

 

     Sec. 4a. (1) Subject to subsection (2), the following are

 

exempt from the tax under this act:

 

     (a) A sale of tangible personal property not for resale to a

 

nonprofit school, nonprofit hospital, or nonprofit 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 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 any restricted

 

group. A sale of tangible personal property to a parent cooperative

 

preschool is exempt from taxation under this act. 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.

 

     (b) A sale of tangible personal property not for resale to a

 

regularly organized church or house of religious worship, except

 

the following:

 

     (i) Sales in activities that are mainly commercial enterprises.

 

     (ii) Sales of vehicles licensed for use on 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.

 

     (c) The sale of food to bona fide enrolled students by a

 

school or other educational institution not operated for profit.

 

     (d) The sale of a vessel designated 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 the

 

vessel engaged in interstate commerce.

 

     (e) A sale of tangible personal property to persons engaged in

 

a business enterprise and using or consuming the tangible personal

 

property in the tilling, planting, caring for, or harvesting of the

 

things of the soil; in the breeding, raising, or caring for

 

livestock, poultry, or horticultural products, including transfers

 

of livestock, poultry, or horticultural products for further

 

growth; or in the direct gathering of fish, by net, line, or

 

otherwise only by an owner-operator of the business enterprise, not

 

including a charter fishing business enterprise. 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, and subsurface

 

irrigation pipe, if the land tile or irrigation pipe is used in the

 

production of agricultural products as a business enterprise. This

 

exemption 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 also includes grain drying equipment and

 

natural or propane gas used to fuel that equipment for agricultural

 

purposes. This exemption does not include transfers of food, fuel,

 

clothing, or any similar tangible personal property for personal

 

living or human consumption. This exemption does not include

 

tangible personal property permanently affixed 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.

 

     (f) The sale of a copyrighted motion picture film or a

 

newspaper or periodical admitted 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 not less than 2 years, and published not less than once

 

a week, or, before October 1, 2009, a periodical admitted under

 

federal postal laws and regulations effective September 1, 1985 as

 

second-class mail. 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. 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.

 

     (g) A sale of tangible personal property to persons licensed

 

to operate commercial radio or television stations 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 transmission to or

 

receiving from an artificial satellite.

 

     (h) The sale of a prosthetic device, durable medical

 

equipment, or mobility enhancing equipment.

 

     (i) The sale of a vehicle not for resale to a Michigan

 

nonprofit corporation organized exclusively to provide a community

 

with ambulance or fire department services.

 

     (j) A sale of tangible personal property to inmates in a penal

 

or correctional institution purchased with scrip or its equivalent

 

issued and redeemed by the institution.

 

     (k) A sale of textbooks sold by a public or nonpublic school

 

to or for the use of students enrolled in any part of a

 

kindergarten through twelfth grade program.

 

     (l) A Before October 1, 2009, a sale of tangible personal

 

property 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.

 

     (m) The sale or lease of the following to 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.

 

     (n) A sale of tangible personal property to a person holding a

 

direct payment permit under section 8 of the use tax act, 1937 PA

 

94, MCL 205.98.

 

     (2) The tangible personal property under subsection (1) is

 

exempt only to the extent that that property is used for the exempt

 

purpose 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. 4g. (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 that are 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 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. 4i. (1) As used in this section:

 

     (a) "Bad debt" means any portion of a debt that is related to

 

a sale at retail taxable under this act for which gross proceeds

 

are not otherwise deductible or excludable and that is eligible to

 

be claimed, or could be eligible to be claimed if the taxpayer kept

 

accounts on an accrual basis, as a deduction pursuant to section

 

166 of the internal revenue code, 26 USC 166. A bad debt shall not

 

include any finance charge, interest, or sales tax on the purchase

 

price, uncollectible amounts on property that remains in the

 

possession of the taxpayer until the full purchase price is paid,

 

expenses incurred in attempting to collect any account receivable

 

or any portion of the debt recovered, any accounts receivable that

 

have been sold to and remain in the possession of a third party for

 

collection, and 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) "Taxpayer" means a person that has remitted sales tax

 

directly to the department on the specific sales at retail

 

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.

 

     (2) In computing the amount of tax levied under this act for

 

any month before October 1, 2009, a taxpayer may deduct the amount

 

of bad debts from his or her gross proceeds used for the

 

computation of the tax. The amount of gross proceeds deducted must

 

be charged off as uncollectible on the books and records of the

 

taxpayer 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, before October 1, 2009, 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 taxpayer

 

claimed a deduction under this section, the taxpayer 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.

 

     (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) 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 by a taxpayer claiming a deduction

 

pursuant to this section and shall ensure that the deduction on any

 

bad debt does not result in the taxpayer claiming the deduction

 

recovering any more or less than the taxes imposed on the sale that

 

constitutes the bad debt.

 

     (5) 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, before October 1, 2009, claim, on

 

behalf of the taxpayer, any bad debt allowable to the taxpayer and

 

shall credit or refund that amount of bad debt allowed or refunded

 

to the taxpayer.

 

     (6) If the books and records of a taxpayer 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 taxpayer

 

may allocate the bad debts.

 

     Sec. 4x. (1) A sale to a domestic air carrier of 1 or more of

 

the following is exempt from the tax under this act:

 

     (a) An aircraft that has a maximum certificated takeoff weight

 

of at least 6,000 pounds for use solely in the transport of air

 

cargo, passengers, or a combination of air cargo and passengers.

 

     (b) Parts and materials, excluding shop equipment or fuel,

 

affixed or to be affixed to an aircraft that has a maximum

 

certificated takeoff weight of at least 6,000 pounds for use solely

 

in the transport of air cargo, passengers, or a combination of air

 

cargo and passengers.

 

     (2) The Before October 1, 2007, 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) A sale of an aircraft to a person for subsequent lease to

 

a domestic air carrier operating under a certificate issued by the

 

federal aviation administration under 14 CFR 121, for use solely in

 

the regularly scheduled transport of passengers is exempt from the

 

tax under this act.

 

     (5) 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" is limited to entities 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) "Prepurchase evaluation" means an examination of an

 

aircraft to provide a potential purchaser with information relevant

 

to the potential purchase.

 

     (d) "Postsale customization" means any improvement,

 

maintenance, or repair that is performed on an aircraft following a

 

transfer of ownership of the aircraft.

 

     (e) "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.