HB-5556, As Passed Senate, December 19, 2008

SUBSTITUTE FOR

HOUSE BILL NO. 5556

A bill to amend 1937 PA 94, entitled

"Use tax act,"

by amending sections 2, 2b, 3a, 3b, 3c, 4d, 4i, 7, 13, 14a, and 14b

(MCL 205.92, 205.92b, 205.93a, 205.93b, 205.93c, 205.94d, 205.94i,

205.97, 205.103, 205.104a, and 205.104b), sections 2 and 7 as

amended by 2007 PA 103, section 2b as amended by 2006 PA 428,

section 3a as amended by 2007 PA 93, section 3b as added by 2002 PA

456, sections 3c, 13, 14a, and 14b as added and section 4d as

amended by 2004 PA 172, and section 4i as added by 1986 PA 41; and

to repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 2. As used in this act:

(a) "Person" means an individual, firm, partnership, joint

venture, association, social club, fraternal organization,

municipal or private corporation whether or not organized for

profit, company, limited liability company, estate, trust,

receiver, trustee, syndicate, the United States, this state,

county, or any other group or combination acting as a unit, and the

plural as well as the singular number, unless the intention to give

a more limited meaning is disclosed by the context.

(b) "Use" means the exercise of a right or power over tangible

personal property incident to the ownership of that property

including transfer of the property in a transaction where

possession is given. Converting tangible personal property acquired

for a use exempt from the tax levied under this act to a use not

exempt from the tax levied under this act is a taxable use.

state for any purpose after the property loses its interstate

character.

(d) "Seller" means the person from whom a purchase is made and

includes every person selling tangible personal property or

services for storage, use, or other consumption in this state. If,

in the opinion of the department, it is necessary for the efficient

administration of this act to regard a salesperson, representative,

peddler, or canvasser as the agent of a dealer, distributor,

supervisor, or employer under whom the person operates or from whom

he or she obtains tangible personal property or services sold by

him or her for storage, use, or other consumption in this state,

irrespective of whether or not he or she is making the sales on his

or her own behalf or on behalf of the dealer, distributor,

supervisor, or employer, the department may so consider him or her,

and may consider the dealer, distributor, supervisor, or employer

as the seller for the purpose of this act.

(e) "Purchase" means to acquire for a consideration, whether

the acquisition is effected by a transfer of title, of possession,

or of both, or a license to use or consume; whether the transfer is

absolute or conditional, and by whatever means the transfer is

effected; and whether consideration is a price or rental in money,

or by way of exchange or barter. Purchase includes converting

tangible personal property acquired for a use exempt from the tax

levied under this act to a use not exempt from the tax levied under

this act.

(f) "Purchase price" or "price" means the total amount of

consideration paid by the consumer to the seller, including cash,

credit, property, and services, for which tangible personal

property or services are sold, leased, or rented, valued in money,

whether received in money or otherwise, and applies to the measure

subject to use tax. Purchase price includes the following

subparagraphs (i) through (vi) (vii) and excludes subparagraphs (~~vii~~)

(viii) through (~~viii~~) (x):

(i) Seller's cost of the property sold.

(ii) Cost of materials used, labor or service cost, interest,

losses, costs of transportation to the seller, taxes imposed on the

seller other than taxes imposed by this act, and any other expense

of the seller.

(iii) Charges by the seller for any services necessary to

complete the sale, other than the following:

(A) An amount received or billed by the taxpayer for

remittance to the employee as a gratuity or tip, if the gratuity or

tip is separately identified and itemized on the guest check or

billed to the customer.

(B) Labor or service charges involved in maintenance and

repair work on tangible personal property of others if separately

itemized.

(iv) Delivery charges incurred or to be incurred before the

completion of the transfer of ownership of tangible personal

property subject to the tax levied under this act from the seller

to the purchaser.

(v) Installation charges incurred or to be incurred before the

completion of the transfer of ownership of tangible personal

property from the seller to the purchaser.

(vi) Credit for any trade-in.

(vii) Except as otherwise provided in subparagraph (x),

consideration received by the seller from third parties if all of

the following conditions are met:

(A) The seller actually receives consideration from a party

other than the purchaser and the consideration is directly related

to a price reduction or discount on the sale.

(B) The seller has an obligation to pass the price reduction

or discount through to the purchaser.

is fixed and determinable by the seller at the time of the sale of

the item to the purchaser.

(D) One of the following criteria is met:

(I) The purchaser presents a coupon, certificate, or other

documentation to the seller to claim a price reduction or discount

where the coupon, certificate, or documentation is authorized,

distributed, or granted by a third party with the understanding

that the third party will reimburse any seller to whom the coupon,

certificate, or documentation is presented.

(II) The purchaser identifies himself or herself to the seller

as a member of a group or organization entitled to a price

reduction or discount. A preferred customer card that is available

to any patron does not constitute membership in a group or

organization.

(III) The price reduction or discount is identified as a third

party price reduction or discount on the invoice received by the

purchaser or on a coupon, certificate, or other documentation

presented by the purchaser.

(viii) (~~vii~~) Interest, financing, or carrying charges from credit

extended on the sale of personal property or services, if the

amount is separately stated on the invoice, bill of sale, or

similar document given to the purchaser.

(ix) (~~viii~~) Any taxes legally imposed directly on the consumer

that are separately stated on the invoice, bill of sale, or similar

document given to the purchaser.

(x) Beginning January 1, 2000, employee discounts that are

reimbursed by a third party on sales of motor vehicles.

(g) "Consumer" means the person who has purchased tangible

personal property or services for storage, use, or other

consumption in this state and includes, but is not limited to, 1 or

more of the following:

(i) A person acquiring tangible personal property if engaged in

the business of constructing, altering, repairing, or improving the

real estate of others.

(ii) A person who has converted tangible personal property or

services acquired for storage, use, or consumption in this state

that is exempt from the tax levied under this act to storage, use,

or consumption in this state that is not exempt from the tax levied

under this act.

(h) "Business" means all activities engaged in by a person or

caused to be engaged in by a person with the object of gain,

benefit, or advantage, either direct or indirect.

(i) "Department" means the department of treasury.

(j) "Tax" includes all taxes, interest, or penalties levied

under this act.

(k) "Tangible personal property" means personal property that

can be seen, weighed, measured, felt, or touched or that is in any

other manner perceptible to the senses and includes electricity,

water, gas, steam, and prewritten computer software.

(l) "Textiles" means goods that are made of or incorporate

woven or nonwoven fabric, including, but not limited to, clothing,

shoes, hats, gloves, handkerchiefs, curtains, towels, sheets,

pillows, pillowcases, tablecloths, napkins, aprons, linens, floor

mops, floor mats, and thread. Textiles also include materials used

to repair or construct textiles, or other goods used in the rental,

sale, or cleaning of textiles.

(m) "Interstate motor carrier" means a person who operates or

causes to be operated a qualified commercial motor vehicle on a

public road or highway in this state and at least 1 other state or

Canadian province.

(n) "Qualified commercial motor vehicle" means that term as

defined in section 1(i), (j), and (k) of the motor carrier fuel tax

act, 1980 PA 119, MCL 207.211.

(o) "Diesel fuel" means that term as defined in section 2(p)

of the motor fuel tax act, 2000 PA 403, MCL 207.1002.

(p) "Sale" means a transaction by which tangible personal

property or services are purchased or rented for storage, use, or

other consumption in this state.

(q) "Convert" means putting a service or tangible personal

property acquired for a use exempt from the tax levied under this

act at the time of acquisition to a use that is not exempt from the

tax levied under this act, whether the use is in whole or in part,

or permanent or not permanent. A motor vehicle purchased for resale

by a new vehicle dealer licensed under section 248(8)(a) of the

Michigan vehicle code, 1949 PA 300, MCL 257.248, and not titled in

the name of the dealer shall not be considered to be converted

prior to sale or lease by that dealer.

Sec. 2b. As used in this act:

(a) "Alcoholic beverage" means a beverage suitable for human

consumption that contains 1/2 of 1% or more of alcohol by volume.

(b) "Computer" means an electronic device that accepts

information in digital or similar form and manipulates it for a

result based on a sequence of instructions.

designed to cause a computer or automatic data processing equipment

to perform a task.

(d) "Delivered electronically" means delivered from the seller

to the purchaser by means other than tangible storage media.

(e) "Delivery charges" means charges by the seller for

preparation and delivery to a location designated by the purchaser

of tangible personal property or services. Delivery charges

include, but are not limited to, transportation, shipping, postage,

handling, crating, and packing. Beginning September 1, 2004,

delivery charges do not include the charges for delivery of direct

mail if the charges are separately stated on an invoice or similar

billing document given to the purchaser. If a shipment includes

both exempt property and taxable property, the seller shall

allocate the delivery charge using 1 of the following methods:

(i) Multiply the delivery price by a fraction, the numerator of

which is the total sales prices of the taxable property and the

denominator of which is the total sales prices of all property in

the shipment.

(ii) Multiply the delivery price by a fraction, the numerator

of which is the total weight of the taxable property and the

denominator of which is the total weight of all property in the

shipment.

(f) "Dietary supplement" means any product, other than

tobacco, intended to supplement the diet that is all of the

following:

(i) Required to be labeled as a dietary supplement identifiable

by the "supplemental facts" box found on the label as required by

21 CFR 101.36.

(ii) Contains 1 or more of the following dietary ingredients:

(A) A vitamin.

(B) A mineral.

(D) An amino acid.

(E) A dietary substance for use by humans to supplement the

diet by increasing the total dietary intake.

(F) A concentrate, metabolite, constituent, extract, or

combination of any ingredient listed in sub-subparagraphs (A)

through (E).

(iii) Intended for ingestion in tablet, capsule, powder,

softgel, gelcap, or liquid form, or if not intended for ingestion

in 1 of those forms, is not represented as conventional food or for

use as a sole item of a meal or of the diet.

(g) "Direct mail" means printed material delivered or

distributed by United States mail or other delivery service to a

mass audience or to addresses on a mailing list provided by the

purchaser or at the direction of the purchaser when the cost of the

items is not billed directly to the recipients, including tangible

personal property supplied directly or indirectly by the purchaser

to the direct mail seller for inclusion in the package containing

the printed material but not including multiple items of printed

material delivered to a single address.

(h) "Drug" means a compound, substance, or preparation, or any

component of a compound, substance, or preparation, other than food

or food ingredients, dietary supplements, or alcoholic beverages,

intended for human use that is 1 or more of the following:

(i) Recognized in the official United States pharmacopoeia,

official homeopathic pharmacopoeia of the United States, or

official national formulary, or in any of their supplements.

(ii) Intended for use in the diagnosis, cure, mitigation,

treatment, or prevention of disease.

(iii) Intended to affect the structure or any function of the

body.

(i) "Durable medical equipment" means equipment for home use,

other than mobility enhancing equipment, dispensed pursuant to a

prescription, including durable medical equipment repair or

replacement parts, ~~for that equipment,~~ that does all of the

following:

(i) Can withstand repeated use.

(ii) Is primarily and customarily used to serve a medical

purpose.

(iii) Is not useful generally to a person in the absence of

illness or injury.

(iv) Is not worn in or on the body.

(j) "Durable medical equipment repair or replacement parts"

includes all components or attachments used in conjunction with

durable medical equipment.

(k) ~~(j)~~ "Electronic" means relating to technology having

electrical, digital, magnetic, wireless, optical, electromagnetic,

or similar capabilities.

(l) ~~(k)~~ "Lease or rental" means any transfer of possession or

control of tangible personal property for a fixed or indeterminate

term for consideration and may include future options to purchase

or extend. This definition applies only to leases and rentals

entered into after September 1, 2004 and has no retroactive impact

on leases and rentals that existed on that date. Lease or rental

does not include the following subparagraphs (i) through (iii) and

includes subparagraph (iv):

(i) A transfer of possession or control of tangible personal

property under a security agreement or deferred payment plan that

requires the transfer of title upon completion of the required

payments.

(ii) A transfer of possession or control of tangible personal

property under an agreement requiring transfer of title upon

completion of the required payments and payment of an option price

that does not exceed $100.00 or 1% of the total required payments,

whichever is greater.

(iii) The provision of tangible personal property along with an

operator for a fixed or indeterminate period of time, where that

operator is necessary for the equipment to perform as designed. To

be necessary, an operator must do more than maintain, inspect, or

set up the tangible personal property.

(iv) An agreement covering motor vehicles or trailers if the

amount of consideration may be increased or decreased by reference

to the amount realized upon sale or disposition of the property as

defined in 26 USC 7701(h)(1).

(m) (l) "Mobility enhancing equipment" means equipment, other

than durable medical equipment or a motor vehicle or equipment on a

motor vehicle normally provided by a motor vehicle manufacturer,

dispensed pursuant to a prescription, including repair or

replacement parts for that equipment, that is all of the following:

(i) Primarily and customarily used to provide or increase the

ability to move from 1 place to another and is appropriate for use

at home or on a motor vehicle.

(ii) Not generally used by a person with normal mobility.

(n) ~~(m)~~ "Prescription" means an order, formula, or recipe,

issued in any form of oral, written, electronic, or other means of

transmission by a licensed physician or other health professional

as defined in section 3501 of the insurance code of 1956, 1956 PA

218, MCL 500.3501. For a hearing aid, prescription includes an

order, instruction, or direction of a hearing aid dealer or

salesperson licensed under article 13 of the occupational code,

1980 PA 299, MCL 339.1301 to 339.1309.

(o) ~~(n)~~ "Prewritten computer software" means computer

software, including prewritten upgrades, that is delivered by any

means and that is not designed and developed by the author or other

creator to the specifications of a specific purchaser. Prewritten

computer software includes all of the following:

(i) Any combination of 2 or more prewritten computer software

programs or portions of prewritten computer software programs.

(ii) Computer software designed and developed by the author or

other creator to the specifications of a specific purchaser if it

is sold to a person other than that specific purchaser.

(iii) The modification or enhancement of prewritten computer

software or portions of prewritten computer software where the

modification or enhancement is designed and developed to the

specifications of a specific purchaser unless there is a

reasonable, separately stated charge or an invoice or other

statement of the price is given to the purchaser for the

modification or enhancement. If a person other than the original

author or creator modifies or enhances prewritten computer

software, that person is considered to be the author or creator of

only that person's modifications or enhancements.

(p) ~~(o)~~ "Prosthetic device" means a replacement, corrective,

or supportive device, other than contact lenses and dental

prosthesis, dispensed pursuant to a prescription, including repair

or replacement parts for that device, worn on or in the body to do

1 or more of the following:

(i) Artificially replace a missing portion of the body.

(ii) Prevent or correct a physical deformity or malfunction of

the body.

(iii) Support a weak or deformed portion of the body.

(q) ~~(p)~~ "Tobacco" means cigarettes, cigars, chewing or pipe

tobacco, or any other item that contains tobacco.

Sec. 3a. (1) The use or consumption of the following services

is taxed under this act in the same manner as tangible personal

property is taxed under this act:

(a) Except as provided in section 3b, intrastate ~~telephone,~~

~~telegraph, leased wire, and other similar communications, including~~

~~local telephone exchange and long distance telephone service~~

telecommunications services that both ~~originates and terminates~~

originate and terminate in this state, ~~and telegraph, private line,~~

~~and teletypewriter service between places in this state, but~~

~~excluding telephone service by coin-operated installations,~~

~~switchboards, concentrator-identifiers, interoffice circuitry and~~

~~their accessories for telephone answering service,~~ including, but

not limited to, intrastate private communications services,

ancillary services, conference bridging service, 900 service, pay

telephone service other than coin-operated telephone service, and

value-added nonvoice data service, but excluding 800 service, coin-

operated telephone service, fixed wireless service, 1-way paging

service, prepaid calling service, telecommunications nonrecurring

charges, and directory advertising proceeds.

(b) Rooms or lodging furnished by hotelkeepers, motel

operators, and other persons furnishing accommodations that are

available to the public on the basis of a commercial and business

enterprise, irrespective of whether or not membership is required

for use of the accommodations, except rooms and lodging rented for

a continuous period of more than 1 month. As used in this act,

"hotel" or "motel" means a building or group of buildings in which

the public may obtain accommodations for a consideration,

including, without limitation, such establishments as inns, motels,

tourist homes, tourist houses or courts, lodging houses, rooming

houses, nudist camps, apartment hotels, resort lodges and cabins,

camps operated by other than nonprofit organizations but not

including those licensed under 1973 PA 116, MCL 722.111 to 722.128,

and any other building or group of buildings in which

accommodations are available to the public, except accommodations

rented for a continuous period of more than 1 month and

accommodations furnished by hospitals or nursing homes.

~~communications~~ telecommunications services that either originate or

terminate in this state and for which the charge for the service is

billed to a service address in this state or phone number by the

provider either within or outside this state including, ~~calls~~

~~between this state and any place within or without the United~~

~~States of America outside of this state. This subdivision does not~~

~~apply to a wide area telecommunication service or a similar type~~

~~service, an 800 prefix service or similar type service, an~~

~~interstate private network and related usage charges, or an~~

~~international call either inbound or outbound.~~ but not limited to,

ancillary services, conference bridging service, 900 service, pay

telephone service other than coin-operated telephone service, and

value-added nonvoice data services, but excluding interstate

private communications service, 800 service, coin-operated

telephone service, fixed wireless service, 1-way paging service,

prepaid calling service, telecommunications nonrecurring charges,

and international telecommunications service.

(d) The laundering or cleaning of textiles under a sale,

rental, or service agreement with a term of at least 5 days. This

subdivision does not apply to the laundering or cleaning of

textiles used by a restaurant or retail sales business. As used in

this subdivision, "restaurant" means a food service establishment

defined and licensed under the food law of 2000, 2000 PA 92, MCL

289.1101 to 289.8111.

(e) The transmission and distribution of electricity, whether

the electricity is purchased from the delivering utility or from

another provider, if the sale is made to the consumer or user of

the electricity for consumption or use rather than for resale.

(f) For a manufacturer who affixes its product to real estate

and maintains an inventory of its product that is available for

sale to others or who makes its product available for sale to

others by publication or price list, the direct production costs

and indirect production costs of the product affixed to the real

estate that are incident to and necessary for production or

manufacturing operations or processes, as defined by the

department.

(g) For a manufacturer who affixes its product to real estate

but does not maintain an inventory of its product available for

sale to others or make its product available for sale to others by

publication or price list, the sum of the materials cost of the

property and the cost of labor to manufacture, fabricate, or

assemble the property, but not the cost of labor to cut, bend,

assemble, or attach the property at the site for affixation to real

estate.

(2) If charges for intrastate telecommunications services or

telecommunications services between this state and another state

and other billed services not subject to the tax under this act are

aggregated with and not separately stated from charges for

telecommunications services that are subject to the tax under this

act, the nontaxable telecommunications services and other

nontaxable billed services are subject to the tax under this act

unless the service provider can reasonably identify charges for

telecommunications services not subject to the tax under this act

from its books and records that are kept in the regular course of

business.

(3) If charges for intrastate telecommunications services or

telecommunications services between this state and another state

and other billed services not subject to the tax under this act are

aggregated with and not separately stated from telecommunications

services that are subject to the tax under this act, a customer may

not rely upon the nontaxability of those telecommunications

services and other billed services unless the customer's service

provider separately states the charges for nontaxable

telecommunications services and other nontaxable billed services

from taxable telecommunications services or the service provider

elects, after receiving a written request from the customer in the

form required by the provider, to provide verifiable data based

upon the service provider's books and records that are kept in the

regular course of business that reasonably identify the nontaxable

services.

(4) All of the following apply in the case of a bundled

transaction that includes telecommunications service, ancillary

service, internet access, or audio or video programming:

(a) If the purchase price is attributable to products that are

taxable and products that are nontaxable, the portion of the

purchase price attributable to the nontaxable products may be

subject to tax unless the provider can identify by reasonable and

verifiable standards that portion from its books and records that

are kept in the regular course of business for other purposes,

including, but not limited to, nontax purposes.

(b) The provisions of this subsection apply unless otherwise

provided by federal law.

(5) ~~(4)~~ As used in this section:

(a) "Ancillary services" means services that are associated

with or incidental to the provision of telecommunications services,

including, but not limited to, detailed telecommunications billing,

directory assistance, vertical service, and voice mail services.

(b) "Bundled transaction" means the purchase of 2 or more

distinct and identifiable products, except real property and

services to real property, where the products are sold for a single

nonitemized price. A bundled transaction does not include the sale

of any products in which the sales price varies, or is negotiable,

based on the selection by the purchaser of the products included in

the transaction. As used in this subdivision:

(i) "Distinct and identifiable products" does not include any

of the following:

(A) Packaging, such as containers, boxes, sacks, bags, and

bottles or other materials such as wrapping, labels, tags, and

instruction guides, that accompany the purchase of the products and

are incidental or immaterial to the purchase of the products,

including grocery sacks, shoeboxes, dry cleaning garment bags, and

express delivery envelopes and boxes.

(B) A product provided free of charge with the required

purchase of another product. A product is provided free of charge

if the sales price of the product purchased does not vary depending

on the inclusion of the product provided free of charge.

(ii) "Purchase price" means the price paid by the seller for

the property.

(iii) "Sales price" means that term as defined in section 1 of

the general sales tax act, 1933 PA 167, MCL 205.51.

(iv) "Single nonitemized price" does not include a price that

is separately identified by product on binding sales or other

supporting sales-related documentation made available to the

purchaser in paper or electronic form, including, but not limited

to, an invoice, bill of sale, receipt, contract, service agreement,

lease agreement, periodic notice of rates and services, rate card,

or price list.

(v) Bundled transaction does not include any of the following:

(A) The purchase of tangible personal property and a service

if the tangible personal property is essential to the use of the

service and is provided exclusively in connection with the service

and the true object of the transaction is the service.

(B) The purchase of services if 1 service is provided that is

essential to the use or receipt of a second service and the first

service is provided exclusively in connection with the second

service and the true object of the transaction is the second

service.

products and the purchase price of the taxable products is de

minimis. As used in this sub-subparagraph, "de minimis" means the

seller's purchase price or sales price of the taxable products is

10% or less of the total purchase price or sales price of the

products. A seller shall use the full term of a service contract to

determine if the taxable products are de minimis. A seller shall

use either the purchase price or the sales price of the products to

determine if the taxable products are de minimis. A seller shall

not use a combination of the purchase price and sales price of the

products to determine if the taxable products are de minimis.

(D) The retail sale of exempt tangible personal property and

taxable tangible personal property if all of the following

conditions are satisfied:

(I) The transaction includes food and food ingredients,

prescription or over-the-counter drugs, durable medical equipment,

mobility enhancing equipment, medical supplies, or prosthetic

devices.

(II) Where the seller's purchase price or sales price of the

taxable tangible personal property is 50% or less of the total

purchase price or sales price of the bundled tangible personal

property. A seller may not use a combination of the purchase price

and sales price of the tangible personal property when making the

50% determination for a transaction.

telecommunications service paid for by inserting money into a

telephone that accepts direct deposits of money to operate.

(d) "Conference bridging service" means an ancillary service

that links 2 or more participants of an audio or video conference

call and may include the provision of a telephone number, but does

not include the telecommunications services used to reach the

conference bridge.

(e) "Detailed telecommunications billing service" means an

ancillary service of separately stating information pertaining to

individual calls on a customer's billing statement.

(f) "Directory assistance" means an ancillary service of

providing telephone number information or address information.

(g) ~~(a)~~ "Fabricate" means to modify or prepare tangible

personal property for affixation or assembly.

(h) "Fixed wireless service" means a telecommunications

service that provides radio communication between fixed points.

(i) "International" means a telecommunications service that

originates or terminates in the United States and terminates or

originates outside the United States, respectively. United States

includes the District of Columbia and any possession or territory

of the United States.

(j) "Interstate" means a telecommunications service that

originates in 1 United States state, territory, or possession and

terminates in a different United States state, territory, or

possession.

(k) "Intrastate" means a telecommunications service that

originates in a United States state, territory, or possession and

terminates in the same Unites States state, territory, or

possession.

(l) ~~(b)~~ "Manufacture" means to convert or condition tangible

personal property by changing the form, composition, quality,

combination, or character of the property.

(m) ~~(c)~~ "Manufacturer" means a person who manufactures,

fabricates, or assembles tangible personal property.

(n) "Paging service" means a telecommunications service that

provides transmission of coded radio signals for the purpose of

activating specific pagers, which may include messages or sounds.

(o) "Pay telephone service" means a telecommunications service

provided through any pay telephone.

(p) "Prepaid calling service" means the right to access

exclusively telecommunications services that must be paid for in

advance and that enables the origination of calls using an access

number or authorization code, whether manually or electronically

dialed, and that is sold in predetermined units or dollars that

decline with use in a known amount.

(q) "Private communications service" means a

telecommunications service that entitles the customer to exclusive

or priority use of a communications channel or group of channels

between or among termination points, regardless of the manner in

which that channel or group of channels are connected, and includes

switching capacity, extension lines, stations, and any other

associated services that are provided in connection with the use of

that channel or group of channels.

(r) "Telecommunications nonrecurring charges" means an amount

billed for the installation, connection, change, or initiation of

telecommunications service received by the customer.

(s) "Telecommunications service" means the electronic

transmission, conveyance, or routing of voice, data, audio, video,

or any other information or signals to a point, or between or among

points, including a transmission, conveyance, or routing in which

computer processing applications are used to act on the form, code,

or protocol of the content for purposes of transmission,

conveyance, or routing without regard to whether that service is

referred to as voice over internet protocol services or is

classified by the federal communications commission as enhanced or

value added. Telecommunications service does not include any of the

following:

(i) Data processing and information services that allow data to

be generated, acquired, stored, processed, or retrieved and

delivered by an electronic transmission to a purchaser where the

purchaser's primary purpose for the underlying transaction is the

processed data or information.

(ii) Installation or maintenance of wiring or equipment on a

customer's premises.

(iii) Tangible personal property.

(iv) Advertising, including, but not limited to, directory

advertising.

(v) Billing and collection services provided to third parties.

(vi) Internet access service.

(vii) Radio and television audio and video programming

services, including, but not limited to, cable service as defined

in 47 USC 522(6) and audio and video programming services delivered

by commercial mobile radio service providers as defined in 47 CFR

20.3, regardless of the medium, including the furnishing of

transmission, conveyance, and routing of those services by the

programming service provider.

(viii) Ancillary services.

(ix) Answering services, if the primary purpose of the

transaction is the answering service rather than message

transmission.

(x) Digital products delivered electronically, including, but

not limited to, software, music, video, reading materials, or ring

tones.

(t) "Value-added nonvoice data service" means a

telecommunications service in which computer processing

applications are used to act on the form, content, code, or

protocol of the information or data primarily for a purpose other

than transmission, conveyance, or routing.

(u) "Vertical service" means an ancillary service that is

offered in connection with 1 or more telecommunications services

that offers advanced calling features that allow customers to

identify callers and to manage multiple calls and call connections,

including conference bridging services.

(v) "Voice mail service" means an ancillary service that

enables the customer to store, send, or receive recorded messages,

but does not include any vertical services that the customer may be

required to have in order to utilize the voice mail service.

(w) "800 service" means a telecommunications service that

allows a caller to dial a toll-free number without incurring a

charge for the call, typically marketed under the designation

"800", "855", "866", "877", or "888" toll-free calling, or any

subsequent number designated by the federal communications

commission.

(x) "900 service" means an inbound toll telecommunications

service purchased by a subscriber that allows the subscriber's

customers to call in to the subscriber's prerecorded announcement

or live service, typically marketed under the designation "900"

service, and any subsequent number designated by the federal

communications commission, but does not include a charge for

collection services provided by the seller of the

telecommunications services to the subscriber, or the service or

product sold by the subscriber to the subscriber's customer.

Sec. 3b. (1) The use or consumption of mobile

~~telecommunications~~ wireless services is subject to the tax levied

under this act in the same manner as tangible personal property

regardless of where the mobile ~~telecommunications~~ wireless services

originate, terminate, or pass through, subject to all of the

following:

(a) Mobile ~~telecommunications~~ wireless services provided to a

customer, the charges for which are billed by or for the customer's

home service provider, are considered to be provided by the

customer's home service provider if the customer's place of primary

use for the mobile ~~telecommunications~~ wireless services is in this

state. If the customer's place of primary use for mobile

~~telecommunications~~ wireless services is outside of this state, the

mobile ~~telecommunications~~ wireless services are not subject to the

tax levied under this act.

(b) A home service provider is responsible for obtaining and

maintaining a record of the customer's place of primary use.

Subject to subsection (2), in obtaining and maintaining a record of

the customer's place of primary use, a home service provider may do

all of the following:

(i) Rely in good faith on information provided by a customer as

to the customer's place of primary use.

(ii) Treat the address used for a customer under a service

contract or agreement in effect on August 1, 2002 as that

customer's place of primary use for the remaining term of the

service contract or agreement, excluding any extension or renewal

of the service contract or agreement.

if the department chooses to create or provide a database that

complies with the provisions of 4 ~~U.S.C.~~ USC 119, a home service

provider shall use that database to determine the assignment of the

customer's place of primary use to this state. If a database is not

provided by the department, a home service provider may use an

enhanced zip code to determine the assignment of the customer's

place of primary use to this state. A home service provider that

uses a database provided by the department is not liable for any

tax that otherwise would be due solely as a result of an error or

omission in that database. A home service provider that uses an

enhanced zip code is not liable for any tax that otherwise would be

due solely as a result of an assignment of a street address to

another state if the home provider exercised due diligence to

ensure that the appropriate street addresses are assigned to this

state.

(d) If a customer believes that the amount of the tax levied

under this act or that the home service provider's record of the

customer's place of primary use is incorrect, the customer shall

notify the home service provider in writing and provide all of the

following information:

(i) The street address of the customer's place of primary use.

(ii) The account name and number for which the customer

requests the correction.

(iii) A description of the error asserted by the customer.

(iv) Any other information that the home service provider

reasonably requires to process the request.

(e) Not later than 60 days after the home service provider

receives a request under subdivision (d) or subsection (5)(b), the

home service provider shall review its record of the customer's

place of primary use and the customer's enhanced zip code to

determine the correct amount of the tax levied under this act. If

the home service provider determines that the tax levied under this

act or its record of the customer's place of primary use is

incorrect, the home service provider shall correct the error and

refund or credit any tax erroneously collected from the customer. A

refund under this subdivision shall not exceed a period of 4 years.

If the home service provider determines that the tax levied under

this act and the customer's place of primary use are correct, the

home service provider shall provide a written explanation of that

determination to the customer. The procedures prescribed in this

subdivision and in subdivision (d) are the first course of remedy

available to a customer requesting a correction of the provider's

record of place of primary use or a refund of taxes erroneously

collected by the home service provider.

(2) If the department makes a final determination that the

home service provider's record of a customer's place of primary use

is incorrect, the home service provider shall change its records to

reflect that final determination. The corrected record of a

customer's place of primary use shall be used to calculate the tax

levied under this act prospectively, from the date of the

department's final determination. The department shall not make a

final determination under this subsection before the department has

notified the customer that the department has found that the home

service provider's record of the customer's place of primary use is

incorrect and the customer has been afforded an opportunity to

appeal that finding. An appeal to the department shall be conducted

according to the provision of section 22 of 1941 PA 122, MCL

205.22.

(3) Notwithstanding section 8 and subject to section 5, if the

department makes a final determination under subsection (2) that a

customer's place of primary use is incorrect, a home service

provider is not liable for any taxes that would have been levied

under this act if the customer's place of primary use had been

correct.

(4) If charges for mobile ~~telecommunications~~ wireless services

and other billed services not subject to the tax levied under this

act are aggregated with and not separately stated from charges for

mobile ~~telecommunications~~ wireless services that are subject to the

tax levied under this act, the nontaxable mobile ~~telecommunications~~

wireless services and other billed services are subject to the tax

levied under this act unless the home service provider can

reasonably identify billings for services not subject to the tax

levied under this act from its books and records kept in the

regular course of business.

(5) If charges for mobile ~~telecommunications~~ wireless services

and other billed services not subject to the tax levied under this

act are aggregated with and not separately stated from charges for

mobile ~~telecommunications~~ wireless services that are subject to the

tax levied under this act, a customer may not rely upon the exempt

status for those mobile ~~telecommunications~~ wireless services and

other billed services unless 1 or more of the following conditions

are satisfied:

(a) The customer's home service provider separately states the

charges for mobile ~~telecommunications~~ wireless services that are

exempt and other exempt billed services from taxable mobile

~~telecommunications~~ wireless services.

(b) The home service provider elects, after receiving a

written request from the customer in the form required by the home

service provider, to identify the exempt mobile ~~telecommunications~~

wireless services and other exempt billed services by reference to

the home service provider's books and records kept in the regular

course of business.

(6) This section is repealed as of the date of entry of a

final judgment by a court of competent jurisdiction that

substantially limits or impairs the essential elements of sections

116 to 126 of title 4 of the United States Code, 4 ~~U.S.C.~~ USC 116

to 126, and that final judgment is no longer subject to appeal.

(7) For an air-ground radiotelephone service, the tax under

this act is imposed at the location of the origination of the air-

ground radiotelephone service in this state as identified by the

home service provider or information received by the home service

provider from its servicing carrier.

(8) All of the following apply in the case of a bundled

transaction that includes telecommunications service, ancillary

service, internet access, or audio or video programming:

(a) If the purchase price is attributable to products that are

taxable and products that are nontaxable, the portion of the

purchase price attributable to the nontaxable products may be

subject to tax unless the provider can identify by reasonable and

verifiable standards that portion from its books and records kept

in the regular course of business for other purposes, including,

but not limited to, nontax purposes.

(b) If the purchase price is attributable to products that are

subject to tax at different tax rates, the total purchase price may

be treated as attributable to the products subject to tax at the

highest tax rate unless the provider can identify by reasonable and

verifiable standards the portion of the purchase price attributable

to the products subject to tax at the lower rate from its books and

records kept in the regular course of business for other purposes,

including, but not limited to, nontax purposes.

otherwise provided by federal law.

(9) ~~(8)~~ As used in this section:

(a) "Air-ground radiotelephone service" means that term as

defined in 47 ~~C.F.R.~~ CFR part 22.

(b) "Commercial mobile radio service" means that term as

defined in 47 ~~C.F.R.~~ CFR 20.3.

~~telecommunications~~ wireless services" means any charge for, or

associated with, the provision of commercial mobile radio service,

or any charge for, or associated with, a service provided as an

adjunct to a commercial mobile radio service, that is billed to a

customer by or for the customer's home service provider regardless

of whether individual transmissions originate or terminate within

the licensed service area of the home service provider.

(d) "Customer" means 1 of the following, but does not include

a reseller or a serving carrier:

(i) The person who contracts with the home service provider for

mobile ~~telecommunications~~ wireless services.

(ii) If the end user of mobile ~~telecommunications~~ wireless

services is not the contracting party, then the end user of the

mobile ~~telecommunications~~ wireless service. This subparagraph

applies only for the purpose of determining the place of primary

use.

(e) "Enhanced zip code" means a United States postal zip code

of 9 or more digits.

(f) "Home service provider" means the facilities-based carrier

or reseller that enters into a contract with a customer for mobile

~~telecommunications~~ wireless services.

(g) "Licensed service area" means the geographic area in which

a home service provider is authorized by law or contract to provide

commercial mobile radio services to its customers.

(h) "Mobile ~~telecommunications~~ wireless services" means

~~commercial mobile radio services that originate and terminate in~~

~~the same state or originate in 1 state and terminate in another~~

~~state. Mobile telecommunications services do not include prepaid~~

~~mobile telecommunications services or air-ground radiotelephone~~

~~service.~~ a telecommunications service that is transmitted,

conveyed, or routed, regardless of the technology used, whereby the

origination or termination points of the transmission, conveyance,

or routing are not fixed, including, but not limited to,

telecommunications services that are provided by a commercial

mobile radio service provider.

(i) "Place of primary use" means the residential street

address or the primary business street address within the licensed

service area of the home service provider at which a customer

primarily uses mobile ~~telecommunications~~ wireless services. For

mobile wireless services, place of primary use shall be within the

licensed service area of the home service provider.

(j) "Prepaid mobile ~~telecommunications~~ wireless calling

service" means ~~the advance purchase of exclusive mobile~~

~~telecommunications services, which enables the origination of calls~~

~~using an access number or authorization code, whether manually or~~

~~electronically dialed, if the remaining units of service are known~~

~~by the provider of the service on a continuous basis~~ a

telecommunications service that provides the right to utilize

mobile wireless service as well as other nontelecommunications

services, including the download of digital products delivered

electronically, content, and ancillary services, which shall be

paid for in advance and that is sold in predetermined units or

dollars that decline with use in a known amount.

(k) "Reseller" means a telecommunications services provider

who purchases telecommunications services from another

telecommunications services provider and then resells the

telecommunications services, uses the telecommunications services

as a component part of a mobile ~~telecommunications~~ wireless

service, or integrates the telecommunications services into a

mobile ~~telecommunications~~ wireless service. Reseller does not

include a serving carrier.

(l) "Serving carrier" means a facilities-based

telecommunications services provider that contracts with a home

service provider for mobile ~~telecommunications~~ wireless services to

a customer outside of the home service provider's or reseller's

licensed service area.

(m) "Telecommunications service" means the electronic

transmission, conveyance, or routing of voice, data, audio, video,

or any other information or signals to a point, or between or among

points, including a transmission, conveyance, or routing in which

computer processing applications are used to act on the form, code,

or protocol of the content for purposes of transmission,

conveyance, or routing without regard to whether that service is

referred to as voice over internet protocol services or is

classified by the federal communications commission as enhanced or

value added. Telecommunications service does not include any of the

following:

(i) Data processing and information services that allow data to

be generated, acquired, stored, processed, or retrieved and

delivered by an electronic transmission to a purchaser where the

purchaser's primary purpose for the underlying transaction is the

processed data or information.

(ii) Installation or maintenance of wiring or equipment on a

customer's premises.

(iii) Tangible personal property.

(iv) Advertising, including, but not limited to, directory

advertising.

(v) Billing and collection services provided to third parties.

(vi) Internet access service.

(vii) Radio and television audio and video programming

services, including, but not limited to, cable service as defined

in 47 USC 522(6) and audio and video programming services delivered

by commercial mobile radio service providers, as defined in 47 CFR

20.3, regardless of the medium, including the furnishing of

transmission, conveyance, and routing of those services by the

programming service provider.

(viii) Ancillary services.

(ix) Answering services, if the primary purpose of the

transaction is the answering service rather than message

transmission.

(x) Digital products delivered electronically, including, but

not limited to, software, music, video, reading materials, or ring

tones.

Sec. 3c. (1) Except for the defined telecommunications

services in section 3b and subsection (3), the sale of

telecommunications service sold on a call-by-call basis shall be

sourced to each level of taxing jurisdiction where the call

originates and terminates in that jurisdiction or each level of

taxing jurisdiction where the call either originates or terminates

and in which the service address is also located.

(2) Except for the defined telecommunications services in

section 3b and subsection (3), a sale of telecommunications

services sold on a basis other than a call-by-call basis is sourced

to the customer's place of primary use.

(3) The sale of the following telecommunications services

shall be sourced to each level of taxing jurisdiction as follows:

(a) A sale of post-paid calling service is sourced to the

origination point of the telecommunications signal as first

identified by either the seller's telecommunications system, or

information received by the seller from its service provider, where

the system used to transport such signals is not that of the

seller.

(b) A sale of prepaid calling service or prepaid wireless

calling service is sourced in accordance with section 20. However,

for a sale of ~~mobile telecommunications service that is~~ a prepaid

~~telecommunications~~ wireless calling service, the rule provided in

section 20(1)(e) shall include as an option the location associated

with the mobile telephone number.

~~(c) A sale of a private communication service is sourced as~~

~~follows:~~

(i~~) Service for a separate charge related to a customer channel~~

~~termination point is sourced to each level of jurisdiction in which~~

~~the customer channel termination point is located.~~

(ii~~) Service where all customer termination points are located~~

~~entirely within 1 jurisdiction or levels of jurisdiction is sourced~~

~~in the jurisdiction in which the customer channel termination~~

~~points are located.~~

(~~iii~~~~) Service for segments of a channel between 2 customer~~

~~channel termination points located in different jurisdictions and~~

~~which segment of channel is separately charged is sourced 50% in~~

~~each level of jurisdiction in which the customer channel~~

~~termination points are located.~~

(iv~~) Service for segments of a channel located in more than 1~~

~~jurisdiction or levels of jurisdiction and which segments are not~~

~~separately billed is sourced in each jurisdiction based on the~~

~~percentage determined by dividing the number of customer channel~~

~~termination points in the jurisdiction by the total number of~~

~~customer channel termination points.~~

customer's place of primary use.

(4) As used in this section:

(a) ~~"Air-to-ground radiotelephone service" means a radio~~

~~service, as that term is defined in 47 CFR part 22, in which common~~

~~carriers are authorized to offer and provide radio~~

~~telecommunications service for hire to subscribers in aircraft.~~

"Ancillary services" means services that are associated with or

incidental to the provision of telecommunications services,

including, but not limited to, detailed telecommunications billing,

directory assistance, vertical service, and voice mail services.

(b) "Call-by-call basis" means any method of charging for

telecommunications services where the price is measured by

individual calls.

virtual path of communications over which signals are transmitted

between or among customer channel termination points.

(d) "Customer" means the person or entity that contracts with

the seller of telecommunications services. If the end user of

telecommunications services is not the contracting party, the end

user of the telecommunications service is the customer of the

telecommunications service for purposes of this section. Customer

does not include a reseller of telecommunications service or for

mobile ~~telecommunications~~ wireless service of a serving carrier

under an agreement to serve the customer outside the home service

provider's licensed service area.

(e) "Customer channel termination point" means the location

where the customer either inputs or receives the communications.

(f) "End user" means the person who utilizes the

telecommunications service. In the case of an entity, "end user"

means the individual who utilizes the service on behalf of the

entity.

~~(g) "Home service provider" means the facilities-based carrier~~

~~or reseller that enters into a contract with a customer for mobile~~

~~telecommunications services.~~

~~(h) "Mobile telecommunications services" means commercial~~

~~mobile radio services that originate and terminate in the same~~

~~state or originate in 1 state and terminate in another state.~~

~~Mobile telecommunications services do not include prepaid mobile~~

~~telecommunications services or air-ground radiotelephone service.~~

(g) ~~(i)~~ "Place of primary use" means the street address

representative of where the customer's use of the

telecommunications service primarily occurs, which must be the

residential street address or the primary business street address

of the customer. For mobile ~~telecommunications~~ wireless services,

place of primary use must be within the licensed service area of

the home service provider.

(h) ~~(j)~~ "Post-paid calling service" means the

telecommunications service obtained by making a payment on a call-

by-call basis either through the use of a credit card or payment

mechanism such as a bank card, travel card, credit card, or debit

card, or by charge made to a telephone number that is not

associated with the origination or termination of the

telecommunications service. A post-paid calling service includes a

telecommunications service, except a prepaid wireless calling

service, that would be a prepaid calling service except it is not

exclusively a telecommunications service.

(i) ~~(k)~~ "Prepaid calling service" means the right to access

exclusively telecommunications services, which must be paid for in

advance and that enables the origination of calls using an access

number or authorization code, whether manually or electronically

dialed, and that is sold in predetermined units or dollars of which

the number declines with use in a known amount.

(j) "Prepaid wireless calling service" means a

telecommunications service that provides the right to utilize

mobile wireless service as well as other nontelecommunications

services, including the download of digital products delivered

electronically, content, and ancillary services, which shall be

paid for in advance and that is sold in predetermined units or

dollars that decline with use in a known amount.

(k) (l) "Private communication service" means a

telecommunications service that entitles the customer to exclusive

or priority use of a communications channel or group of channels

between or among termination points, regardless of the manner in

which the channel or channels are connected, and includes switching

capacity, extension lines, stations, and any other associated

services that are provided in connection with the use of such

channel or channels.

(l) ~~(m)~~ "Service address" means the following:

(i) The location of the telecommunications equipment to which a

customer's call is charged and from which the call originates or

terminates, regardless of where the call is billed or paid.

(ii) If the location in subparagraph (i) is not known, service

address means the origination point of the signal of the

telecommunications services first identified by either the seller's

telecommunications system or in information received by the seller

from its service provider, where the system used to transport the

signals is not that of the seller.

(iii) If the location in subparagraphs (i) and (ii) is not known,

the service address means the location of the customer's place of

primary use.

(m) "Telecommunications service" means the electronic

transmission, conveyance, or routing of voice, data, audio, video,

or any other information or signals to a point, or between or among

points, including a transmission, conveyance, or routing in which

computer processing applications are used to act on the form, code,

or protocol of the content for purposes of transmission,

conveyance, or routing without regard to whether the service is

referred to as voice over internet protocol services or is

classified by the federal communications commission as enhanced or

value added. Telecommunications service does not include any of the

following:

(i) Data processing and information services that allow data to

be generated, acquired, stored, processed, or retrieved and

delivered by an electronic transmission to a purchaser if the

purchaser's primary purpose for the underlying transaction is the

processed data or information.

(ii) Installation or maintenance of wiring or equipment on a

customer's premises.

(iii) Tangible personal property.

(iv) Advertising, including, but not limited to, directory

advertising.

(v) Billing and collection services provided to third parties.

(vi) Internet access service.

(vii) Radio and television audio and video programming

services, including, but not limited to, cable service as defined

in 47 USC 522(6) and audio and video programming services delivered

by commercial mobile radio service providers, as defined in 47 CFR

20.3, regardless of the medium, including the furnishing of

transmission, conveyance, and routing of those services by the

programming service provider.

(viii) Ancillary services.

(ix) Answering services, if the primary purpose of the

transaction is the answering service rather than message

transmission.

(x) Digital products delivered electronically, including, but

not limited to, software, music, video, reading materials, or ring

tones.

Sec. 4d. (1) The following are exempt from the tax under this

act:

(a) Sales of drugs for human use that can only be legally

dispensed by prescription or food or food ingredients, except

prepared food intended for immediate human consumption.

(b) The deposit on a returnable container for a beverage or

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

containers.

federal food stamp program or meals sold by a person exempt from

the tax under this act eligible to be purchased under the federal

food stamp program.

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

purchased at a place of business authorized to accept food stamps

by the food and nutrition service of the United States department

of agriculture or a place of business that has made a complete and

proper application for authorization to accept food stamps but has

been denied authorization and provides proof of denial to the

department of treasury.

(e) Live animals purchased with the intent to be slaughtered

for human consumption.

(2) Food or drink heated or cooled mechanically, electrically,

or by other artificial means to an average temperature above 75

degrees Fahrenheit or below 65 degrees Fahrenheit before sale and

sold from a vending machine, except milk, nonalcoholic beverages in

a sealed container, and fresh fruit, is subject to the tax under

this act. The tax due under this act on the sale of food or drink

from a vending machine selling both taxable items and items exempt

under this subsection shall be calculated under this act after

December 31, 1994 based on 1 of the following as determined by the

taxpayer:

(a) Actual gross proceeds from sales at retail.

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

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

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

(3) "Food and food ingredients" means substances, whether in

liquid, concentrated, solid, frozen, dried, or dehydrated form,

that are sold for ingestion or chewing by humans and are consumed

for their taste or nutritional value. Food and food ingredients do

not include alcoholic beverages and tobacco.

(4) "Prepared food" means the following:

(a) Food sold in a heated state or that is heated by the

seller.

(b) Two or more food ingredients mixed or combined by the

seller for sale as a single item.

including knives, forks, spoons, glasses, cups, napkins, straws, or

plates, but not including a container or packaging used to

transport the food.

(5) Prepared food does not include the following:

(a) Food that is only cut, repackaged, or pasteurized by the

seller.

(b) Raw eggs, fish, meat, poultry, and foods containing those

raw items requiring cooking by the consumer in recommendations

contained in section 3-401.11 of part 3-4 of chapter 3 of the 2001

food code published by the food and drug administration of the

public health service of the department of health and human

services, to prevent foodborne illness.

single item, without eating utensils.

(d) Bakery items, including bread, rolls, buns, biscuits,

bagels, croissants, pastries, doughnuts, danish, cakes, tortes,

pies, tarts, muffins, bars, cookies, and tortillas, sold without

eating utensils.

(6) "Prepared food intended for immediate consumption" means

prepared food.

Sec. 4i. (1) A seller required to collect the tax under this

act shall be exempt from collecting the tax on sales of tangible

personal property if the tangible personal property is part of a

drop shipment and if the taxpayer complies with the requirements of

subsection (3).

(2) As used in this section, "drop shipment" means the direct

delivery of tangible personal property to a purchaser in Michigan

by a person who has sold the property to another person not

licensed under this act but possessing a resale or exemption

certificate or other written evidence of exemption authorized by

another state, or any other acceptable information evidencing

qualification for a resale exemption, for resale to the Michigan

purchaser.

(3) For each transaction for which an exemption is claimed

under subsection (1), the taxpayer shall provide the following

information to the department annually in any reasonable form:

(a) The name, address, and, if readily available, the federal

taxpayer identification number of the person to whom the property

is sold for resale.

(b) The name, address, and, if readily available, the federal

taxpayer identification number of the person to whom the property

is shipped in Michigan.

(4) A person making a drop shipment is a seller.

Sec. 7. (1) Each person storing, using, or consuming in this

state tangible personal property or services is liable for the tax

levied under this act, and that liability shall not be extinguished

until the tax levied under this act has been paid to the

department.

(2) A person who acquires tangible personal property or

services for any tax-exempt use who subsequently converts the

tangible personal property or service to a taxable use, including

an interim taxable use, is liable for the tax levied under this

act. If tangible personal property or services are converted to a

taxable use, the tax levied under this act shall be imposed without

regard to any subsequent tax-exempt use. The payment to the

department of the tax, interest, and any penalty assessed by the

department relieves the seller, who sold the property or services

with regard to the storing, use, or consumption on which the tax

was paid from the payment of the amount of the tax that he or she

may be required under this act to collect from the purchaser.

(3) Beginning January 1, 2009, except as limited by subsection

(4), a consumer is relieved from liability, including liability for

tax, penalty, and interest, for having failed to pay the correct

amount of tax imposed under this act in the following

circumstances:

(a) The consumer's seller or the seller's certified service

provider, as defined in the streamlined sales and use tax

administration act, 2004 PA 174, MCL 205.801 to 205.833, relied on

erroneous data contained in the taxability matrix.

(b) The consumer relied on erroneous data contained in the

taxability matrix.

(4) Liability relief under subsection (3) is limited to the

erroneous classification in the taxability matrix of terms included

in the streamlined sales and use tax agreement's library of

definitions as taxable or exempt, included in sales price, excluded

from sales price, or excluded from the definition.

(5) As used in this section:

(a) "Penalty" means an amount imposed for noncompliance that

is not fraudulent, willful, or intentional and that is in addition

to the correct amount of tax imposed under this act and in addition

to interest.

(b) "Taxability matrix" means the taxability matrix published

by the department pursuant to the streamlined sales and use tax

administration act, 2004 PA 174, MCL 205.801 to 205.833.

Sec. 13. (1) A purchaser of direct mail other than a holder of

a direct pay permit under section 8 shall provide to the seller at

the time of purchase either ~~a direct mail~~ an exemption form as

prescribed by the department or information indicating the taxing

jurisdictions to which the direct mail is delivered to recipients.

(2) Upon receipt of the ~~direct mail~~ exemption form, the seller

is relieved of all obligation to collect, pay, or remit the

applicable tax and the purchaser is then obligated to pay the

applicable tax on a direct pay basis.

(3) ~~A direct mail~~ An exemption form remains in effect for all

subsequent sales of direct mail by the seller to the purchaser

until revoked in writing.

(4) Upon receipt of information from the purchaser indicating

the taxing jurisdictions to which the direct mail is delivered to

recipients, the seller shall collect the tax according to that

delivery information. In the absence of bad faith, the seller is

relieved of any further obligation to collect the tax if the seller

collected the tax using the delivery information provided by the

purchaser.

(5) If the purchaser does not have a direct pay permit and

does not provide the seller with ~~a direct mail~~ an exemption form or

delivery information as required in subsection (1), the seller

shall collect the tax in the same manner as provided in section 19.

Nothing in this subsection limits a purchaser's obligation for the

tax under this act.

(6) A purchaser who provides the seller with documentation of

a direct pay permit is not required to provide ~~a direct mail~~ an

exemption form or delivery information.

Sec. 14a. (1) A person in the business of selling tangible

personal property and liable for any tax under this act shall keep

accurate and complete beginning and annual inventory and purchase

records of additions to inventory, complete daily sales records,

receipts, invoices, bills of lading, and all pertinent documents in

a form the department requires. If an exemption from use tax is

claimed by a person because the sale is for resale at retail, a

record shall be kept of the sales tax license number if the person

has a sales tax license. These records shall be retained for a

period of 4 years after the tax imposed under this act to which the

records apply is due or as otherwise provided by law.

(2) If the department considers it necessary, the department

may require a person, by notice served upon that person, to make a

return, render under oath certain statements, or keep certain

records the department considers sufficient to show whether or not

that person is liable for the tax under this act.

(3) A person knowingly making a sale of tangible personal

property for the purpose of resale at retail to another person not

licensed under this act is liable for the tax imposed under this

act unless the transaction is exempt under the provisions of

section 4i.

(4) If a taxpayer fails to file a return or to maintain or

preserve proper records as prescribed in this section, or the

department has reason to believe that any records maintained or

returns filed are inaccurate or incomplete and that additional

taxes are due, the department may assess the amount of the tax due

from the taxpayer based on information that is available or that

may become available to the department. That assessment is

considered prima facie correct for the purpose of this act and the

burden of proof of refuting the assessment is upon the taxpayer.

(5) For purposes of this act, exemption certificate includes a

blanket exemption certificate on a form prescribed by the

department that covers all exempt transfers between the taxpayer

and the buyer for a period of 4 years or for a period of less than

4 years as stated on the blanket exemption certificate if that

period is agreed to by the buyer and taxpayer.

~~(6) This section applies when this state is a member state of~~

~~the streamlined sales and use tax agreement.~~

Sec. 14b. (1) If an exemption from the tax under this act is

claimed, the seller shall obtain identifying information of the

purchaser and the reason for claiming the exemption at the time of

the purchase or at a later date. The seller shall obtain the same

information for a claimed exemption regardless of the medium in

which the transaction occurred.

(2) A seller shall use a standard format for claiming an

exemption electronically as adopted by the governing board under

the streamlined sales and use tax agreement.

(3) A purchaser is not required to provide a signature to

claim an exemption under this act unless a paper exemption form is

used.

(4) A seller shall maintain a proper record of all exempt

transactions and shall provide them when requested by the

department.

(5) A seller who complies with the requirements of this

section is not liable for the tax under this act if a purchaser

improperly claims an exemption. A purchaser who improperly claims

an exemption is liable for the tax due under this act. This

subsection does not apply if a seller ~~fraudulently~~ does any of the

following:

(a) Fraudulently fails to collect the tax. ~~or solicits~~

(b) Solicits a purchaser to make an improper claim for

exemption.

entity-based exemption if both of the following occur:

(i) The subject of the transaction sought to be covered by the

exemption form is actually received by the purchaser at a location

operated by the seller.

(ii) The state in which the location operated by the seller is

located provides an exemption form that clearly and affirmatively

indicates that the claimed exemption is not available in that

state.

(6) A seller who obtains a fully completed exemption form or

captures the relevant data elements as outlined in this section

within 120 days after the date of sale is not liable for the tax

under this act.

(7) If the seller has not obtained an exemption form or all

relevant data elements, the seller may either prove that the

transaction was not subject to the tax under this act by other

means or obtain a fully completed exemption form from the

purchaser, by the later of the following:

(a) 120 days after a request by the department.

(b) The date an assessment becomes final.

(d) In the instance of a credit audit, the issuance of an

audit determination letter or informal conference decision and

order of determination.

(e) The date of a final order of the court of claims or the

Michigan tax tribunal, as applicable, with respect to an

assessment, order, or decision of the department.

(8) The department may, in its discretion, allow a seller

additional time to comply with subsection (7).

(9) A seller is not liable for the tax under this act if the

seller obtains a blanket exemption form for a purchaser with which

the seller has a recurring business relationship. Renewals of

blanket exemption forms or updates of exemption form information or

data elements are not required if there is a recurring business

relationship between the seller and the purchaser. For purposes of

this section, a recurring business relationship exists when a

period of not more than 12 months elapses between sales

transactions.

Enacting section 1. Sections 12 and 14 of the use tax act,

1937 PA 94, MCL 205.102 and 205.104, are repealed.