HOUSE BILL No. 4643
April 16, 1997, Introduced by Reps. Perricone, Profit, Cassis and Palamara and referred to the Committee on Tax Policy. A bill to amend 1937 PA 94, entitled "Use tax act," by amending section 4 (MCL 205.94), as amended by 1996 PA 436. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 4. The tax levied does not apply to the following: 2 (a) Property sold in this state on which transaction a tax 3 is paid under the general sales tax act, Act No. 167 of the 4 Public Acts of 1933, being sections 205.51 to 205.78 of the 5 Michigan Compiled Laws 1933 PA 167, MCL 205.51 TO 205.78, if the 6 tax was due and paid on the retail sale to a consumer. 7 (b) Property, the storage, use, or other consumption of 8 which this state is prohibited from taxing under the constitution 9 or laws of the United States, or under the constitution of this 10 state. 03100'97 CSC 2 1 (c) Property purchased for resale, demonstration purposes, 2 or lending or leasing to a public or parochial school offering a 3 course in automobile driving except that a vehicle purchased by 4 the school shall be certified for driving education and shall not 5 be reassigned for personal use by the school's administrative 6 personnel. For a dealer selling a new car or truck, exemption 7 for demonstration purposes shall be determined by the number of 8 new cars and trucks sold during the current calendar year or the 9 immediately preceding year without regard to specific make or 10 style according to the following schedule of 0 to 25, 2 units; 26 11 to 100, 7 units; 101 to 500, 20 units; 501 or more, 25 units; but 12 not to exceed 25 cars and trucks in 1 calendar year for demon- 13 stration purposes. Property purchased for resale includes promo- 14 tional merchandise transferred pursuant to a redemption offer to 15 a person located outside this state or any packaging material, 16 other than promotional merchandise, acquired for use in fulfill- 17 ing a redemption offer or rebate to a person located outside this 18 state. 19 (d) Property that is brought into this state by a nonresi- 20 dent person for storage, use, or consumption while temporarily 21 within this state, except if the property is used in this state 22 in a nontransitory business activity for a period exceeding 15 23 days. 24 (e) Property the sale or use of which was already subjected 25 to a sales tax or use tax equal to, or in excess of, that imposed 26 by this act under the law of any other state or a local 27 governmental unit within a state if the tax was due and paid on 03100'97 3 1 the retail sale to the consumer and the state or local 2 governmental unit within a state in which the tax was imposed 3 accords like or complete exemption on property the sale or use of 4 which was subjected to the sales or use tax of this state. If 5 the sale or use of property was already subjected to a tax under 6 the law of any other state or local governmental unit within a 7 state in an amount less than the tax imposed by this act, this 8 act shall apply, but at a rate measured by the difference between 9 the rate provided in this act and the rate by which the previous 10 tax was computed. 11 (f) Property sold to a person engaged in a business enter- 12 prise and using and consuming the property in the tilling, plant- 13 ing, caring for, or harvesting of the things of the soil or in 14 the breeding, raising, or caring for livestock, poultry, or 15 horticultural products, including transfers of livestock, poul- 16 try, or horticultural products for further growth. At the time 17 of the transfer of that tangible personal property, the trans- 18 feree shall sign a statement, in a form approved by the depart- 19 ment, stating that the property is to be used or consumed in con- 20 nection with the production of horticultural or agricultural pro- 21 ducts as a business enterprise. The statement shall be accepted 22 by the courts as prima facie evidence of the exemption. This 23 exemption includes agricultural land tile, which means fired clay 24 or perforated plastic tubing used as part of a subsurface drain- 25 age system for land used in the production of agricultural pro- 26 ducts as a business enterprise and includes a portable grain bin, 27 which means a structure that is used or is to be used to shelter 03100'97 4 1 grain and that is designed to be disassembled without significant 2 damage to its component parts. This exemption does not include 3 transfers of food, fuel, clothing, or similar tangible personal 4 property for personal living or human consumption. This exemp- 5 tion does not include tangible personal property permanently 6 affixed and becoming a structural part of real estate. 7 (g) Property sold to the following: 8 (i) An industrial processor for use or consumption in indus- 9 trial processing. Property used or consumed in industrial pro- 10 cessing does not include tangible personal property permanently 11 affixed and becoming a structural part of real estate; office 12 furniture, office supplies, and administrative office equipment; 13 or vehicles licensed and titled for use on public highways other 14 than a specially designed vehicle, together with parts, used to 15 mix and agitate materials added at a plant or jobsite in the con- 16 crete manufacturing process. Industrial processing does not 17 include receipt and storage of raw materials purchased or 18 extracted by the user or consumer, or the preparation of food and 19 beverages by a retailer for retail sale. As used in this subdi- 20 vision, "industrial processor" means a person who transforms, 21 alters, or modifies tangible personal property by changing the 22 form, composition, or character of the property for ultimate sale 23 at retail or sale to another industrial processor to be further 24 processed for ultimate sale at retail. Sales to a person per- 25 forming a service who does not act as an industrial processor 26 while performing the service may not be excluded under this 27 subdivision, except as provided in subparagraph (ii). 03100'97 5 1 (ii) A person, whether or not the person is an industrial 2 processor, when the property is a computer used in operating 3 industrial processing equipment; equipment used in a computer 4 assisted manufacturing system; equipment used in a computer 5 assisted design or engineering system integral to an industrial 6 process; or a subunit or electronic assembly comprising a compo- 7 nent in a computer integrated industrial processing system. 8 (h) Property or services sold to the United States, an unin- 9 corporated agency or instrumentality of the United States, an 10 incorporated agency or instrumentality of the United States 11 wholly owned by the United States or by a corporation wholly 12 owned by the United States, the American red cross and its chap- 13 ters or branches, this state, a department or institution of this 14 state, or a political subdivision of this state. 15 (i) Property or services sold to a school, hospital, or home 16 for the care and maintenance of children or aged persons, oper- 17 ated by an entity of government, a regularly organized church, 18 religious, or fraternal organization, a veterans' organization, 19 or a corporation incorporated under the laws of this state, if 20 not operated for profit, and if the income or benefit from the 21 operation does not inure, in whole or in part, to an individual 22 or private shareholder, directly or indirectly, and if the activ- 23 ities of the entity or agency are carried on exclusively for the 24 benefit of the public at large and are not limited to the advan- 25 tage, interests, and benefits of its members or a restricted 26 group. The tax levied does not apply to property or services 27 sold to a parent cooperative preschool. As used in this 03100'97 6 1 subdivision, "parent cooperative preschool" means a nonprofit, 2 nondiscriminatory educational institution, maintained as a commu- 3 nity service and administered by parents of children currently 4 enrolled in the preschool that provides an educational and devel- 5 opmental program for children younger than compulsory school age, 6 that provides an educational program for parents, including 7 active participation with children in preschool activities, that 8 is directed by qualified preschool personnel, and that is 9 licensed by the department of consumer and industry services 10 pursuant to Act No. 116 of the Public Acts of 1973, being sec- 11 tions 722.111 to 722.128 of the Michigan Compiled Laws 1973 PA 12 116, MCL 722.111 TO 722.128. 13 (j) Property or services sold to a regularly organized 14 church or house of religious worship except the following: 15 (i) Sales in which the property is used in activities that 16 are mainly commercial enterprises. 17 (ii) Sales of vehicles licensed for use on the public high- 18 ways other than a passenger van or bus with a manufacturer's 19 rated seating capacity of 10 or more that is used primarily for 20 the transportation of persons for religious purposes. 21 (k) A vessel designed for commercial use of registered ton- 22 nage of 500 tons or more, if produced upon special order of the 23 purchaser, and bunker and galley fuel, provisions, supplies, 24 maintenance, and repairs for the exclusive use of a vessel of 500 25 tons or more engaged in interstate commerce. 26 (l) Property purchased by a person engaged in the business 27 of constructing, altering, repairing, or improving real estate 03100'97 7 1 for others to the extent the property is affixed to and made a 2 structural part of the real estate of a nonprofit hospital or a 3 nonprofit housing entity qualified as exempt pursuant to section 4 15a of the state housing development authority act of 1966, Act 5 No. 346 of the Public Acts of 1966, being section 125.1415a of 6 the Michigan Compiled Laws 1966 PA 346, MCL 125.1415A. A non- 7 profit hospital or nonprofit housing includes only the property 8 of a nonprofit hospital or the homes or dwelling places con- 9 structed by a nonprofit housing entity, the income or property of 10 which does not directly or indirectly inure to the benefit of an 11 individual, private stockholder, or other private person. 12 (m) Property purchased for use in this state where actual 13 personal possession is obtained outside this state, the purchase 14 price or actual value of which does not exceed $10.00 during 1 15 calendar month. 16 (n) A newspaper or periodical classified under federal 17 postal laws and regulations effective September 1, 1985 as second 18 class mail matter or as a controlled circulation publication or 19 qualified to accept legal notices for publication in this state, 20 as defined by law, or any other newspaper or periodical of gen- 21 eral circulation, established at least 2 years, and published at 22 least once a week, and a copyrighted motion picture film. 23 Tangible personal property used or consumed, and not becoming a 24 component part of a copyrighted motion picture film, newspaper or 25 periodical, except that portion or percentage of tangible per- 26 sonal property used or consumed in producing an advertising 27 supplement that becomes a component part of a newspaper or 03100'97 8 1 periodical is subject to tax. For purposes of this subdivision, 2 tangible personal property that becomes a component part of a 3 newspaper or periodical and consequently not subject to tax, 4 includes an advertising supplement inserted into and circulated 5 with a newspaper or periodical that is otherwise exempt from tax 6 under this subdivision, if the advertising supplement is deliv- 7 ered directly to the newspaper or periodical by a person other 8 than the advertiser, or the advertising supplement is printed by 9 the newspaper or periodical. 10 (o) Property purchased by persons licensed to operate a com- 11 mercial radio or television station if the property is used in 12 the origination or integration of the various sources of program 13 material for commercial radio or television transmission. This 14 subdivision does not include a vehicle licensed and titled for 15 use on public highways or property used in the transmitting to or 16 receiving from an artificial satellite. 17 (p) A person who is a resident of this state who purchases 18 an automobile in another state while in the military service of 19 the United States and who pays a sales tax in the state where the 20 automobile is purchased. 21 (q) A vehicle for which a special registration is secured in 22 accordance with section 226(12) of the Michigan vehicle code, 23 Act No. 300 of the Public Acts of 1949, being section 257.226 of 24 the Michigan Compiled Laws 1949 PA 300, MCL 257.226. 25 (r) A hearing aid, contact lenses if prescribed for a spe- 26 cific disease which THAT precludes the use of eyeglasses, or 27 any other apparatus, device, or equipment used to replace or 03100'97 9 1 substitute for any part of the human body, or used to assist the 2 disabled person to lead a reasonably normal life when the tangi- 3 ble personal property is purchased on a written prescription or 4 order issued by a health professional as defined by section 4 of 5 former Act No. 264 of the Public Acts of 1974 1974 PA 264, or 6 section 21005 of the public health code, Act No. 368 of the 7 Public Acts of 1978, being section 333.21005 of the Michigan 8 Compiled Laws 1978 PA 368, MCL 333.21005, or eyeglasses pre- 9 scribed or dispensed to correct the person's vision by an oph- 10 thalmologist, optometrist, or optician. 11 (s) Water when delivered through water mains or in bulk 12 tanks in quantities of not less than 500 gallons. 13 (t) The purchase of machinery and equipment for use or con- 14 sumption in the rendition of any combination of services, the use 15 or consumption of which is taxable under section 3a(a) or (c) 16 except that this exemption is limited to the tangible personal 17 property located on the premises of the subscriber and to central 18 office equipment or wireless equipment, directly used or consumed 19 in transmitting, receiving, or switching or the monitoring of 20 switching of a 2-way interactive communication. As used in this 21 subdivision, central office equipment or wireless equipment does 22 not include distribution equipment including cable or wire 23 facilities. 24 (u) A vehicle not for resale used by a nonprofit corporation 25 organized exclusively to provide a community with ambulance or 26 fire department services. 03100'97 10 1 (v) Tangible personal property purchased and installed as a 2 component part of a water pollution control facility for which a 3 tax exemption certificate is issued pursuant to part 37 (water 4 pollution control facilities; tax exemption) of the natural 5 resources and environmental protection act, Act No. 451 of the 6 Public Acts of 1994, being sections 324.3701 to 324.3708 of the 7 Michigan Compiled Laws 1994 PA 451, MCL 324.3701 TO 324.3708, or 8 an air pollution control facility for which a tax exemption cer- 9 tificate is issued pursuant to part 59 (air pollution control 10 facility; tax exemption) of Act No. 451 of the Public Acts of 11 1994, being sections 324.5901 to 324.5908 of the Michigan 12 Compiled Laws THE NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION 13 ACT, 1994 PA 451, MCL 324.5901 TO 324.5908. 14 (w) Tangible real or personal property donated by a manufac- 15 turer, wholesaler, or retailer to an organization or entity 16 exempt pursuant to subdivision (i) or (j) or section 4a(a) or (b) 17 of Act No. 167 of the Public Acts of 1933, being section 205.54a 18 of the Michigan Compiled Laws THE GENERAL SALES TAX ACT, 1933 PA 19 167, MCL 205.54A. 20 (x) The storage, use, or consumption by a domestic air car- 21 rier of an aircraft purchased after December 31, 1992 for use 22 solely in the transport of air cargo that has a maximum certifi- 23 cated takeoff weight of at least 12,500 pounds. For purposes of 24 this subdivision, the term "domestic air carrier" is limited to 25 entities engaged in the commercial transport for hire of cargo or 26 entities engaged in the commercial transport of passengers as a 27 business activity. 03100'97 11 1 (y) The storage, use, or consumption by a domestic air 2 carrier of an aircraft purchased after June 30, 1994 that is used 3 solely in the regularly scheduled transport of passengers. For 4 purposes of this subdivision, the term "domestic air carrier" is 5 limited to entities engaged in the commercial transport for hire 6 of cargo or entities engaged in the commercial transport of pas- 7 sengers as a business activity. 8 (z) The storage, use, or consumption by a domestic air car- 9 rier of an aircraft, other than an aircraft described under 10 subdivision (y), purchased after December 31, 1994, that has a 11 maximum certificated takeoff weight of at least 12,500 pounds and 12 that is designed to have a maximum passenger seating configura- 13 tion of more than 30 seats and used solely in the transport of 14 passengers. For purposes of this subdivision, the term "domestic 15 air carrier" is limited to entities engaged in the commercial 16 transport for hire of cargo or entities engaged in the commercial 17 transport of passengers as a business activity. 18 (aa) Property or services sold to a health, welfare, educa- 19 tional, cultural arts, charitable, or benevolent organization not 20 operated for profit that has been issued before June 13, 1994 an 21 exemption ruling letter to purchase items exempt from tax signed 22 by the administrator of the sales, use, and withholding taxes 23 division of the department. The department shall reissue an 24 exemption letter to each of those organizations after June 13, 25 1994 that shall remain in effect unless the organization fails to 26 meet the requirements that originally entitled it to this 27 exemption; or to an organization not operated for profit and 03100'97 12 1 exempt from federal income tax under section 501(c)(3) or 2 501(c)(4) of the internal revenue code. of 1986, 26 U.S.C. 501. 3 The exemption does not apply to sales of tangible personal prop- 4 erty and sales of vehicles licensed for use on public highways, 5 that are not used primarily to carry out the purposes of the 6 organization as stated in the bylaws or articles of incorporation 7 of the exempt organization. 8 (BB) GAS USED OR CONSUMED TO COMPRESS, PUMP, OR OTHERWISE 9 PRODUCE MOTIVE POWER TO EXTRACT, GATHER WITH PIPELINES, TRANSPORT 10 THROUGH PIPELINES, INJECT INTO STORAGE FIELDS, OR REMOVE FROM 11 STORAGE FIELDS, NATURAL GAS OR NATURAL GAS LIQUIDS. 03100'97 Final page. CSC