HB-4685, As Passed Senate, December 15, 2015

SUBSTITUTE FOR

HOUSE BILL NO. 4685

     A bill to amend 1933 PA 167, entitled

"General sales tax act,"

by amending section 6a (MCL 205.56a), as amended by 2013 PA 1.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 6a. (1) Through March 31, 2013, at the time of purchase

or shipment from a refiner, pipeline terminal operator, or marine

terminal operator, a purchaser or receiver of gasoline shall prepay

a portion of the tax imposed by this act at the rate provided in

this section to the refiner, pipeline terminal operator, or marine

terminal operator for the purchase or receipt of gasoline. If the

purchase or receipt of gasoline is made outside this state for

shipment into and subsequent sale within this state, the purchaser

or receiver, other than a refiner, pipeline terminal operator, or

marine terminal operator, shall make the prepayment required by

this section directly to the department. Prepayments for gasoline

shall be made at a cents-per-gallon rate determined by the

department and shall be based on 6% of the statewide average retail

price of a gallon of self-serve unleaded regular gasoline as

determined and certified by the department rounded up to the

nearest 1/10 of 1 cent. A person that makes prepayments directly to

the department shall make those prepayments according to the

schedule in subsection (6).

     (2) Beginning April 1, 2013 through March 31, 2016, at the

time of purchase or shipment from a refiner, pipeline terminal

operator, or marine terminal operator, a purchaser or receiver of

fuel shall prepay a portion of the tax imposed by this act at the

rates provided in this section to the refiner, pipeline terminal

operator, or marine terminal operator for the purchase or receipt

of fuel. If the purchase or receipt of fuel is made outside this

state for shipment into and subsequent sale within this state, the

purchaser or receiver, other than a refiner, pipeline terminal

operator, or marine terminal operator, shall make the prepayment

required by this section directly to the department. Prepayments

for gasoline shall be made at a cents-per-gallon rate determined by

the department and shall be based on 6% of the statewide average

retail price of a gallon of self-serve unleaded regular gasoline as

determined and certified by the department rounded up to the

nearest 1/10 of 1 cent. Prepayments for diesel fuel shall be made

at a cents-per-gallon rate determined by the department and shall

be based on 6% of the statewide average retail price of a gallon of

undyed No. 2 ultra-low sulfur diesel fuel as determined and

certified by the department rounded up to the nearest 1/10 of 1

cent. A person that makes prepayments directly to the department

shall make those prepayments according to the schedule in

subsection (6).

     (3) Through March 31, 2013, the rate of prepayment applied

pursuant to subsection (1) shall be determined every 3 months by

the department unless the department certifies that the change in

the statewide average retail price of a gallon of self-serve

unleaded regular gasoline has been less than 10% since the

establishment of the rate of prepayment then in effect.Beginning

April 1, 2016, at the time of purchase or shipment in this state

from a refiner, pipeline terminal operator, or marine terminal

operator, a purchaser or receiver of fuel other than an exporter or

supplier for immediate export, as evidenced by the terminal's

shipping papers or bill of lading, shall prepay a portion of the

tax imposed by this act at the rates provided in this section to

the refiner, pipeline terminal operator, or marine terminal

operator for the purchase or receipt of fuel. If the purchase or

receipt of fuel is made outside this state for shipment into and

subsequent sale within this state, the purchaser or receiver, other

than a refiner, pipeline terminal operator, or marine terminal

operator as part of a bulk transfer, shall make the prepayment

required by this section directly to the department. Prepayments

for gasoline shall be made at a cents-per-gallon rate determined by

the department and shall be based on 6% of the statewide average

retail price of a gallon of self-serve unleaded regular gasoline as

determined and certified by the department rounded up to the

nearest 1/10 of 1 cent. Prepayments for diesel fuel shall be made

at a cents-per-gallon rate determined by the department and shall

be based on 6% of the statewide average retail price of a gallon of

undyed No. 2 ultra-low sulfur diesel fuel as determined and

certified by the department rounded up to the nearest 1/10 of 1

cent. A person that makes prepayments directly to the department

shall make those prepayments according to the schedule in

subsection (6).

     (4) Beginning April 1, 2013, the The rates of prepayment

applied pursuant to subsection (2) subsections (2) and (3) shall be

determined every month by the department. Notwithstanding

subsection (3), the The department shall publish notice of the

rates of prepayment applicable to gasoline and diesel fuel pursuant

to subsection (2) subsections (2) and (3) not later than the tenth

day of the month immediately preceding the month in which the rate

is effective.

     (5) A person subject to tax under this act that makes

prepayment to another person as required by this section for

gasoline may claim an estimated prepayment credit on its regular

monthly return filed pursuant to section 6. The credit shall be for

prepayments made during the month for which the return is required

and shall be based upon the difference between prepayments made in

the immediately preceding month and collections of prepaid tax

received from sales or transfers during the month for which the

return required under section 6 is made. A sale or transfer for

which collection of prepaid tax is due the taxpayer is subject to a

bad debt deduction under section 4i, whether or not the sale or

transfer is a sale at retail. The credit shall not be reduced

because of actual shrinkage. A taxpayer that does not, in the

ordinary course of business, sell gasoline in each month of the

year may, with the approval of the department, base the initial

prepayment deduction in each tax year on prepayments made in a

month other than the immediately preceding month. The difference in

actual prepayments shall be reconciled on the annual return in

accordance with procedures prescribed by the department.

     (6) Notwithstanding the other provisions for the payment and

remitting of tax due under this act, a refiner, pipeline terminal

operator, or marine terminal operator shall account for and remit

to the department the prepayments received pursuant to this section

in accordance with the following schedule:

     (a) On or before the twenty-fifth of each month, prepayments

received after the end of the preceding month and before the

sixteenth of the month in which the prepayments are made.

     (b) On or before the tenth of each month, payments received

after the fifteenth and before the end of the preceding month.

     (7) A refiner, pipeline terminal operator, or marine terminal

operator that fails to remit prepayments made by a purchaser or

receiver of fuel is subject to the penalties provided by 1941 PA

122, MCL 205.1 to 205.31.

     (8) The refiner, pipeline terminal operator, or marine

terminal operator shall not receive a deduction under section 4 for

receiving and remitting prepayments from a purchaser or receiver

pursuant to this section.

     (9) The purchaser or receiver of fuel that makes prepayments

is not subject to further liability for the amount of the

prepayment if the refiner, pipeline terminal operator, or marine

terminal operator fails to remit the prepayment.

     (10) A person subject to tax under this act that makes

prepayment to another person as required by this section for diesel

fuel may claim an estimated prepayment credit on its regular

monthly return filed pursuant to section 6. The credit shall be for

prepayments made during the month for which the return is required

and shall be based upon the difference between the prepayments made

in the immediately preceding month and collections of prepaid tax

received from sales or transfers during the month for which the

return required under section 6 is made. A sale or transfer for

which collection of prepaid tax is due the taxpayer is subject to a

bad debt deduction under section 4i, whether or not the sale or

transfer is a sale at retail. The credit shall not be reduced

because of actual shrinkage. A taxpayer that does not, in the

ordinary course of business, sell diesel fuel in each month of the

year may, with the approval of the department, base the initial

prepayment deduction in each tax year on prepayments made in a

month other than the immediately preceding month. Estimated

prepayment credits claimed with the return due in April 2013 shall

be based on the taxpayer's retail sales of diesel fuel in March

2013. The difference in actual prepayments shall be reconciled on

the annual return in accordance with procedures prescribed by the

department. Repayment of the credit claimed on the return due in

April 2013 shall be made by the earlier of the date that the

taxpayer stops selling diesel fuel or October 15, 2013.

     (11) As used in this section:

     (a) "Alcohol" means fuel grade ethanol or a mixture of fuel

grade ethanol and another product.

(b) (a) "Blendstock" includes all of the following:

     (i) Any petroleum product component of fuel, such as naphtha,

reformate, or toluene.

     (ii) Any oxygenate that can be blended for use in a motor

fuel.

(c) (b) "Boat terminal transfer" means a dock, a tank, or

equipment contiguous to a dock or a tank, including equipment used

in the unloading of fuel from a ship and in transferring the fuel

to a tank pending wholesale bulk reshipment.

     (d) "Bulk transfer" means a transfer of fuel from, or purchase

for resale by, a refiner, pipeline terminal operator, or marine

terminal operator to or from another refiner, pipeline terminal

operator, or marine terminal operator through pipeline tender or

marine delivery, including pipeline movements of fuel or marine

vessel movements of fuel. Bulk transfer also includes a transaction

involving the transfer by any transportation means to, or purchase

for resale by, a refiner, pipeline terminal operator, or marine

terminal operator of alcohol to be used exclusively for blending

with gasoline. Notwithstanding anything to the contrary in this

definition, fuel transferred to, or purchased for resale by, a

refiner, pipeline terminal operator, or marine terminal operator

must be delivered to, or otherwise remain within, the bulk transfer

terminal system prior to removal across the rack in order to

constitute a bulk transfer.

     (e) "Bulk transfer terminal system" means the fuel

distribution system consisting of refineries, pipelines, marine

vessels, and terminals and includes fuel storage tanks and fuel

storage facilities that are part of a refinery, boat terminal

transfer, or terminal owned, operated, or controlled by a refiner,

marine terminal operator, or pipeline terminal operator.

(f) (c) "Diesel fuel" means any liquid other than gasoline

that is capable of use as a fuel or a component of a fuel in a

motor vehicle that is propelled by a diesel-powered engine or in a

diesel-powered train. Diesel fuel includes number 1 and number 2

fuel oils, kerosene, and mineral spirits. Diesel fuel also includes

any blendstock or additive that is sold for blending with diesel

fuel and any liquid prepared, advertised, offered for sale, sold

for use as, or used in the generation of power for the propulsion

of a diesel-powered engine, airplane, or marine vessel. An additive

or blendstock is presumed to be sold for blending unless a

certification is obtained for federal purposes that the substance

is for a use other than blending for diesel fuel. Diesel fuel does

not include dyed diesel fuel, dyed kerosene, or an excluded liquid.

(g) (d) "Dyed diesel fuel" means diesel fuel that is dyed in

accordance with internal revenue service rules or pursuant to any

other internal revenue service requirements, including any

invisible marker requirements.

     (h) "Dyed kerosene" means kerosene that is dyed in accordance

with internal revenue service rules or pursuant to any other

internal revenue service requirements, including invisible marker

requirements.

(i) (e) "Excluded liquid" means that term as defined in 26 CFR

48.4081-1.

     (j) "Export" means to purchase or receive fuel in this state

for immediate shipment and subsequent sale outside of this state.

     (k) "Exporter" means a person that exports fuel and is

licensed under section 86 of the motor fuel tax act, 2000 PA 403,

MCL 207.1086.

(l) (f) "Fuel" means gasoline and diesel fuel that is subject

to tax under this act, collectively, except when gasoline or diesel

fuel is referred to separately.

(m) (g) "Gasoline" means and includes gasoline, alcohol,

gasohol, casing head or natural gasoline, benzol, benzine, naphtha,

methanol, transmix, any blendstock additive, or other product that

is sold for blending with gasoline or for use on the road, other

than products typically sold in containers of less than 5 gallons.

Gasoline also includes a liquid prepared, advertised, offered for

sale, sold for use as, or used in the generation of power for the

propulsion of a motor vehicle, airplane, or marine vessel,

including a product obtained by blending together any 1 or more

products of petroleum, with or without another product, and

regardless of the original character of the petroleum products

blended, if the product obtained by the blending is capable of use

in the generation of power for the propulsion of a motor vehicle,

airplane, or marine vessel. The blending of all of the above-named

products, regardless of their name or characteristics, shall

conclusively be presumed to have been done to produce fuel, unless

the product obtained by the blending is entirely incapable of use

as fuel. An additive or blendstock is presumed to be sold for

blending unless a certification is obtained for federal purposes

that the substance is for a use other than blending for gasoline.

Gasoline does not include diesel fuel, dyed diesel fuel, dyed

kerosene, or an excluded liquid.

(n) (h) "Kerosene" means all grades of kerosene, including,

but not limited to, the 2 grades of kerosene, No. 1-K and No. 2-K,

commonly known as K-1 kerosene and K-2 kerosene, respectively,

described in American society for testing and materials

specification D-3699, in effect on January 1, 1999, and kerosene-

type jet fuel described in American society for testing and

materials specification D-1655 and military specifications MIL-T-

5624r and MIL-T-83133d (grades jp-5 and jp-8), and any successor

internal revenue service rules or regulations, as the specification

for kerosene and kerosene-type jet fuel. Kerosene does not include

dyed kerosene or an excluded liquid.

(o) (i) "Marine terminal operator" means a person that stores

fuel at a boat terminal transfer.

(p) (j) "Pipeline terminal operator" means a person that

stores fuel in tanks and equipment used in receiving and storing

fuel from interstate and intrastate pipelines pending wholesale

bulk reshipment.

(q) (k) "Purchase", "receipt", or "shipment" does not include

an exchange of fuel or an exchange transaction between refiners,

pipeline terminal operators, or marine terminal operators.a two-

party exchange, a bulk transfer, or a receipt of fuel as part of a

bulk transfer.

     (r) "Rack" means a mechanism for delivering fuel from a

refiner, a pipeline terminal operator, or a marine terminal

operator into a railroad tank car, a transport truck, a tank wagon,

or the fuel supply tank of a marine vessel.

(s) (l) "Refiner" means a person that manufactures meets all

of the following requirements:

     (i) Manufactures or produces fuel at a refinery by any process

involving substantially more than the blending of fuel.

     (ii) Is a taxable fuel registrant that is a refiner for

purposes of 26 CFR 48.4081-1.

     (t) "Refinery" means a facility used by a refiner to produce

fuel from crude oil, unfinished oils, natural gas liquids, or other

hydrocarbons and from which fuel may be removed by pipeline or

marine vessel or at a rack.

     (u) "Removal" or "removed" means a physical transfer other

than by evaporation, loss, or destruction of fuel from a refiner,

pipeline terminal operator, or marine terminal operator.

     (v) "Supplier" means a supplier or permissive supplier

licensed under section 70 or 73 of the motor fuel tax act, 2000 PA

403, MCL 207.1070 and 207.1073.

     (w) "Tank wagon" means a straight truck having 1 or more

compartments other than the fuel supply tank designed or used to

carry fuel.

     (x) "Terminal" means a fuel storage and distribution facility

that meets all of the following requirements:

     (i) Is registered as a qualified terminal by the internal

revenue service.

     (ii) Is supplied by pipeline or marine vessel.

     (iii) Has a rack from which fuel may be removed.

     (y) "Transport truck" means a semitrailer combination rig

designed or used for the purpose of transporting fuel over the

public roads or highways.

     (z) "Transmix" means the mixed product that results from the

buffer or interface of 2 different products in a pipeline shipment,

or a mixture of 2 different products within a terminal operated by

a pipeline terminal operator, within a boat terminal transfer

operated by a marine terminal operator, or at a refinery that

results in an off-grade mixture.

     (aa) "Two-party exchange" means a transaction, including a

book transfer, in which fuel is transferred from 1 supplier to

another supplier where all of the following occur:

     (i) The transaction includes a transfer of fuel from the

person who holds the original inventory position for the fuel in

fuel storage tanks as reflected in the records of the refiner,

pipeline terminal operator, or marine terminal operator.

     (ii) The exchange transaction is completed before removal

across the rack by the receiving supplier.

     (iii) The refiner, pipeline terminal operator, or marine

terminal operator in its books and records treats the receiving

exchange party as the supplier that removes the fuel across a rack

for purposes of reporting the transaction to the department under

the motor fuel tax act, 2000 PA 403, MCL 207.1001 to 207.1170.

     Enacting section 1. This amendatory act takes effect April 1,

2016.