Bill Text: MI SB0369 | 2015-2016 | 98th Legislature | Engrossed
Bill Title: Use tax; exemptions; tangible personal property eligible for an industrial processing exemption; expand. Amends sec. 4o of 1937 PA 94 (MCL 205.94o). TIE BAR WITH: SB 0370'15
Spectrum: Partisan Bill (Republican 4-0)
Status: (Passed) 2015-12-01 - Assigned Pa 0204'15 With Immediate Effect [SB0369 Detail]
Download: Michigan-2015-SB0369-Engrossed.html
SB-0369, As Passed Senate, September 17, 2015
SUBSTITUTE FOR
SENATE BILL NO. 369
A bill to amend 1937 PA 94, entitled
"Use tax act,"
by amending section 4o (MCL 205.94o), as amended by 2012 PA 474.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 4o. (1) The tax levied under this act does not apply to
property sold to the following after March 30, 1999, subject to
subsection (2):
(a) An industrial processor for use or consumption in
industrial processing.
(b) A person, whether or not the person is an industrial
processor, if the tangible personal property is intended for
ultimate use in and is used in industrial processing by an
industrial processor.
(c) A person, whether or not the person is an industrial
processor, if the tangible personal property is used by that person
to perform an industrial processing activity for or on behalf of an
industrial processor.
(d) A person, whether or not the person is an industrial
processor, if the tangible personal property is 1 of the following:
(i) A computer used in operating industrial processing
equipment.
(ii) Equipment used in a computer assisted manufacturing
system.
(iii) Equipment used in a computer assisted design or
engineering system integral to an industrial process.
(iv) A subunit or electronic assembly comprising a component
in a computer integrated industrial processing system.
(v) Computer equipment used in connection with the computer
assisted production, storage, and transmission of data if the
equipment would have been exempt had the data transfer been made
using tapes, disks, CD-ROMs, or similar media by a company whose
business includes publishing doctoral dissertations and information
archiving, and that sells the majority of the company's products to
nonprofit organizations exempt under section 4(1)(w).
(vi) Equipment used in the production of prewritten computer
software or software modified or adapted to the user's needs or
equipment by the seller, only if the software is available for sale
from a seller of software on an as-is basis or as an end product
without modification or adaption.
(2) The property under subsection (1) is exempt only to the
extent that the property is used for the exempt purpose stated in
this section. The exemption is limited to the percentage of exempt
use to total use determined by a reasonable formula or method
approved by the department.
(3) Industrial processing includes the following activities:
(a) Production or assembly.
(b) Research or experimental activities.
(c) Engineering related to industrial processing.
(d) Inspection, quality control, or testing to determine
whether particular units of materials or products or processes
conform to specified parameters at any time before materials or
products first come to rest in finished goods inventory storage.
(e) Planning, scheduling, supervision, or control of
production or other exempt activities.
(f) Design, construction, or maintenance of production or
other exempt machinery, equipment, and tooling.
(g) Remanufacturing.
(h) Processing of production scrap and waste up to the point
it is stored for removal from the plant of origin.
(i) Recycling of used materials for ultimate sale at retail or
reuse.
(j) Production material handling.
(k) Storage of in-process materials.
(4) Property that is eligible for an industrial processing
exemption includes the following:
(a) Property that becomes an ingredient or component part of
the finished product to be sold ultimately at retail or affixed to
and made a structural part of real estate.
(b) Machinery, equipment, tools, dies, patterns, foundations
for machinery or equipment, or other processing equipment used in
an industrial processing activity and in their repair and
maintenance.
(c) Property that is consumed or destroyed or that loses its
identity in an industrial processing activity.
(d) Tangible personal property, not permanently affixed and
not becoming a structural part of real estate, that becomes a part
of, or is used and consumed in installation and maintenance of,
systems used for an industrial processing activity.
(e) Fuel or energy used or consumed for an industrial
processing activity.
(f) Machinery, equipment, or materials used within a plant
site or between plant sites operated by the same person for
movement of tangible personal property in the process of
production. Property exempt under this subdivision includes front
end loaders, forklifts, pettibone lifts, skidsters, multipurpose
loaders, knuckle-boom log loaders, tractors, and log loaders used
to unload logs from trucks at a saw mill site for the purpose of
processing at the site and to load lumber onto trucks at a saw mill
site for purposes of transportation from the site.
(g) Office equipment, including data processing equipment,
used for an industrial processing activity.
(h) Tangible personal property used or consumed in an
industrial processing activity to produce alcoholic beverages that
are sold at retail by that industrial processor through its own
locations.
(5) Property that is not eligible for an industrial processing
exemption includes the following:
(a) Tangible personal property permanently affixed and
becoming a structural part of real estate in this state including
building utility systems such as heating, air conditioning,
ventilating, plumbing, lighting, and electrical distribution, to
the point of the last transformer, switch, valve, or other device
at which point usable power, water, gas, steam, or air is diverted
from distribution circuits for use in industrial processing.
(b) Office equipment, including data processing equipment used
for nonindustrial processing purposes.
(c) Office furniture or office supplies.
(d) An industrial processor's own product or finished good
that it uses or consumes for purposes other than industrial
processing.
(e) Tangible personal property used for receiving and storage
of materials, supplies, parts, or components purchased by the user
or consumer.
(f) Tangible personal property used for receiving or storage
of natural resources extracted by the user or consumer.
(g) Vehicles, including special bodies or attachments,
required to display a vehicle permit or license plate to operate on
public highways, except for a vehicle bearing a manufacturer's
plate or a specially designed vehicle, together with parts, used to
mix and agitate materials at a plant or job site in the concrete
manufacturing process.
(h) Tangible personal property used for the preparation of
food or beverages by a retailer for ultimate sale at retail through
its own locations, except as provided in subsection (4)(h).
(i) Tangible personal property used or consumed for the
preservation or maintenance of a finished good once it first comes
to rest in finished goods inventory storage.
(j) Returnable shipping containers or materials, except as
provided in subsection (4)(f).
(k) Tangible personal property used in the production of
computer software originally designed for the exclusive use and
special needs of the purchaser.
(6) Industrial processing does not include the following
activities:
(a) Purchasing, receiving, or storage of raw materials.
(b) Sales, distribution, warehousing, shipping, or advertising
activities.
(c) Administrative, accounting, or personnel services.
(d) Design, engineering, construction, or maintenance of real
property and nonprocessing equipment.
(e) Plant security, fire prevention, or medical or hospital
services.
(7) As used in this section:
(a) "Industrial processing" means the activity of converting
or conditioning tangible personal property by changing the form,
composition, quality, combination, or character of the property for
ultimate sale at retail or for use in the manufacturing of a
product to be ultimately sold at retail or affixed to and made a
structural part of real estate located in another state. Industrial
processing begins when tangible personal property begins movement
from raw materials storage to begin industrial processing and ends
when finished goods first come to rest in finished goods inventory
storage.
(b) "Industrial processor" means a person who performs the
activity of converting or conditioning tangible personal property
for ultimate sale at retail or use in the manufacturing of a
product to be ultimately sold at retail or affixed to and made a
structural part of real estate located in another state.
(c) "Product", as used in subdivision (e), includes, but is
not limited to, a prototype, pilot model, process, formula,
invention, technique, patent, or similar property, whether intended
to be used in a trade or business or to be sold, transferred,
leased, or licensed.
(d) "Remanufacturing" means the activity of overhauling,
retrofitting, fabricating, or repairing a product or its component
parts for ultimate sale at retail.
(e) "Research or experimental activity" means activity
incident to the development, discovery, or modification of a
product or a product related process. Research or experimental
activity also includes activity necessary for a product to satisfy
a government standard or to receive government approval. Research
or experimental activity does not include the following:
(i) Ordinary testing or inspection of materials or products
for quality control purposes.
(ii) Efficiency surveys.
(iii) Management surveys.
(iv) Market or consumer surveys.
(v) Advertising or promotions.
(vi) Research in connection with literacy, historical, or
similar projects.
Enacting section 1. This amendatory act does not take effect
unless Senate Bill No. 370 of the 98th Legislature is enacted into
law.
