HOUSE BILL No. 6249 November 5, 1998, Introduced by Rep. Profit 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 1997 PA 194. 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, 1933 PA 167, MCL 205.51 4 to 205.78, if the tax was due and paid on the retail sale to a 5 consumer. 6 (b) Property, the storage, use, or other consumption of 7 which this state is prohibited from taxing under the constitution 8 or laws of the United States, or under the constitution of this 9 state. 10 (c) Property purchased for resale, demonstration purposes, 11 or lending or leasing to a public or parochial school offering a 06816'98 DAM 2 1 course in automobile driving except that a vehicle purchased by 2 the school shall be certified for driving education and shall not 3 be reassigned for personal use by the school's administrative 4 personnel. For a dealer selling a new car or truck, exemption 5 for demonstration purposes shall be determined by the number of 6 new cars and trucks sold during the current calendar year or the 7 immediately preceding year without regard to specific make or 8 style according to the following schedule of 0 to 25, 2 units; 26 9 to 100, 7 units; 101 to 500, 20 units; 501 or more, 25 units; but 10 not to exceed 25 cars and trucks in 1 calendar year for demon- 11 stration purposes. Property purchased for resale includes promo- 12 tional merchandise transferred pursuant to a redemption offer to 13 a person located outside this state or any packaging material, 14 other than promotional merchandise, acquired for use in fulfill- 15 ing a redemption offer or rebate to a person located outside this 16 state. 17 (d) Property that is brought into this state by a nonresi- 18 dent person for storage, use, or consumption while temporarily 19 within this state, except if the property is used in this state 20 in a nontransitory business activity for a period exceeding 15 21 days. 22 (e) Property the sale or use of which was already subjected 23 to a sales tax or use tax equal to, or in excess of, that imposed 24 by this act under the law of any other state or a local govern- 25 mental unit within a state if the tax was due and paid on the 26 retail sale to the consumer and the state or local governmental 27 unit within a state in which the tax was imposed accords like or 06816'98 3 1 complete exemption on property the sale or use of which was 2 subjected to the sales or use tax of this state. If the sale or 3 use of property was already subjected to a tax under the law of 4 any other state or local governmental unit within a state in an 5 amount less than the tax imposed by this act, this act shall 6 apply, but at a rate measured by the difference between the rate 7 provided in this act and the rate by which the previous tax was 8 computed. 9 (f) Property sold to a person engaged in a business enter- 10 prise and using and consuming the property in the tilling, plant- 11 ing, caring for, or harvesting of the things of the soil or in 12 the breeding, raising, or caring for livestock, poultry, or 13 horticultural products, including transfers of livestock, poul- 14 try, or horticultural products for further growth. At the time 15 of the transfer of that tangible personal property, the trans- 16 feree shall sign a statement, in a form approved by the depart- 17 ment, stating that the property is to be used or consumed in con- 18 nection with the production of horticultural or agricultural pro- 19 ducts as a business enterprise. The statement shall be accepted 20 by the courts as prima facie evidence of the exemption. This 21 exemption includes agricultural land tile, which means fired clay 22 or perforated plastic tubing used as part of a subsurface drain- 23 age system for land used in the production of agricultural pro- 24 ducts as a business enterprise and includes a portable grain bin, 25 which means a structure that is used or is to be used to shelter 26 grain and that is designed to be disassembled without significant 27 damage to its component parts. This exemption does not include 06816'98 4 1 transfers of food, fuel, clothing, or similar tangible personal 2 property for personal living or human consumption. This exemp- 3 tion does not include tangible personal property permanently 4 affixed and becoming a structural part of real estate. 5 (g) Property sold to the following: 6 (i) An industrial processor for use or consumption in indus- 7 trial processing. Property used or consumed in industrial pro- 8 cessing does not include tangible personal property permanently 9 affixed and becoming a structural part of real estate; office 10 furniture, office supplies, and administrative office equipment; 11 or vehicles licensed and titled for use on public highways other 12 than a specially designed vehicle, together with parts, used to 13 mix and agitate materials added at a plant or jobsite in the con- 14 crete manufacturing process. Industrial processing does not 15 include THE receipt and storage of raw materials purchased or 16 extracted by the user or consumer, or the preparation of food and 17 beverages by a retailer for retail sale. As used in this subdi- 18 vision, "industrial processor" means a person who transforms, 19 alters, or modifies tangible personal property by changing the 20 form, composition, or character of the property for ultimate sale 21 at retail or sale to another industrial processor to be further 22 processed for ultimate sale at retail. Sales to a person per- 23 forming a service who does not act as an industrial processor 24 while performing the service may not be excluded under this sub- 25 division, except as provided in subparagraph (ii). 26 (ii) A person, whether or not the person is an industrial 27 processor, when the property is a computer used in operating 06816'98 5 1 industrial processing equipment; equipment used in a computer 2 assisted manufacturing system; equipment used in a computer 3 assisted design or engineering system integral to an industrial 4 process; or a subunit or electronic assembly comprising a compo- 5 nent in a computer integrated industrial processing system. 6 (iii) AN INDUSTRIAL PROCESSOR FOR USE OR CONSUMPTION IN OR 7 ON THE PREMISES OF A FACILITY USED BY THE INDUSTRIAL PROCESSOR 8 FOR INDUSTRIAL PROCESSING AS DEFINED IN SUBPARAGRAPH (i) TO MANU- 9 FACTURE, PROCESS, COMPOUND, OR PRODUCE ITEMS OF TANGIBLE PERSONAL 10 PROPERTY FROM WASTE MATERIAL GENERATED BY THE INDUSTRIAL PROCESS- 11 ING OR TO PROCESS OR RECYCLE ANY PRODUCT THAT HAS SERVED ITS 12 INTENDED END USE IN INDUSTRIAL PROCESSING AND THAT HAS BEEN SEPA- 13 RATED FROM WASTE MATERIAL GENERATED BY THE INDUSTRIAL PROCESSING 14 FOR THE PURPOSE OF COLLECTION AND DISPOSITION OR COLLECTION AND 15 REUSE. 16 (h) Property or services sold to the United States, an unin- 17 corporated agency or instrumentality of the United States, an 18 incorporated agency or instrumentality of the United States 19 wholly owned by the United States or by a corporation wholly 20 owned by the United States, the American red cross and its chap- 21 ters or branches, this state, a department or institution of this 22 state, or a political subdivision of this state. 23 (i) Property or services sold to a school, hospital, or home 24 for the care and maintenance of children or aged persons, oper- 25 ated by an entity of government, a regularly organized church, 26 religious, or fraternal organization, a veterans' organization, 27 or a corporation incorporated under the laws of this state, if 06816'98 6 1 not operated for profit, and if the income or benefit from the 2 operation does not inure, in whole or in part, to an individual 3 or private shareholder, directly or indirectly, and if the activ- 4 ities of the entity or agency are carried on exclusively for the 5 benefit of the public at large and are not limited to the advan- 6 tage, interests, and benefits of its members or a restricted 7 group. The tax levied does not apply to property or services 8 sold to a parent cooperative preschool. As used in this subdivi- 9 sion, "parent cooperative preschool" means a nonprofit, nondis- 10 criminatory educational institution, maintained as a community 11 service and administered by parents of children currently 12 enrolled in the preschool that provides an educational and devel- 13 opmental program for children younger than compulsory school age, 14 that provides an educational program for parents, including 15 active participation with children in preschool activities, that 16 is directed by qualified preschool personnel, and that is 17 licensed by the department of consumer and industry services pur- 18 suant to 1973 PA 116, MCL 722.111 to 722.128. 19 (j) Property or services sold to a regularly organized 20 church or house of religious worship except the following: 21 (i) Sales in which the property is used in activities that 22 are mainly commercial enterprises. 23 (ii) Sales of vehicles licensed for use on the public high- 24 ways other than a passenger van or bus with a manufacturer's 25 rated seating capacity of 10 or more that is used primarily for 26 the transportation of persons for religious purposes. 06816'98 7 1 (k) A vessel designed for commercial use of registered 2 tonnage of 500 tons or more, if produced upon special order of 3 the purchaser, and bunker and galley fuel, provisions, supplies, 4 maintenance, and repairs for the exclusive use of a vessel of 500 5 tons or more engaged in interstate commerce. 6 (l) Property purchased by a person engaged in the business 7 of constructing, altering, repairing, or improving real estate 8 for others to the extent the property is affixed to and made a 9 structural part of the real estate of a nonprofit hospital or a 10 nonprofit housing entity qualified as exempt pursuant to section 11 15a of the state housing development authority act of 1966, 1966 12 PA 346, MCL 125.1415a. A nonprofit hospital or nonprofit housing 13 includes only the property of a nonprofit hospital or the homes 14 or dwelling places constructed by a nonprofit housing entity, the 15 income or property of which does not directly or indirectly inure 16 to the benefit of an individual, private stockholder, or other 17 private person. 18 (m) Property purchased for use in this state where actual 19 personal possession is obtained outside this state, the purchase 20 price or actual value of which does not exceed $10.00 during 1 21 calendar month. 22 (n) A newspaper or periodical classified under federal 23 postal laws and regulations effective September 1, 1985 as second 24 class mail matter or as a controlled circulation publication or 25 qualified to accept legal notices for publication in this state, 26 as defined by law, or any other newspaper or periodical of 27 general circulation, established at least 2 years, and published 06816'98 8 1 at least once a week, and a copyrighted motion picture film. 2 Tangible personal property used or consumed, and not becoming a 3 component part of a copyrighted motion picture film, newspaper or 4 periodical, except that portion or percentage of tangible per- 5 sonal property used or consumed in producing an advertising sup- 6 plement that becomes a component part of a newspaper or periodi- 7 cal is subject to tax. For purposes of this subdivision, tangi- 8 ble personal property that becomes a component part of a newspa- 9 per or periodical and consequently not subject to tax, includes 10 an advertising supplement inserted into and circulated with a 11 newspaper or periodical that is otherwise exempt from tax under 12 this subdivision, if the advertising supplement is delivered 13 directly to the newspaper or periodical by a person other than 14 the advertiser, or the advertising supplement is printed by the 15 newspaper or periodical. 16 (o) Property purchased by persons licensed to operate a com- 17 mercial radio or television station if the property is used in 18 the origination or integration of the various sources of program 19 material for commercial radio or television transmission. This 20 subdivision does not include a vehicle licensed and titled for 21 use on public highways or property used in the transmitting to or 22 receiving from an artificial satellite. 23 (p) A person who is a resident of this state who purchases 24 an automobile in another state while in the military service of 25 the United States and who pays a sales tax in the state where the 26 automobile is purchased. 06816'98 9 1 (q) A vehicle for which a special registration is secured in 2 accordance with section 226(12) of the Michigan vehicle code, 3 1949 PA 300, MCL 257.226. 4 (r) A hearing aid, contact lenses if prescribed for a spe- 5 cific disease that precludes the use of eyeglasses, or any other 6 apparatus, device, or equipment used to replace or substitute for 7 any part of the human body, or used to assist the disabled person 8 to lead a reasonably normal life when the tangible personal prop- 9 erty is purchased on a written prescription or order issued by a 10 health professional as defined bysection 4 of former 1974 PA11264, orsection 21005 of the public health code, 1978 PA 368, 12 MCL 333.21005, or eyeglasses prescribed or dispensed to correct 13 the person's vision by an ophthalmologist, optometrist, or 14 optician. 15 (s) Water when delivered through water mains or in bulk 16 tanks in quantities of not less than 500 gallons. 17 (t) The purchase of machinery and equipment for use or con- 18 sumption in the rendition of any combination of services, the use 19 or consumption of which is taxable under section 3a(a) or (c) 20 except that this exemption is limited to the tangible personal 21 property located on the premises of the subscriber and to central 22 office equipment or wireless equipment, directly used or consumed 23 in transmitting, receiving, or switching or the monitoring of 24 switching of a 2-way interactive communication. As used in this 25 subdivision, central office equipment or wireless equipment does 26 not include distribution equipment including cable or wire 27 facilities. 06816'98 10 1 (u) A vehicle not for resale used by a nonprofit corporation 2 organized exclusively to provide a community with ambulance or 3 fire department services. 4 (v) Tangible personal property purchased and installed as a 5 component part of a water pollution control facility for which a 6 tax exemption certificate is issued pursuant to part 37(water7pollution control facilities; tax exemption)of the natural 8 resources and environmental protection act, 1994 PA 451, MCL 9 324.3701 to 324.3708, or an air pollution control facility for 10 which a tax exemption certificate is issued pursuant to part 59 11(air pollution control facility; tax exemption)of the natural 12 resources and environmental protection act, 1994 PA 451, MCL 13 324.5901 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 the general sales tax act, 1933 PA 167, MCL 205.54a. 18 (x) The storage, use, or consumption by a domestic air car- 19 rier of an aircraft purchased after December 31, 1992 for use 20 solely in the transport of air cargo that has a maximum certifi- 21 cated takeoff weight of at least 12,500 pounds. For purposes of 22 this subdivision, the term "domestic air carrier" is limited to 23 entities engaged in the commercial transport for hire of cargo or 24 entities engaged in the commercial transport of passengers as a 25 business activity. 26 (y) The storage, use, or consumption by a domestic air 27 carrier of an aircraft purchased after June 30, 1994 that is used 06816'98 11 1 solely in the regularly scheduled transport of passengers. For 2 purposes of this subdivision, the term "domestic air carrier" is 3 limited to entities engaged in the commercial transport for hire 4 of cargo or entities engaged in the commercial transport of pas- 5 sengers as a business activity. 6 (z) The storage, use, or consumption by a domestic air car- 7 rier of an aircraft, other than an aircraft described under 8 subdivision (y), purchased after December 31, 1994, that has a 9 maximum certificated takeoff weight of at least 12,500 pounds and 10 that is designed to have a maximum passenger seating configura- 11 tion of more than 30 seats and used solely in the transport of 12 passengers. For purposes of this subdivision, the term "domestic 13 air carrier" is limited to entities engaged in the commercial 14 transport for hire of cargo or entities engaged in the commercial 15 transport of passengers as a business activity. 16 (aa) Property or services sold to a health, welfare, educa- 17 tional, cultural arts, charitable, or benevolent organization not 18 operated for profit that has been issued before June 13, 1994 an 19 exemption ruling letter to purchase items exempt from tax signed 20 by the administrator of the sales, use, and withholding taxes 21 division of the department. The department shall reissue an 22 exemption letter to each of those organizations after June 13, 23 1994 that shall remain in effect unless the organization fails to 24 meet the requirements that originally entitled it to this exemp- 25 tion; or to an organization not operated for profit and exempt 26 from federal income tax under section 501(c)(3) or 501(c)(4) of 27 the internal revenue code of 1986, 26 U.S.C. 501. The exemption 06816'98 12 1 does not apply to sales of tangible personal property and sales 2 of vehicles licensed for use on public highways, that are not 3 used primarily to carry out the purposes of the organization as 4 stated in the bylaws or articles of incorporation of the exempt 5 organization. 6 (bb) The use or consumption of service described in section 7 3a(a) or (c) by means of a prepaid telephone calling card, a pre- 8 paid authorization number for telephone use, or a charge for 9 internet access. 06816'98