SALES TAX ON THE DIFFERENCE S.B. 89 (S-1) & 90 (S-1):
FLOOR SUMMARY
Senate Bill 89 (Substitute S-1 as reported)
Senate Bill 90 (Substitute S-1 as reported)
Sponsor: Senator Dave Robertson
CONTENT
Senate Bills 89 (S-1) and 90 (S-1) would amend the General Sales Tax Act and the Use Tax Act, respectively, to exclude from taxation the value of a trade-in on a new or used motor vehicle or titled watercraft, or a recreational vehicle (RV), subject to a phase-in on the value of the trade-in vehicle or RV between 2014 and 2022.
The General Sales Tax Act and the Use Tax Act impose a tax of 6% on the sales price or purchase price of nonexempt personal property and services. The Acts' definitions of "sales price" and "purchase price" include credit for any trade-in.
Under the bills, beginning June 1, 2013, "sales price" and "purchase price" would not include the agreed-upon value of a motor vehicle or RV used as part payment of the purchase price of a new motor vehicle or used motor vehicle or RV, or the agreed-upon value of a titled watercraft used as part payment of a new or used titled watercraft, if the agreed-upon value were separately stated on the invoice, bill of sale, or similar document given to the purchaser.
The agreed-upon value of a motor vehicle or RV used as part payment would be limited to 10% between June 1, 2013, and December 31, 2013. The value would increase to 20% in 2014 and increase in 10-percentage-point increments each year until it reached 90% in 2021. There would be no limit in 2022 and subsequent years.
MCL 205.51 (S.B. 89) Legislative Analyst: Suzanne Lowe
205.92 (S.B. 90)
FISCAL IMPACT
Based on the level of vehicle sales forecast for FY 2012-13, the bills would reduce State sales and use tax revenue by approximately $5.7 million in FY 2012-13, lowering revenue to the School Aid Fund, the General Fund, and the Comprehensive Transportation Fund, as well as constitutional revenue sharing to local units of government.
In FY 2013-14, the first full year the bills would be effective, they would reduce State sales and use tax revenue by approximately $45.3 million. The bills would lower revenue to the School Aid Fund by approximately $33.3 million, the General Fund by $3.1 million, the Comprehensive Transportation Fund by $2.1 million, and local units of government (through constitutional revenue sharing) by $6.8 million. The revenue loss under the bills would grow roughly $45.3 million per year, eventually reaching in $226.7 million in FY 2021-23 and lowering School Aid
Fund revenue by $166.6 million, General Fund revenue by $15.4 million, Comprehensive Transportation Fund revenue by $10.6 million, and constitutional revenue sharing to cities, villages, and townships by $34.1 million. The estimate further assumes that the reduced tax liability compared with current law would affect either the number and/or value of vehicles purchased. To the extent that vehicle prices and/or sales increase in later years from FY 2012-13 levels, the revenue loss would be larger.
Date Completed: 2-4-13 Fiscal Analyst: David Zin
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.