SENATE BILL NO. 630 June 1, 1999, Introduced by Senators KOIVISTO, NORTH, MC MANUS, MC COTTER, DINGELL and GOUGEON and referred to the Committee on Finance. A bill to amend 1937 PA 94, entitled "Use tax act," by amending sections 4 and 4k (MCL 205.94 and 205.94k), section 4 as amended by 1998 PA 491 and section 4k as amended by 1996 PA 477. 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. 03811'99 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 03811'99 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 03811'99 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). 03811'99 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; or 8 computer equipment used in connection with the computer assisted 9 production, storage, and transmission of data if the equipment 10 would have been exempt had the data transfer been made using 11 tapes, disks, CD-ROMS, or similar media by a company whose busi- 12 ness includes publishing doctoral dissertations and information 13 archiving, and that sells the majority of the company's products 14 to nonprofit organizations exempt under subdivision (aa). 15 (h) Property or services sold to the United States, an unin- 16 corporated agency or instrumentality of the United States, an 17 incorporated agency or instrumentality of the United States 18 wholly owned by the United States or by a corporation wholly 19 owned by the United States, the American red cross and its chap- 20 ters or branches, this state, a department or institution of this 21 state, or a political subdivision of this state. 22 (i) Property or services sold to a school, hospital, or home 23 for the care and maintenance of children or aged persons, oper- 24 ated by an entity of government, a regularly organized church, 25 religious, or fraternal organization, a veterans' organization, 26 or a corporation incorporated under the laws of this state, if 27 not operated for profit, and if the income or benefit from the 03811'99 6 1 operation does not inure, in whole or in part, to an individual 2 or private shareholder, directly or indirectly, and if the activ- 3 ities of the entity or agency are carried on exclusively for the 4 benefit of the public at large and are not limited to the advan- 5 tage, interests, and benefits of its members or a restricted 6 group. The tax levied does not apply to property or services 7 sold to a parent cooperative preschool. As used in this subdivi- 8 sion, "parent cooperative preschool" means a nonprofit, nondis- 9 criminatory educational institution, maintained as a community 10 service and administered by parents of children currently 11 enrolled in the preschool that provides an educational and devel- 12 opmental program for children younger than compulsory school age, 13 that provides an educational program for parents, including 14 active participation with children in preschool activities, that 15 is directed by qualified preschool personnel, and that is 16 licensed by the department of consumer and industry services pur- 17 suant to 1973 PA 116, MCL 722.111 to 722.128. 18 (j) Property or services sold to a regularly organized 19 church or house of religious worship except the following: 20 (i) Sales in which the property is used in activities that 21 are mainly commercial enterprises. 22 (ii) Sales of vehicles licensed for use on the public high- 23 ways other than a passenger van or bus with a manufacturer's 24 rated seating capacity of 10 or more that is used primarily for 25 the transportation of persons for religious purposes. 26 (k) A vessel designed for commercial use of registered 27 tonnage of 500 tons or more, if produced upon special order of 03811'99 7 1 the purchaser, and bunker and galley fuel, provisions, supplies, 2 maintenance, and repairs for the exclusive use of a vessel of 500 3 tons or more engaged in interstate commerce. 4 (l) Property purchased by a person engaged in the business 5 of constructing, altering, repairing, or improving real estate 6 for others to the extent the property is affixed to and made a 7 structural part of the real estate of a nonprofit hospital or a 8 nonprofit housing entity qualified as exempt pursuant to section 9 15a of the state housing development authority act of 1966, 1966 10 PA 346, MCL 125.1415a. A nonprofit hospital or nonprofit housing 11 includes only the property of a nonprofit hospital or the homes 12 or dwelling places constructed by a nonprofit housing entity, the 13 income or property of which does not directly or indirectly inure 14 to the benefit of an individual, private stockholder, or other 15 private person. For taxes assessed after December 31, 1990 and 16 before January 1, 1996, as used in this subdivision, "hospital" 17 includes, but is not limited to, an entity that meets all of the 18 following qualifications: 19 (i) Is a separately organized entity, or a group of entities 20 sufficiently related to be considered a single employer for pur- 21 poses of section 414 of the internal revenue code of 1986, the 22 primary purpose of which is to provide medical, obstetrical, psy- 23 chiatric, or surgical care or nursing. Nursing includes care 24 provided by skilled nurses in a long-term care facility. 25 (ii)Prior toBEFORE January 1, 1996, initiated an appeal 26 of taxes assessed under this act on tangible personal property 27 used to construct a facility after December 31, 1990 and before 03811'99 8 1 January 1, 1996, the primary purpose of which is to provide 2 medical, obstetrical, psychiatric, or surgical care or nursing. 3 Nursing includes a long-term care facility. 4 (m) Property purchased for use in this state where actual 5 personal possession is obtained outside this state, the purchase 6 price or actual value of which does not exceed $10.00 during 1 7 calendar month. 8 (n) A newspaper or periodical classified under federal 9 postal laws and regulations effective September 1, 1985 as 10 second-class mail matter or as a controlled circulation publica- 11 tion or qualified to accept legal notices for publication in this 12 state, as defined by law, or any other newspaper or periodical of 13 general circulation, established at least 2 years, and published 14 at least once a week, and a copyrighted motion picture film. 15 Tangible personal property used or consumed in producing a copy- 16 righted motion picture film, a newspaper published more than 14 17 times per year, or a periodical published more than 14 times per 18 year, and not becoming a component part of that film, newspaper, 19 or periodical is subject to the tax. After December 31, 1993, 20 tangible personal property used or consumed in producing a news- 21 paper published 14 times or less per year or a periodical pub- 22 lished 14 times or less per year and that portion or percentage 23 of tangible personal property used or consumed in producingand24 AN advertising supplement that becomes a component part of a 25 newspaper or periodical is exempt from the tax under this 26 subdivision. A claim for a refund for taxes paid before January 27 1, 1999 under this subdivision shall be made before June 30, 03811'99 9 1 1999. For purposes of this subdivision, tangible personal 2 property that becomes a component part of a newspaper or periodi- 3 cal and consequently not subject to tax, includes an advertising 4 supplement inserted into and circulated with a newspaper or peri- 5 odical that is otherwise exempt from tax under this subdivision, 6 if the advertising supplement is delivered directly to the news- 7 paper or periodical by a person other than the advertiser, or the 8 advertising supplement is printed by the newspaper or 9 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 1949 PA 300, MCL 257.226. 24 (r) A hearing aid, contact lenses if prescribed for a spe- 25 cific disease that precludes the use of eyeglasses, or any other 26 apparatus, device, or equipment used to replace or substitute for 27 any part of the human body, or used to assist the disabled person 03811'99 10 1 to lead a reasonably normal life when the tangible personal 2 property is purchased on a written prescription or order issued 3 by a health professional as defined by section 4 of former 1974 4 PA 264, or section 21005 of the public health code, 1978 PA 368, 5 MCL 333.21005, or eyeglasses prescribed or dispensed to correct 6 the person's vision by an ophthalmologist, optometrist, or 7 optician. 8 (s) Water when delivered through water mains or in bulk 9 tanks in quantities of not less than 500 gallons. 10 (t) The purchase of machinery and equipment for use or con- 11 sumption in the rendition of any combination of services, the use 12 or consumption of which is taxable under section 3a(a) or (c) 13 except that this exemption is limited to the tangible personal 14 property located on the premises of the subscriber and to central 15 office equipment or wireless equipment, directly used or consumed 16 in transmitting, receiving, or switching or the monitoring of 17 switching of a 2-way interactive communication. As used in this 18 subdivision, central office equipment or wireless equipment does 19 not include distribution equipment including cable or wire 20 facilities. 21 (u) A vehicle not for resale used by a nonprofit corporation 22 organized exclusively to provide a community with ambulance or 23 fire department services. 24 (v) Tangible personal property purchased and installed as a 25 component part of a water pollution control facility for which a 26 tax exemption certificate is issued pursuant to part 37 of the 27 natural resources and environmental protection act, 1994 PA 451, 03811'99 11 1 MCL 324.3701 to 324.3708, or an air pollution control facility 2 for which a tax exemption certificate is issued pursuant to part 3 59 of the natural resources and environmental protection act, 4 1994 PA 451, MCL 324.5901 to 324.5908. 5 (w) Tangible real or personal property donated by a manufac- 6 turer, wholesaler, or retailer to an organization or entity 7 exempt pursuant to subdivision (i) or (j) or section 4a(a) or (b) 8 of the general sales tax act, 1933 PA 167, MCL 205.54a. 9 (x) The storage, use, or consumption by a domestic air car- 10 rier of an aircraft purchased after December 31, 1992 for use 11 solely in the transport of air cargo that has a maximum certifi- 12 cated takeoff weight of at least 12,500 pounds. For purposes of 13 this subdivision, the term "domestic air carrier" is limited to 14 entities engaged in the commercial transport for hire of cargo or 15 entities engaged in the commercial transport of passengers as a 16 business activity. 17 (y) The storage, use, or consumption by a domestic air car- 18 rier of an aircraft purchased after June 30, 1994 that is used 19 solely in the regularly scheduled transport of passengers. For 20 purposes of this subdivision, the term "domestic air carrier" is 21 limited to entities engaged in the commercial transport for hire 22 of cargo or entities engaged in the commercial transport of pas- 23 sengers as a business activity. 24 (z) The storage, use, or consumption by a domestic air car- 25 rier of an aircraft, other than an aircraft described under 26 subdivision (y), purchased after December 31, 1994, that has a 27 maximum certificated takeoff weight of at least 12,500 pounds and 03811'99 12 1 that is designed to have a maximum passenger seating 2 configuration of more than 30 seats and used solely in the trans- 3 port of passengers. For purposes of this subdivision, the term 4 "domestic air carrier" is limited to entities engaged in the com- 5 mercial transport for hire of cargo or entities engaged in the 6 commercial transport of passengers as a business activity. 7 (AA) THE STORAGE, USE, OR CONSUMPTION BY A DOMESTIC AIR CAR- 8 RIER OF AN AIRCRAFT PURCHASED AFTER DECEMBER 31, 1998 FOR USE IN 9 THE TRANSPORT OF AIR CARGO, PASSENGERS, OR A COMBINATION OF AIR 10 CARGO AND PASSENGERS THAT HAS A MAXIMUM CERTIFIED TAKEOFF WEIGHT 11 OF AT LEAST 6,000 POUNDS. FOR PURPOSES OF THIS SUBDIVISION, THE 12 TERM "DOMESTIC AIR CARRIER" IS LIMITED TO ENTITIES ENGAGED IN THE 13 COMMERCIAL TRANSPORT FOR HIRE OF AIR CARGO, PASSENGERS, OR A COM- 14 BINATION OF AIR CARGO AND PASSENGERS AS A BUSINESS ACTIVITY. 15 (BB)(aa)Property or services sold to an organization not 16 operated for profit and exempt from federal income tax under sec- 17 tion 501(c)(3) or 501(c)(4) of the internal revenue code of 1986, 18 26 U.S.C. 501; or to a health, welfare, educational, cultural 19 arts, charitable, or benevolent organization not operated for 20 profit that has been issued before June 13, 1994 an exemption 21 ruling letter to purchase items exempt from tax signed by the 22 administrator of the sales, use, and withholding taxes division 23 of the department. The department shall reissue an exemption 24 letter after June 13, 1994 to each of those organizations that 25 had an exemption letter that shall remain in effect unless the 26 organization fails to meet the requirements that originally 27 entitled it to this exemption. The exemption does not apply to 03811'99 13 1 sales of tangible personal property and sales of vehicles 2 licensed for use on public highways, that are not used primarily 3 to carry out the purposes of the organization as stated in the 4 bylaws or articles of incorporation of the exempt organization. 5 (CC)(bb)The use or consumption of services described in 6 section 3a(a) or (c) by means of a prepaid telephone calling 7 card, a prepaid authorization number for telephone use, or a 8 charge for internet access. 9 (DD)(cc)The purchase, lease, use, or consumption of the 10 following by an industrial laundry after December 31, 1997: 11 (i) Textiles and disposable products including, but not 12 limited to, soap, paper, chemicals, tissues, deodorizers and dis- 13 pensers, and all related items such as packaging, supplies, hang- 14 ers, name tags, and identification tags. 15 (ii) Equipment, whether owned or leased, used to repair and 16 dispense textiles including, but not limited to, roll towel cabi- 17 nets, slings, hardware, lockers, mop handles and frames, and 18 carts. 19 (iii) Machinery, equipment, parts, lubricants, and repair 20 services used to clean, process, and package textiles and related 21 items, whether owned or leased. 22 (iv) Utilities such as electric, gas, water, or oil. 23 (v) Production washroom equipment and mending and packaging 24 supplies and equipment. 25 (vi) Material handling equipment including, but not limited 26 to, conveyors, racks, and elevators and related control 27 equipment. 03811'99 14 1 (vii) Wastewater pretreatment equipment and supplies and 2 related maintenance and repair services. 3 Sec. 4k. (1) The tax levied under this act does not apply 4 to parts and materials, excluding shop equipment or fuel, affixed 5 to or to be affixed in this state to an aircraft owned or used by 6 a domestic air carrier that is any of the following: 7 (a) An aircraft for use solely in the transport of air cargo 8 that has a maximum certificated takeoff weight of at least 12,500 9 pounds for taxes levied before January 1, 1997 and at least 6,000 10 pounds for taxes levied after December 31, 1996. 11 (b) An aircraft that is used solely in the regularly sched- 12 uled transport of passengers. 13 (c) An aircraft other than an aircraft described in subdivi- 14 sion (b), that has a maximum certificated takeoff weight of at 15 least 12,500 pounds for taxes levied before January 1, 1997 and 16 at least 6,000 pounds for taxes levied after December 31, 1996, 17 and that is designed to have a maximum passenger seating configu- 18 ration of more than 30 seats and used solely in the transport of 19 passengers. 20 (D) FOR TAXES LEVIED AFTER DECEMBER 31, 1998, AN AIRCRAFT 21 THAT HAS A MAXIMUM CERTIFIED TAKEOFF WEIGHT OF AT LEAST 6,000 22 POUNDS FOR USE IN THE TRANSPORT OF A COMBINATION OF AIR CARGO AND 23 PASSENGERS. 24 (2) For taxes levied after December 31, 1992 and before 25 May 1, 1999, the tax levied under this act does not apply to the 26 storage, use, or consumption of rolling stock used in interstate 27 commerce and purchased, rented, or leased outside of this state 03811'99 15 1 by an interstate motor carrier. A refund for taxes paid before 2 January 1, 1997 shall not be paid under this subsection if the 3 refund claim is made after June 30, 1997. 4 (3) For taxes levied after December 31, 1996 and before 5 May 1, 1999, the tax levied under this act does not apply to the 6 product of the out-of-state usage percentage and the price other- 7 wise taxable under this act of a qualified truck or a trailer 8 designed to be drawn behind a qualified truck, purchased, rented, 9 or leased in this state by an interstate motor carrier and used 10 in interstate commerce. 11 (4) As used in this section: 12 (a) "Domestic air carrier" is limited to entities engaged in 13 the commercial transport for hire of AIR cargo,or entities14engaged in the commercial transport ofpassengers, OR A COMBINA- 15 TION OF AIR CARGO AND PASSENGERS as a business activity. 16 (b) "Interstate motor carrier" means a person engaged in the 17 business of carrying persons or property, other than themselves, 18 their employees, or their own property, for hire across state 19 lines, whose fleet mileage was driven at least 10% outside of 20 this state in the immediately preceding tax year. 21 (c) "Out-of-state usage percentage" is a fraction, the 22 numerator of which is the number of miles driven outside of this 23 state in the immediately preceding tax year by qualified trucks 24 used by the taxpayer and the denominator of which is the total 25 miles driven in the immediately preceding tax year by qualified 26 trucks used by the taxpayer. Miles driven by qualified trucks 03811'99 16 1 used solely in intrastate commerce shall not be included in 2 calculating the out-of-state usage percentage. 3 (d) "Qualified truck" means a commercial motor vehicle power 4 unit that has 2 axles and a gross vehicle weight rating in excess 5 of 10,000 pounds or a commercial motor vehicle power unit that 6 has 3 or more axles. 7 (e) "Rolling stock" means a qualified truck, a trailer 8 designed to be drawn behind a qualified truck, and parts affixed 9 to either a qualified truck or a trailer designed to be drawn 10 behind a qualified truck. 03811'99 Final page. CSC