HOUSE BILL No. 5212 October 1, 1997, Introduced by Rep. Profit and referred to the Committee on Tax Policy. A bill to amend 1933 PA 167, entitled "General sales tax act," by amending sections 1, 4a, and 9 (MCL 205.51, 205.54a, and 205.59), section 1 as amended by 1995 PA 209, section 4a as amended by 1996 PA 435, and section 9 as amended by 1991 PA 87. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 1. (1) As used in this act: 2 (a) "Person" means an individual, firm, partnership, joint 3 venture, association, social club, fraternal organization, munic- 4 ipal or private corporation,whether organized for profit or 5 not, company, estate, trust, receiver, trustee, syndicate, the 6 United States, this state, county, or any other group or combina- 7 tion acting as a unit, and includes the plural as well as the 8 singular number, unless the intention to give a more limited 9 meaning is disclosed by the context. 03545'97 ** CSC 2 1 (b) "Sale at retail" means a transaction by which the 2 ownership of tangible personal property is transferred for con- 3 sideration, if the transfer is made in the ordinary course of the 4 transferor's business and is made to the transferee for consump- 5 tion or use, or for any purpose other than for resale, or for 6 lease, if the rental receipts are taxable under the use tax act, 7Act No. 94 of the Public Acts of 1937, being sections 205.91 to8205.111 of the Michigan Compiled Laws1937 PA 94, MCL 205.91 TO 9 205.111, in the form of tangible personal property to a person 10 licensed under this act, or for demonstration purposes or lending 11 or leasing to a public or parochial school offering a course in 12 automobile driving. However, a vehicle purchased by the school 13 shall be certified for driver education and shall not be reas- 14 signed for personal use of the school's administrative 15 personnel. For a dealer selling a new car or truck, the exemp- 16 tion for demonstration purposes shall be determined by the number 17 of new cars and trucks sold during the current calendar year or 18 the immediately preceding year without regard to specific make or 19 style in accordance with the following schedule of 0 to 25, 2 20 units; 26 to 100, 7 units; 101 to 500, 20 units; 501 or more, 25 21 units; but not to exceed 25 cars and trucks in a calendar year 22 for demonstration purposes. 23 (c) "Sale at retail" includes the sale of tangible personal 24 property to persons directly engaged in the business of con- 25 structing, altering, repairing, or improving real estate for 26 others except property affixed to and made a structural part of 27 the real estate of a nonprofit hospital or nonprofit housing. A 03545'97 ** 3 1 nonprofit hospital or nonprofit housing includes only the 2 property of a nonprofit hospital or the homes or dwelling places 3 constructed by a nonprofit housing entity qualified as exempt 4 pursuant to section 15a of the state housing development author- 5 ity act of 1966,Act No. 346 of the Public Acts of 1966, being6section 125.1415a of the Michigan Compiled Laws1966 PA 346, MCL 7 125.1415A, the income or property of which does not directly or 8 indirectly inure to the benefit of an individual, private stock- 9 holder, or other private person. 10 (d) "Sale at retail" includes a conditional sale, install- 11 ment lease sale,andOR other transfer of property if title is 12 retained as security for the purchase price but is intended to be 13 transferred later. 14 (e) "Sale at retail" includes the sale of electricity, natu- 15 ral or artificial gas, or steam if THE SALE IS made to the con- 16 sumer or user for consumption or use rather than for resale. 17 Sale at retail does not include the sale of water through water 18 mains or the sale of water delivered in bulk tanks in quantities 19 of not less than 500 gallons. 20 (f) "Sale at retail" includes computer software offered for 21 general sale to the public or software modified or adapted to the 22 user's needs or equipment by the seller, only if the software is 23 available for sale from a seller of software on an as is basis or 24 as an end product without modification or adaptation. Sale at 25 retail does not include specific charges for technical support or 26 for adapting or modifying prewritten, standard, or canned 27 computer software programs to a purchaser's needs or equipment if 03545'97 ** 4 1 those charges are separately stated and identified. Sale at 2 retail does not include computer software originally designed for 3 the exclusive use and special needs of the purchaser. As used in 4 this subdivision, "computer software" means a set of statements 5 or instructions that when incorporated in a machine usable medium 6 is capable of causing a machine or device having information pro- 7 cessing capabilities to indicate, perform, or achieve a particu- 8 lar function, task, or result. 9 (G) "SALE AT RETAIL" INCLUDES THE LAUNDERING OR CLEANING OF 10 TEXTILES UNDER A SALE, RENTAL, OR SERVICE AGREEMENT WITH A TERM 11 OF AT LEAST 5 DAYS. 12 (H)(g)"Sale at retail" does not include an isolated 13 transaction by a person not licensed or required to be licensed 14 under this act, in which tangible personal property is offered 15 for sale, sold, transferred, and delivered by the owner. 16 (I)(h)"Sale at retail" does not include a commercial 17 advertising element if the commercial advertising element is used 18 to create or develop a print, radio, television, or other adver- 19 tisement, the commercial advertising element is discarded or 20 returned to the provider after the advertising message is com- 21 pleted, and the commercial advertising element is custom devel- 22 oped by the provider for the purchaser. As used in this subdivi- 23 sion, "commercial advertising element" means a negative or posi- 24 tive photographic image, an audiotape or videotape master, a 25 layout, a manuscript, writing of copy, a design, artwork, an 26 illustration, retouching, and mechanical or keyline 27 instructions. "Sale at retail" includes black and white or full 03545'97 ** 5 1 color process separation elements, an audiotape reproduction, or 2 a videotape reproduction. 3 (J)(i)"Gross proceeds" means the amount received in 4 money, credits, subsidies, property, or other money's worth in 5 consideration of a sale at retail within this state, without a 6 deduction for the cost of the property sold, the cost of material 7 used, the cost of labor or service purchased, an amount paid for 8 interest or a discount, a tax paid on cigarettes or tobacco pro- 9 ducts at the time of purchase, a tax paid on beer or liquor at 10 the time of purchase or other expenses. Also, a deduction is not 11 allowed for losses. Gross proceeds does not include an amount 12 received or billed by the taxpayer for remittance to the employee 13 as a gratuity or tip, if the gratuity or tip is separately iden- 14 tified and itemized on the guest check or billed to the 15 customer. In a taxable sale at retail of a motor vehicle, if 16 another motor vehicle is used as part payment of the purchase 17 price, the value of the motor vehicle used as part payment of the 18 purchase price shall be that value agreed to by the parties to 19 the sale as evidenced by the signed statement executed pursuant 20 to section 251 of the Michigan vehicle code,Act No. 300 of the21Public Acts of 1949, being section 257.251 of the Michigan22Compiled Laws1949 PA 300, MCL 257.251. A credit or refund for 23 returned goods or a refund less an allowance for use made for a 24 motor vehicle returned underAct No. 87 of the Public Acts of251986, being sections 257.1401 to 257.1410 of the Michigan26Compiled Laws1986 PA 87, MCL 257.1401 TO 257.1410, as certified 03545'97 ** 6 1 by the manufacturer on a form provided by the department of 2 treasury, may be deducted. 3 (K)(j)"Business" includes an activity engaged in by a 4 person or caused to be engaged in by that person with the object 5 of gain, benefit, or advantage, either direct or indirect. 6 (l)(k)"Tax year" or "taxable year" means the fiscal year 7 of the state or the taxpayer's fiscal year if permission is 8 obtained by the taxpayer from the department to use the 9 taxpayer's fiscal year as the tax period instead. 10 (M)(l)"Department" means the revenue division of the 11 department of treasury. 12 (N)(m)"Taxpayer" means a person subject to a tax under 13 this act. 14 (O)(n)"Tax" includes a tax, interest, or penalty levied 15 under this act. 16 (P) "TEXTILES" MEANS GOODS THAT ARE MADE OF OR INCORPORATE 17 WOVEN OR NONWOVEN FABRIC, INCLUDING, BUT NOT LIMITED TO, CLOTH- 18 ING, SHOES, HATS, GLOVES, HANDKERCHIEFS, CURTAINS, TOWELS, 19 SHEETS, PILLOWS, PILLOW CASES, TABLECLOTHS, NAPKINS, APRONS, 20 LINENS, FLOOR MOPS, FLOOR MATS, AND THREAD. TEXTILES ALSO 21 INCLUDE MATERIALS USED TO REPAIR OR CONSTRUCT TEXTILES, OR OTHER 22 GOODS USED IN THE RENTAL, SALE, OR CLEANING OF TEXTILES. 23 (2) If the department determines that it is necessary for 24 the efficient administration of this act to regard an unlicensed 25 person, including a salesperson, representative, peddler, or can- 26 vasser as the agent of the dealer, distributor, supervisor, or 27 employer under whom the unlicensed person operates or from whom 03545'97 ** 7 1 the unlicensed person obtains the tangible personal property sold 2 by the unlicensed person, irrespective of whether the unlicensed 3 person is making sales on the unlicensed person's own behalf or 4 on behalf of the dealer, distributor, supervisor, or employer, 5 the department may so regard the unlicensed person and may regard 6 the dealer, distributor, supervisor, or employer as making sales 7 at retail at the retail price for the purposes of this act. 8 Sec. 4a. A person subject to tax under this act may exclude 9 from the amount of the gross proceeds used for the computation of 10 the tax, a sale of tangible personal property: 11 (a) Not for resale to a nonprofit school, nonprofit hospi- 12 tal, or nonprofit home for the care and maintenance of children 13 or aged persons operated by an entity of government, a regularly 14 organized church, religious, or fraternal organization, a 15 veterans' organization, or a corporation incorporated under the 16 laws of the state, if the income or benefit from the operation 17 does not inure, in whole or in part, to an individual or private 18 shareholder, directly or indirectly, and if the activities of the 19 entity or agency are carried on exclusively for the benefit of 20 the public at large and are not limited to the advantage, inter- 21 ests, and benefits of its members or any restricted group. At 22 the time of the transfer of this tangible personal property, the 23 transferee shall sign a statement, in a form approved by the 24 department, stating that the property is to be used or consumed 25 in connection with the operation of the institution or agency and 26 that the institution or agency qualifies as an exempt entity 27 under this subdivision. The statement shall be accepted by all 03545'97 ** 8 1 courts as prima facie evidence of the exemption and the statement 2 shall provide that if the claim for tax exemption is disallowed 3 the transferee will reimburse the transferor for the amount of 4 tax involved. A sale of tangible personal property to a parent 5 cooperative preschool is exempt from taxation under this act. As 6 used in this subdivision, "parent cooperative preschool" means a 7 nonprofit, nondiscriminatory educational institution, maintained 8 as a community service and administered by parents of children 9 currently enrolled in the preschool, that provides an educational 10 and developmental program for children younger than compulsory 11 school age, that provides an educational program for parents, 12 including active participation with children in preschool activi- 13 ties, that is directed by qualified preschool personnel, and that 14 is licensed by the department of consumer and industry services 15 pursuant toAct No. 116 of the Public Acts of 1973, being sec-16tions 722.111 to 722.128 of the Michigan Compiled Laws1973 PA 17 116, MCL 722.111 TO 722.128. 18 (b) Not for resale to a regularly organized church or house 19 of religious worship, except the following: 20 (i) Sales in activities that are mainly commercial 21 enterprises. 22 (ii) Sales of vehicles licensed for use on public highways 23 other than a passenger van or bus with a manufacturer's rated 24 seating capacity of 10 or more that is used primarily for the 25 transportation of persons for religious purposes. 26 (c) To bona fide enrolled students, of food by a school or 27 other educational institution not operated for profit. 03545'97 ** 9 1 (d) Affixed to and made a structural part of real estate 2 excepted from the definition of "sale at retail" under section 3 1(1)(c). 4 (e) That is a vessel designated for commercial use of regis- 5 tered tonnage of 500 tons or more, if produced upon special order 6 of the purchaser, and bunker and galley fuel, provisions, sup- 7 plies, maintenance, and repairs for the exclusive use of the 8 vessel engaged in interstate commerce. 9 (f) To persons engaged in a business enterprise and using or 10 consuming the tangible personal property in the tilling, plant- 11 ing, caring for, or harvesting of the things of the soil; in the 12 breeding, raising, or caring for livestock, poultry, or horticul- 13 tural products, including transfers of livestock, poultry, or 14 horticultural products for further growth; or in the direct gath- 15 ering of fish, by net, line, or otherwise only by an 16 owner-operator of the business enterprise, not including a 17 charter fishing business enterprise. This exemption includes 18 agricultural land tile, which means fired clay or perforated 19 plastic tubing used as part of a subsurface drainage system for 20 land, and subsurface irrigation pipe, if the land tile or irriga- 21 tion pipe is used in the production of agricultural products as a 22 business enterprise. At the time of the transfer of this tangi- 23 ble personal property, the transferee shall sign a statement, in 24 a form approved by the department, stating that the property is 25 to be used or consumed in connection with the production of 26 horticultural or agricultural products as a business enterprise, 27 or in connection with fishing as an owner-operator business 03545'97 ** 10 1 enterprise. The statement shall be accepted by all courts as 2 prima facie evidence of the exemption. This exemption includes a 3 portable grain bin, which means a structure that is used or is to 4 be used to shelter grain and that is designed to be disassembled 5 without significant damage to its component parts. This exemp- 6 tion does not include transfers of food, fuel, clothing, or any 7 similar tangible personal property for personal living or human 8 consumption. This exemption does not include tangible personal 9 property permanently affixed and becoming a structural part of 10 real estate. 11 (g) To the following: 12 (i) An industrial processor for use or consumption in indus- 13 trial processing. Property used or consumed in industrial pro- 14 cessing does not include tangible personal property permanently 15 affixed and becoming a structural part of real estate; office 16 furniture, office supplies, and administrative office equipment; 17 or vehicles licensed and titled for use on public highways, other 18 than a specially designed vehicle, together with parts, used to 19 mix and agitate materials added at a plant or jobsite in the con- 20 crete manufacturing process. Industrial processing does not 21 include receiving and storage of raw materials purchased or 22 extracted by the user or consumer; or the preparation of food and 23 beverages by a retailer for retail sale. As used in this subdi- 24 vision, "industrial processor" means a person who transforms, 25 alters, or modifies tangible personal property by changing the 26 form, composition, or character of the property for ultimate sale 27 at retail or sale to another industrial processor to be further 03545'97 ** 11 1 processed for ultimate sale at retail. EFFECTIVE JANUARY 1, 2 1993, INDUSTRIAL PROCESSOR INCLUDES, BUT IS NOT LIMITED TO, A 3 PERSON WHO LAUNDERS OR CLEANS TEXTILES FOR REUSE, SALE, OR RENTAL 4 UNDER A SERVICE OR RENTAL AGREEMENT WITH A TERM OF AT LEAST 5 5 DAYS. Sales to a person performing a service who does not act as 6 an industrial processor while performing this service shall not 7 be excluded under this subdivision except as provided in 8subparagraphSUBPARAGRAPHS (ii) AND (iii). 9 (ii) A person, whether or not the person is an industrial 10 processor, if the tangible personal property is a computer used 11 in operating industrial processing equipment; equipment used in a 12 computer assisted manufacturing system; equipment used in a com- 13 puter assisted design or engineering system integral to an indus- 14 trial process; or a subunit or electronic assembly comprising a 15 component in a computer integrated industrial processing system. 16 (iii) A RESTAURANT OR OTHER RETAIL SALES BUSINESS, WHETHER 17 OR NOT THE RESTAURANT OR BUSINESS IS AN INDUSTRIAL PROCESSOR, IF 18 THE TANGIBLE PERSONAL PROPERTY IS A TEXTILE THAT HAS BEEN LAUN- 19 DERED OR CLEANED FOR REUSE, SALE, OR RENTAL UNDER A SERVICE OR 20 RENTAL AGREEMENT WITH A TERM OF AT LEAST 5 DAYS. 21 (h) That is a copyrighted motion picture film or a newspaper 22 or periodical admitted under federal postal laws and regulations 23 effective September 1, 1985 as second-class mail matter or as a 24 controlled circulation publication or qualified to accept legal 25 notices for publication in this state, as defined by law, or any 26 other newspaper or periodical of general circulation, established 27 not less than 2 years, and published not less than once a week. 03545'97 ** 12 1 Tangible personal property used or consumed, and not becoming a 2 component part of a copyrighted motion picture film, newspaper, 3 or periodical, except that portion or percentage of tangible per- 4 sonal property used or consumed in producing an advertising sup- 5 plement that becomes a component part of a newspaper or periodi- 6 cal is subject to tax. For purposes of this subdivision, tangi- 7 ble personal property that becomes a component part of a newspa- 8 per or periodical and consequently not subject to tax includes an 9 advertising supplement inserted into and circulated with a news- 10 paper or periodical that is otherwise exempt from tax under this 11 subdivision, if the advertising supplement is delivered directly 12 to the newspaper or periodical by a person other than the adver- 13 tiser, or the advertising supplement is printed by the newspaper 14 or periodical. 15 (i) To persons licensed to operate commercial radio or tele- 16 vision stations if the property is used in the origination or 17 integration of the various sources of program material for com- 18 mercial radio or television transmission. This subdivision does 19 not include a vehicle licensed and titled for use on public high- 20 ways or property used in the transmission to or receiving from an 21 artificial satellite. 22 (j) That is a hearing aid, contact lenses if prescribed for 23 a specific disease that precludes the use of eyeglasses, or any 24 other apparatus, device, or equipment used to replace or substi- 25 tute for a part of the human body, or used to assist the disabled 26 person to lead a reasonably normal life if the tangible personal 27 property is purchased on a written prescription or order issued 03545'97 ** 13 1 by a health professional as defined by section 21005 of the 2 public health code,Act No. 368 of the Public Acts of 1978,3being section 333.21005 of the Michigan Compiled Laws1978 PA 4 368, MCL 333.21005; a hearing aid battery; or eyeglasses pre- 5 scribed or dispensed to correct the person's vision by an oph- 6 thalmologist, optometrist, or optician. 7 (k) To persons for use or consumption in the rendition of 8 any combination of services, the use or consumption of which is 9 taxable under section 3a(a) or (c) of the use tax act,Act10No. 94 of the Public Acts of 1937, being section 205.93a of the11Michigan Compiled Laws1937 PA 94, MCL 205.93A, except that this 12 exemption is limited to the tangible personal property located on 13 the premises of the subscriber and to central office equipment or 14 wireless equipment, directly used or consumed in transmitting, 15 receiving, or switching or the monitoring of switching of a 2-way 16 interactive communication. As used in this subdivision, central 17 office equipment or wireless equipment does not include distribu- 18 tion equipment including cable or wire facilities. 19 (l) That is a vehicle not for resale to a Michigan nonprofit 20 corporation organized exclusively to provide a community with 21 ambulance or fire department services. 22 (m) To inmates in a penal or correctional institution pur- 23 chased with scrip issued and redeemed by the institution. 24 (n) To or for the use of students enrolled in any part of a 25 kindergarten through twelfth grade program, of textbooks sold by 26 a public or nonpublic school. 03545'97 ** 14 1 (o) Installed as a component part of a water pollution 2 control facility for which a tax exemption certificate is issued 3 pursuant to part 37 (water pollution control facilities; tax 4 exemption) of the natural resources and environmental protection 5 act,Act No. 451 of the Public Acts of 1994, being sections6324.3701 to 324.3708 of the Michigan Compiled Laws1994 PA 451, 7 MCL 324.3701 TO 324.3708, or an air pollution control facility 8 for which a tax exemption certificate is issued pursuant to part 9 59 (air pollution control facility; tax exemption) of the natural 10 resources and environmental protection act,Act No. 451 of the11Public Acts of 1994, being sections 324.5901 to 324.5908 of the12Michigan Compiled Laws1994 PA 451, MCL 324.5901 TO 324.5908. 13 (p) To a purchaser of a new motor vehicle purchased before 14 January 1, 1993 if the purchaser qualifies for a special regis- 15 tration under section 226(12) of the Michigan vehicle code,Act16No. 300 of the Public Acts of 1949, being section 257.226 of the17Michigan Compiled Laws1949 PA 300, MCL 257.226, and the vehicle 18 is purchased through a country determined by the department to be 19 providing a like or complete exemption for the purchase of a new 20 motor vehicle to be removed from that country. 21 Sec. 9. (1) The tax imposed by this act shall be adminis- 22 tered by the commissioner pursuant toAct No. 122 of the Public23Acts of 1941, as amended, being sections 205.1 to 205.31 of the24Michigan Compiled Laws1941 PA 122, MCL 205.1 TO 205.31, and 25 this act. In case of conflict between the provisions ofAct26No. 122 of the Public Acts of 1941, as amended,1941 PA 122, MCL 03545'97 ** 15 1 205.1 TO 205.31, and this act, the provisions of this act shall 2 prevail. 3 (2) The department shall promulgate rulesunderTO 4 IMPLEMENT this act pursuant to the administrative procedures act 5 of 1969,Act No. 306 of the Public Acts of 1969, as amended,6being sections 24.201 to 24.328 of the Michigan Compiled Laws7 1969 PA 306, MCL 24.201 TO 24.328. 8 (3) A claim for a refundpursuant toUNDER the 1991 amen- 9 datory act amending section 4a to provide for the exemption of 10 subsurface irrigation pipe shall be filed not later than 11 September 30, 1991. The approved refunds shall be paid without 12 interest. 13 (4) A CLAIM FOR A REFUND UNDER THE 1997 AMENDATORY ACT 14 AMENDING SECTION 4A TO INCLUDE A PERSON WHO LAUNDERS OR CLEANS 15 TEXTILES FOR REUSE, SALE, OR RENTAL UNDER A SERVICE AGREEMENT 16 WITH A TERM OF AT LEAST 5 DAYS WITHIN THE EXEMPTION FOR AN INDUS- 17 TRIAL PROCESSOR SHALL BE FILED NOT LATER THAN 90 DAYS AFTER THE 18 EFFECTIVE DATE OF THE AMENDATORY ACT THAT ADDED THIS SUBSECTION. 03545'97 ** Final page. CSC