SB-0370, As Passed Senate, September 17, 2015

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

SENATE BILL NO. 370

 

 

 

 

 

 

 

 

 

 

 

     A bill to amend 1933 PA 167, entitled

 

"General sales tax act,"

 

by amending section 4t (MCL 205.54t), as amended by 2010 PA 116.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 4t. (1) The sale of tangible personal property to the

 

following after March 30, 1999, subject to subsection (2), is

 

exempt from the tax under this act:

 

     (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 4q.

 

     (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 adaptation.

 

     (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.

 

     (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

 

retail 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 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. 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.

 

     (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. 369 of the 98th Legislature is enacted into

 

law.