SENATE BILL No. 510

May 29, 2001, Introduced by Senators MC MANUS, GAST, SIKKEMA, SMITH, HART, EMMONS, BULLARD, BENNETT, NORTH, STILLE, GOUGEON, YOUNG,

PETERS, DE BEAUSSAERT and EMERSON and referred to the Committee on

Farming, Agribusiness and Food Systems.

A bill to amend 1933 PA 167, entitled

"General sales tax act,"

by amending sections 4a and 4g (MCL 205.54a and 205.54g), section

4a as amended by 1999 PA 116 and section 4g as amended by 2000 PA

417.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 4a. (1) A person subject to tax under this act may

2 exclude from the amount of the gross proceeds used for the compu-

3 tation of the tax, a sale of tangible personal property, subject

4 to subsection (2):

5 (a) Not for resale to a nonprofit school, nonprofit hospi-

6 tal, or nonprofit home for the care and maintenance of children

7 or aged persons operated by an entity of government, a regularly

8 organized church, religious, or fraternal organization, a

9 veterans' organization, or a corporation incorporated under the

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1 laws of the state, if the income or benefit from the operation

2 does not inure, in whole or in part, to an individual or private

3 shareholder, directly or indirectly, and if the activities of the

4 entity or agency are carried on exclusively for the benefit of

5 the public at large and are not limited to the advantage, inter-

6 ests, and benefits of its members or any restricted group. At

7 the time of the transfer of this tangible personal property, the

8 transferee shall sign a statement, in a form approved by the

9 department, stating that the property is to be used or consumed

10 in connection with the operation of the institution or agency and

11 that the institution or agency qualifies as an exempt entity

12 under this subdivision. The statement shall be accepted by all

13 courts as prima facie evidence of the exemption and the statement

14 shall provide that if the claim for tax exemption is disallowed

15 the transferee will reimburse the transferor for the amount of

16 tax involved. A sale of tangible personal property to a parent

17 cooperative preschool is exempt from taxation under this act. As

18 used in this subdivision, "parent cooperative preschool" means a

19 nonprofit, nondiscriminatory educational institution, maintained

20 as a community service and administered by parents of children

21 currently enrolled in the preschool, that provides an educational

22 and developmental program for children younger than compulsory

23 school age, that provides an educational program for parents,

24 including active participation with children in preschool activi-

25 ties, that is directed by qualified preschool personnel, and that

26 is licensed by the department of consumer and industry services

27 pursuant to 1973 PA 116, MCL 722.111 to 722.128.

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1 (b) Not for resale to a regularly organized church or house

2 of religious worship, except the following:

3 (i) Sales in activities that are mainly commercial

4 enterprises.

5 (ii) Sales of vehicles licensed for use on public highways

6 other than a passenger van or bus with a manufacturer's rated

7 seating capacity of 10 or more that is used primarily for the

8 transportation of persons for religious purposes.

9 (c) To bona fide enrolled students, of food by a school or

10 other educational institution not operated for profit.

11 (d) That is a vessel designated for commercial use of regis-

12 tered tonnage of 500 tons or more, if produced upon special order

13 of the purchaser, and bunker and galley fuel, provisions, sup-

14 plies, maintenance, and repairs for the exclusive use of the

15 vessel engaged in interstate commerce.

16 (e) To persons engaged in a business enterprise and using or

17 consuming the tangible personal property in the tilling, plant-

18 ing, caring for, or harvesting of the things of the soil; in the

19 breeding, raising, or caring for livestock, poultry, or horticul-

20 tural products, including transfers of livestock, poultry, or

21 horticultural products for further growth; or in the direct gath-

22 ering of fish, by net, line, or otherwise only by an

23 owner-operator of the business enterprise, not including a

24 charter fishing business enterprise. This exemption includes

25 agricultural land tile, which means fired clay or perforated

26 plastic tubing used as part of a subsurface drainage system for

27 land, and subsurface irrigation pipe, if the land tile or

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1 irrigation pipe is used in the production of agricultural

2 products as a business enterprise. At the time of the transfer

3 of this tangible personal property, the transferee shall sign a

4 statement, in a form approved by the department, stating that the

5 property is to be used or consumed in connection with the produc-

6 tion of horticultural or agricultural products as a business

7 enterprise, or in connection with fishing as an owner-operator

8 business enterprise. The statement shall be accepted by all

9 courts as prima facie evidence of the exemption. This exemption

10 includes a portable grain bin, which means a structure that is

11 used or is to be used to shelter grain and that is designed to be

12 disassembled without significant damage to its component parts.

13 This exemption also includes grain drying equipment and natural

14 or propane gas used to fuel that equipment for agricultural

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

16 fuel, clothing, or any similar tangible personal property for

17 personal living or human consumption. This exemption does not

18 include tangible personal property permanently affixed and becom-

19 ing a structural part of real estate.

20 (f) That is a copyrighted motion picture film or a newspaper

21 or periodical admitted under federal postal laws and regulations

22 effective September 1, 1985 as second-class mail matter or as a

23 controlled circulation publication or qualified to accept legal

24 notices for publication in this state, as defined by law, or any

25 other newspaper or periodical of general circulation, established

26 not less than 2 years, and published not less than once a week.

27 Tangible personal property used or consumed in producing a

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1 copyrighted motion picture film, a newspaper published more than

2 14 times per year, or a periodical published more than 14 times

3 per year, and not becoming a component part of that film, newspa-

4 per, or periodical is subject to the tax. After December 31,

5 1993, tangible personal property used or consumed in producing a

6 newspaper published 14 times or less per year or a periodical

7 published 14 times or less per year and that portion or percen-

8 tage of tangible personal property used or consumed in producing

9 an advertising supplement that becomes a component part of a

10 newspaper or periodical is exempt from the tax under this

11 subdivision. A claim for a refund for taxes paid before January

12 1, 1999, under this subdivision shall be made before June 30,

13 1999. For purposes of this subdivision, tangible personal prop-

14 erty that becomes a component part of a newspaper or periodical

15 and consequently not subject to tax includes an advertising sup-

16 plement inserted into and circulated with a newspaper or periodi-

17 cal that is otherwise exempt from tax under this subdivision, if

18 the advertising supplement is delivered directly to the newspaper

19 or periodical by a person other than the advertiser, or the

20 advertising supplement is printed by the newspaper or

21 periodical.

22 (g) To persons licensed to operate commercial radio or tele-

23 vision stations if the property is used in the origination or

24 integration of the various sources of program material for com-

25 mercial radio or television transmission. This subdivision does

26 not include a vehicle licensed and titled for use on public

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1 highways or property used in the transmission to or receiving

2 from an artificial satellite.

3 (h) That is a hearing aid, contact lenses if prescribed for

4 a specific disease that precludes the use of eyeglasses, or any

5 other apparatus, device, or equipment used to replace or substi-

6 tute for a part of the human body, or used to assist the disabled

7 person to lead a reasonably normal life if the tangible personal

8 property is purchased on a written prescription or order issued

9 by a health professional as defined by section 21005 of the

10 public health code, 1978 PA 368, MCL 333.21005 3501 OF THE

11 INSURANCE CODE OF 1956, 1956 PA 218, MCL 500.3501; a hearing aid

12 battery; or eyeglasses prescribed or dispensed to correct the

13 person's vision by an ophthalmologist, optometrist, or optician.

14 (i) That is a vehicle not for resale to a Michigan nonprofit

15 corporation organized exclusively to provide a community with

16 ambulance or fire department services.

17 (j) To inmates in a penal or correctional institution pur-

18 chased with scrip issued and redeemed by the institution.

19 (k) To or for the use of students enrolled in any part of a

20 kindergarten through twelfth grade program, of textbooks sold by

21 a public or nonpublic school.

22 (l) Installed as a component part of a water pollution con-

23 trol facility for which a tax exemption certificate is issued

24 pursuant to part 37 of the natural resources and environmental

25 protection act, 1994 PA 451, MCL 324.3701 to 324.3708, or an air

26 pollution control facility for which a tax exemption certificate

27 is issued pursuant to part 59 of the natural resources and

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1 environmental protection act, 1994 PA 451, MCL 324.5901 to

2 324.5908.

3 (m) To a purchaser of a new motor vehicle purchased before

4 January 1, 1993 if the purchaser qualifies for a special regis-

5 tration under section 226(12) of the Michigan vehicle code, 1949

6 PA 300, MCL 257.226, and the vehicle is purchased through a coun-

7 try determined by the department to be providing a like or com-

8 plete exemption for the purchase of a new motor vehicle to be

9 removed from that country.

10 (n) That is the following sold or leased to an industrial

11 laundry after December 31, 1997:

12 (i) Textiles and disposable products including, but not

13 limited to, soap, paper, chemicals, tissues, deodorizers and dis-

14 pensers, and all related items such as packaging, supplies, hang-

15 ers, name tags, and identification tags.

16 (ii) Equipment, whether owned or leased, used to repair and

17 dispense textiles including, but not limited to, roll towel cabi-

18 nets, slings, hardware, lockers, mop handles and frames, and

19 carts.

20 (iii) Machinery, equipment, parts, lubricants, and repair

21 services used to clean, process, and package textiles and related

22 items, whether owned or leased.

23 (iv) Utilities such as electric, gas, water, or oil.

24 (v) Production washroom equipment and mending and packaging

25 supplies and equipment.

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1 (vi) Material handling equipment including, but not limited

2 to, conveyors, racks, and elevators and related control

3 equipment.

4 (vii) Wastewater pretreatment equipment and supplies and

5 related maintenance and repair services.

6 (o) To a person holding a direct payment permit under

7 section 8 of the use tax act, 1937 PA 94, MCL 205.98.

8 (P) THAT IS A RETURNABLE PALLET OR CONTAINER LEASED TO A

9 FARMER OR OTHER PERSON INVOLVED IN AGRICULTURAL PRODUCTION OR

10 PROCESSING, INCLUDING, BUT NOT LIMITED TO, A PACKER, SHIPPER,

11 MANUFACTURER, OR RETAILER.

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

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

14 exempt purpose if one is stated in subsection (1). The exemption

15 is limited to the percentage of exempt use to total use deter-

16 mined by a reasonable formula or method approved by the

17 department.

18 Sec. 4g. (1) A person subject to tax under this act may

19 exclude from the amount of the gross proceeds used for the compu-

20 tation of the tax 1 or more of the following:

21 (a) Sales of prescription drugs for human use or food for

22 human consumption, except prepared food intended for immediate

23 consumption.

24 (b) The deposit on a returnable container for a beverage,

25 or the deposit on a carton or case that is used for returnable

26 containers, OR THE LEASE COST OF RETURNABLE PALLETS AND

27 CONTAINERS.

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1 (c) Food or tangible personal property purchased with

2 federal food stamps.

3 (d) Fruit or vegetable seeds and fruit or vegetable plants

4 if purchased at a place of business authorized to accept food

5 stamps by the food and nutrition service of the United States

6 department of agriculture or a place of business that has made a

7 complete and proper application for authorization to accept food

8 stamps but has been denied authorization and provides proof of

9 denial to the department of treasury.

10 (2) "Prescription drugs for human use" means insulin or a

11 drug dispensed by a licensed pharmacist pursuant to a written

12 prescription prescribed by a licensed physician or other health

13 professional as defined by section 21005 of the public health

14 code, 1978 PA 368, MCL 333.21005 3501 OF THE INSURANCE CODE OF

15 1956, 1956 PA 218, MCL 500.3501, for the use of a designated

16 person, or oxygen dispensed pursuant to a written prescription or

17 order issued by a licensed physician or other health professional

18 as defined in section 21005 of the public health code, 1978

19 PA 368, MCL 333.21005 3501 OF THE INSURANCE CODE OF 1956, 1956

20 PA 218, MCL 500.3501.

21 (3) "Food for human consumption" means all food and drink

22 items, including bottled water, intended primarily for human con-

23 sumption except beverages with an alcohol content of 1/2 of 1% or

24 more by volume, tobacco and tobacco products, and prepared food

25 intended for immediate consumption. Food for human consumption

26 includes live animals purchased with the intent to be slaughtered

27 for human consumption.

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1 (4) "Prepared food intended for immediate consumption" means

2 a retail sale of 1 or more of the following:

3 (a) Food or drink prepared and served for immediate consump-

4 tion at or near the premises or ordinarily sold on a takeout

5 basis for immediate consumption either on or off the premises.

6 For the purposes of this section premises includes the total

7 space and facilities in or on which a retailer conducts his or

8 her business, including, but not limited to, parking areas for

9 the convenience of in-car consumption, outdoor tables, benches,

10 chairs, and similar conveniences.

11 (b) Food or drink furnished, prepared, or served for immedi-

12 ate consumption at a table, chair, or counter or from a tray,

13 glass, dish, container, or other tableware.

14 (c) Food or drink arranged on a plate or platter, whether

15 intended for individual or multiple servings and whether sold by

16 the pound or by the serving; a sandwich, either hot or cold; or a

17 combination of taxable and nontaxable items when sold as a plate

18 or packaged as a meal, even though intended for more than 1

19 serving.

20 (d) Food that is cooked to the order of the purchaser, or

21 that is cooked and maintained at a temperature higher than the

22 surrounding air temperature before sale, or prepared food that is

23 sold by the piece rather than by weight or measure.

24 (e) Food or drink heated or cooled mechanically, electrical-

25 ly, or by other artificial means to an average temperature above

26 75 degrees Fahrenheit or below 65 degrees Farenheit FAHRENHEIT

27 before sale and sold from a mobile facility or vending machine,

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1 except milk, nonalcoholic beverages in a sealed container, and

2 fresh fruit. A refund shall not be made for any taxes paid after

3 December 31, 1994 and before January 16, 1997 for food or drink

4 otherwise exempt under this subdivision. The tax due under this

5 act on the sale of food or drink from a vending machine selling

6 both taxable items and items exempt under this subsection shall

7 be calculated under this act after December 31, 1994 based on 1

8 of the following as determined by the taxpayer:

9 (i) Actual gross proceeds from sales at retail.

10 (ii) Forty-five percent of proceeds from the sale of items

11 subject to tax under this act or exempt from the tax levied under

12 this act, other than from the sale of carbonated beverages.

13 (5) Prepared food intended for immediate consumption does

14 not include bakery products for off-premises consumption, such as

15 doughnuts, pastry, bread, and cakes; meals eligible to be pur-

16 chased with federal food stamps; or nonalcoholic beverages and

17 prepared food intended for immediate consumption provided during

18 work hours for free or at a reduced rate to employees of food

19 service establishments licensed by the Michigan department of

20 agriculture. As used in this subsection, "food service

21 establishment" means that term as defined in section 1107 of the

22 food law of 2000, 2000 PA 92, MCL 289.1107.

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