September 7, 2007, Introduced by Rep. Tobocman and referred to the Committee on Tax Policy.
A bill to amend 1937 PA 94, entitled
"Use tax act,"
by amending sections 2b, 3, 3a, and 10 (MCL 205.92b, 205.93,
205.93a, and 205.100), section 2b as amended by 2006 PA 428 and
sections 3, 3a, and 10 as amended by 2004 PA 172.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
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.
(c) "Computer software" means a set of coded 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
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.
(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.
(C) An herb or other botanical.
(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 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) "Electronic" means relating to technology having
electrical, digital, magnetic, wireless, optical, electromagnetic,
or similar capabilities.
(k) "Hotel" or "motel" means a building or group of buildings
in which the public may obtain accommodations for a consideration,
including, but not limited to, 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.
(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:
(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.
(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. 3. (1) There is levied upon and there shall be collected
from every person in this state a specific tax for the privilege of
using, storing, or consuming tangible personal property in this
state at a rate equal to 6% of the price of the property or
services specified in section 3a or 3b. Penalties and interest
shall be added to the tax if applicable as provided in this act.
For the purpose of the proper administration of this act and to
prevent the evasion of the tax, all of the following shall be
presumed:
(a) That tangible personal property purchased is subject to
the tax if brought into this state within 90 days of the purchase
date and is considered as acquired for storage, use, or other
consumption in this state.
(b) That tangible personal property used solely for personal,
nonbusiness purposes that is purchased outside of this state and
that is not an aircraft is exempt from the tax levied under this
act if 1 or more of the following conditions are satisfied:
(i) The property is purchased by a person who is not a resident
of this state at the time of purchase and is brought into this
state more than 90 days after the date of purchase.
(ii) The property is purchased by a person who is a resident of
this state at the time of purchase and is brought into this state
more than 360 days after the date of purchase.
(2) The tax imposed by this section for the privilege of
using, storing, or consuming a vehicle, ORV, manufactured housing,
aircraft, snowmobile, or watercraft shall be collected before the
transfer of the vehicle, ORV, manufactured housing, aircraft,
snowmobile, or watercraft, except a transfer to a licensed dealer
or retailer for purposes of resale that arises by reason of a
transaction made by a person who does not transfer vehicles, ORVs,
manufactured housing, aircraft, snowmobiles, or watercraft in the
ordinary course of his or her business done in this state. The tax
on a vehicle, ORV, snowmobile, and watercraft shall be collected by
the secretary of state before the transfer of the vehicle, ORV,
snowmobile, or watercraft registration. The tax on manufactured
housing shall be collected by the department of consumer and
industry services, mobile home commission, or its agent before the
transfer of the certificate of title. The tax on an aircraft shall
be collected by the department of treasury. The price tax base of a
new or previously owned car or truck held for resale by a dealer
and that is not exempt under section 4(1)(c) is the purchase price
of the car or truck multiplied by 2.5% plus $30.00 per month
beginning with the month that the dealer uses the car or truck in a
nonexempt manner.
(3) The following transfers or purchases are not subject to
use tax:
(a) A transaction or a portion of a transaction if the
transferee or purchaser is the spouse, mother, father, brother,
sister, child, stepparent, stepchild, stepbrother, stepsister,
grandparent, grandchild, legal ward, or a legally appointed
guardian with a certified letter of guardianship, of the
transferor.
(b) A transaction or a portion of a transaction if the
transfer is a gift to a beneficiary in the administration of an
estate.
(c) If a vehicle, ORV, manufactured housing, aircraft,
snowmobile, or watercraft that has once been subjected to the
Michigan sales or use tax is transferred in connection with the
organization, reorganization, dissolution, or partial liquidation
of an incorporated or unincorporated business and the beneficial
ownership is not changed.
(d) If an insurance company licensed to conduct business in
this state acquires ownership of a late model distressed vehicle as
defined in section 12a of the Michigan vehicle code, 1949 PA 300,
MCL 257.12a, through payment of damages in response to a claim or
when the person who owned the vehicle before the insurance company
reacquires ownership from the company as part of the settlement of
a claim.
(4) The department may utilize the services, information, or
records of any other department or agency of state government in
the performance of its duties under this act, and other departments
or agencies of state government are required to furnish those
services, information, or records upon the request of the
department.
(5) Any decrease in the rate of the tax levied under
subsection (1) on services subject to tax under this act shall
apply only to billings rendered on or after the effective date of
the decrease.
(6) As used in this section, "ORV" means that term as defined
in section 81101 of the natural resources and environmental
protection act, 1994 PA 451, MCL 324.81101.
Sec. 3a. (1) The use or consumption of the following 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 that
both
originates and terminates in Michigan this state, and
telegraph, private line, and teletypewriter service between places
in
Michigan this state, but excluding telephone service by coin-
operated installations, switchboards, concentrator-identifiers,
interoffice circuitry and their accessories for telephone answering
service, 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.
(c) Except as provided in section 3b, interstate telephone
communications that either originate or terminate in this state and
for
which the charge for the service is billed to a Michigan
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. However, if the tax under this act is levied
at a rate of 6%, 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.
(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 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 does not include 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) As used in this section:
(a) "Fabricate" means to modify or prepare tangible personal
property for affixation or assembly.
(b) "Manufacture" means to convert or condition tangible
personal property by changing the form, composition, quality,
combination, or character of the property.
(c) "Manufacturer" means a person who manufactures,
fabricates, or assembles tangible personal property.
(d) "Restaurant" means a food service establishment defined
and licensed under the food law of 2000, 2000 PA 92, MCL 289.1101
to 289.8111.
Sec. 10. (1) The tax imposed by this act shall be administered
by the department under 1941 PA 122, MCL 205.1 to 205.31, the
streamlined sales and use tax administration act, 2004 PA 174, MCL
205.801 to 205.833, and this act. If the provisions of 1941 PA 122,
MCL 205.1 to 205.31, the streamlined sales and use tax
administration act, 2004 PA 174, MCL 205.801 to 205.833, and this
act conflict, the provisions of this act apply.
(2) Rules shall be promulgated to implement this act under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328.
(3) Claims for refund pursuant to the 1988 amendatory act
amending section 2 shall be filed not later than March 31, 1989.
The approved refunds shall be paid without interest. The department
shall not pay refunds totaling more than $1,000,000.00 in any 1
fiscal year, unless the single business tax act, 1975 PA 228, MCL
208.1 to 208.145, or the Michigan business tax act, 2007 PA 36, MCL
208.1101 to 208.1601, is amended to impose a 1-year surcharge on
the business activity of contract construction to recover the cost
of the refunds.
(4)
A claim for a refund pursuant to the final decision of the
Michigan
court of appeals in the case of GTE Sprint Communications
Corp.
v Michigan Department of Treasury, 179 Mich App 276, 1989, LV
DEN
436 Mich 875, 1990, shall be filed not later than January 1,
1994
by a person that paid the tax under this act for interstate
access
telephone services for the period beginning August 1, 1988
through
January 1, 1991. The approved refund shall be paid without
interest.
The department shall pay the refund in 12 equal
installments
commencing in the month that the person begins
applying
the refunds to the billings of its current Michigan
interstate
subscribers in a manner consistent with the requirements
of
the federal communications commission.
(4) (5)
A seller shall not separately state
on an invoice,
bill of sale, or other similar document given to the purchaser the
tax imposed under the tobacco products tax act, 1993 PA 327, MCL
205.421 to 205.436.