Bill Summary – FastDemocracy

HOUSE BILL NO. 4040
     January 24, 2023, Introduced by Reps. Tisdel, Outman, Hall and Schuette and referred to the
        Committee on Tax Policy.
          A bill to amend 1937 PA 94, entitled
    "Use tax act,"
    by amending sections 2 and 21 (MCL 205.92 and 205.111), section 2
    as amended by 2018 PA 1 and section 21 as amended by 2021 PA 109.
                     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,
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 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.
       (c) "Storage" means a keeping or retention of property in this
 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 the person obtains tangible personal property or services
 sold by him or her the person for storage, use, or other
 consumption in this state, irrespective of whether or not he or she
 the person is making the sales on his or her the person's own
 behalf or on behalf of the dealer, distributor, supervisor, or
 employer, the department may so consider him or her, the person,
 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,
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 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 to (vii) and excludes subparagraphs (viii)
 through (xiv):to (xv):
       (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.
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       (iv) Delivery Except as otherwise provided in subparagraph
 (xv), 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.A seller is not liable under this act for delivery
 charges allocated to the delivery of exempt property.
       (v) Installation Except as otherwise provided in subparagraph
 (xv), 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) Except as otherwise provided in subparagraphs (xi), (xii),
 and (xiv), 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.
       (C) The amount of the consideration attributable to the sale
 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,
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 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) 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) 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.
       (xi) Beginning November 15, 2013, credit for the agreed-upon
 value of a titled watercraft used as part payment of the purchase
 price of a new titled watercraft or used titled watercraft
 purchased from a watercraft dealer if the agreed-upon value is
 separately stated on the invoice, bill of sale, or similar document
 given to the purchaser. This subparagraph does not apply to leases
 or rentals.
       (xii) Beginning December 15, 2013, credit for the agreed-upon
 value of a motor vehicle or recreational vehicle used as part
 payment of the purchase price of a new motor vehicle or used motor
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 vehicle or recreational vehicle purchased from a dealer if the
 agreed-upon value is separately stated on the invoice, bill of
 sale, or similar document given to the purchaser. This subparagraph
 does not apply to leases or rentals. Except as otherwise provided
 under subparagraph (xiv), for purposes of this subparagraph, the
 agreed-upon value of a motor vehicle or recreational vehicle used
 as part payment shall be is limited as follows:
       (A) Beginning December 15, 2013, subject to sub-subparagraphs
 (B) and (C), the lesser of the following:
       (I) $2,000.00.
       (II) The agreed-upon value of the motor vehicle or
 recreational vehicle used as part payment.
       (B) Beginning January 1, 2015 and each January 1 thereafter
 through December 31, 2018, the amount under sub-subparagraph (A)(I)
 shall be is increased by an additional $500.00 each year.
       (C) Beginning January 1, 2019, subject to sub-subparagraphs
 (D) and (E), the lesser of the following:
       (I) $5,000.00.
       (II) The agreed-upon value of the motor vehicle used as part
 payment.
       (D) Beginning January 1, 2020 and each January 1 thereafter,
 the amount under sub-subparagraph (C)(I) shall be is increased by
 an additional $1,000.00 each year.
       (E) Beginning on January 1, in the year in which the amount
 under sub-subparagraph (C)(I) exceeds $14,000.00 and each January 1
 thereafter, there shall be is no limitation on the agreed-upon
 value of the motor vehicle used as part payment.
       (xiii) Beginning January 1, 2017, credit for the core charge
 attributable to a recycling fee, deposit, or disposal fee for a
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 motor vehicle or recreational vehicle part or battery if the
 recycling fee, deposit, or disposal fee is separately stated on the
 invoice, bill of sale, or similar document given to the purchaser.
       (xiv) Beginning January 1, 2018, credit for the agreed-upon
 value of a recreational vehicle used as part payment of the
 purchase price of a recreational vehicle purchased from a dealer if
 the agreed-upon value is separately stated on the invoice, bill of
 sale, or similar document given to the purchaser. This subparagraph
 does not apply to leases or rentals.
       (xv) Delivery or installation charges if such charges are
 separately stated on the invoice, bill of sale, or similar document
 provided to the purchaser, and the taxpayer maintains its books and
 records to show separately the transactions used to determine the
 tax levied by this act.
       (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.
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       (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(l), (m), and (n) of the motor carrier fuel tax
 act, 1980 PA 119, MCL 207.211.
       (o) "Diesel fuel" means that term as defined in section 2(q)
 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
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 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 is not be considered to be converted
 prior to before sale or lease by that dealer.
       (r) "New motor vehicle" means that term as defined in section
 33a of the Michigan vehicle code, 1949 PA 300, MCL 257.33a.
       (s) "Recreational vehicle" means that term as defined in
 section 49a of the Michigan vehicle code, 1949 PA 300, MCL 257.49a.
       (t) "Dealer" means that term as defined in section 11 of the
 Michigan vehicle code, 1949 PA 300, MCL 257.11.
       (u) "Watercraft dealer" means a dealer as that term is defined
 in section 80102 of the natural resources and environmental
 protection act, 1994 PA 451, MCL 324.80102.
       Sec. 21. (1) Except as otherwise provided in subsections (2),
 (3), (4), and (5), this section, all money received and collected
 under this act must be deposited by the department of treasury in
 the state treasury to the credit of the general fund, to be
 disbursed only by appropriations by the legislature.
       (2) The collections from the use tax imposed at the additional
 rate of 2% approved by the electors on March 15, 1994 must be
 deposited in the state school aid fund. established in section 11
 of article IX of the state constitution of 1963.
       (3) From In addition to the money deposited in the state
 school aid fund under subsection (2), from the money received and
 collected under this act for the state share, an amount equal to
 all the sum of the following, as determined by the department, must
 be deposited in the state school aid fund:
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       (a) All revenue lost under the state education tax act, 1993
 PA 331, MCL 211.901 to 211.906, and all as a result of the
 exemption of personal property under sections 9m, 9n, and 9o of the
 general property tax act, 1893 PA 206, MCL 211.9m, 211.9n, and
 211.9o.
       (b) All revenue lost from basic school operating mills , as a
 result of the exemption of personal property under sections 9m, 9n,
 and 9o of the general property tax act, 1893 PA 206, MCL 211.9m,
 211.9n, and 211.9o. , and all
       (c) All revenue lost to the state school aid fund as a result
 of the exemptions exemption under sections section 4(1)(gg). and
       (d) All revenue lost to the state school aid fund as a result
 of the exemption under section 4cc. , as determined by the
 department, must be deposited into the state school aid fund
 established by section 11 of article IX of the state constitution
 of 1963. Funds deposited into the state school aid fund under this
 subsection must not include the portion of the state share of the
 use tax imposed at the additional rate of 2% approved by the
 electors of this state on March 15, 1994 and dedicated for aid to
 schools under subsection (2). A person that claims an exemption
 under section 4cc shall report the purchase price of the data
 center equipment as defined in section 4cc and any other
 information necessary to determine the amount of revenue lost to
 the state school aid fund as a result of the exemption under
 section 4cc annually on a form at the time and in a manner
 prescribed by the department. The report requir