Legislative Analysis
Phone: (517) 373-8080
SALES AND USE TAX EXEMPTION OF
http://www.house.mi.gov/hfa
DELIVERY AND INSTALLATION CHARGES
Analysis available at
House Bill 4039 as enacted http://www.legislature.mi.gov
Public Act 20 of 2023
Sponsor: Rep. Pat Outman
House Bill 4253 as enacted
Public Act 21 of 2023
Sponsor: Rep. Kevin Coleman
Committee: Tax Policy
Complete to 7-26-23
SUMMARY:
House Bills 4039 and 4253 respectively amend the General Sales Tax Act and the Use Tax
Act to exempt certain delivery and installation costs from inclusion in the sales price (in the
Sales Tax Act) and purchase price (in the Use Tax Act) on which the taxes are based.
Specifically, under the bills, sales and use taxes are not imposed on delivery or installation
charges if those charges are separately stated on the invoice, bill of sale, or similar document
provided to the purchaser and the seller maintained its books and records to show separately
the transactions used to determine the tax levied by the applicable act. (However, this does not
apply to charges for delivery of gas or electricity by a utility.)
Sales price is defined in the General Sales Tax Act as the total amount of consideration,
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 sales tax.
Purchase price is defined in the Use Tax Act as 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.
Both of the above definitions also list several categories that are included in the term and
several categories that are excluded.
Prior to the bills’ enactment, the list of included costs and charges included the following: 1
• 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.
• 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.
1
See RAB 2015-17 for further discussion: https://www.michigan.gov/taxes/-
/media/Project/Websites/treasury/Reports/2015/2015_RAB_201517_Delivery_Charges.pdf
House Fiscal Agency Page 1 of 3
 Under the bills, delivery and installation charges can be excluded if both of the following apply:
• Those charges are separately stated on the invoice, bill of sale, or similar document
provided to the purchaser.
• The seller maintains its books and records to show separately the transactions used to
determine the applicable tax.
However, the above exclusion does not apply to delivery and installation charges involving or
relating to the sale of electricity or natural or artificial gas by a utility.
A utility means a person regulated by the Michigan Public Service Commission
(MPSC) as a utility or a person that operates equipment or facilities for producing
generating, transmitting, delivering, or furnishing electricity within the state for the
public for compensation, regardless of the person’s owner, ownership structure, or
regulation by the MPSC.
The bills also hold the State School Aid Fund harmless from any reduction by requiring an
amount to be deposited into that fund that is equal to all revenue lost to the fund as a result of
the exclusion of delivery and installation charges from taxation. This deposit is in addition to
others already required by the acts.
Finally, and notwithstanding anything to the contrary in either act, the Department of Treasury
must cancel any outstanding balances on notices of intent to assess or final assessments that
were issued before the bills took effect that are related to delivery or installation charges that
are exempt under the bills (except the delivery or installation involving or relating to the sale
of electricity, natural gas, or artificial gas by a utility). The department must cancel these
balances within 90 days of the applicable bill’s effective date and cannot issue any new
assessments on these activities from the period before the bill took effect.
House Bill 4039 also adds limited liability companies to the definition of person under the
General Sales Tax Act (they were already included in the Use Tax Act definition).
HB 4039: MCL 205.51 and 205.75
HB 4253: MCL 205.92 and 205.111
The bills took effect April 26, 2023.
BACKGROUND AND BRIEF DISCUSSION:
According to House committee testimony, state law on when to apply sales or use tax to
delivery and installation charges was unclear, which created uncertainty for businesses and led
to situations in which they were told they owed taxes on sales for which the taxes were not
collected.
As described in the Department of Treasury Revenue Administrative Bulletin (RAB) 2015-17,
“whether ownership of the property is transferred before or after the delivery or installation
charges are incurred” previously determined whether those charges were subject to tax
(emphases in original). Most commonly, if delivery or installation charges were invoiced
separately from the purchase itself (i.e., not itemized on the purchase invoice as something like
House Fiscal Agency HBs 4039 and 4253 as enacted Page 2 of 3
 “Shipping and Handling”), then those charges were considered to have been made after the
transfer of ownership of the property and were therefore not taxable. Many sellers were
unaware of, or unclear about, this differing tax treatment of delivery and installation charges
based on when the transfer of ownership was considered effected and when the delivery or
installation charges were incurred in relation to that transfer.
Supporters of the bills argued that they would clarify state policy and provide clearer and less
complicated guidelines for both businesses and the Department of Treasury. They also argued
that during a period of high inflation, the state should find ways to provide tax relief wherever
it can.
Opponents of the legislation pointed to the impact that the loss of revenue would have on state
finances, particularly in conjunction with other tax-related legislation being considered at the
time. In addition, some expressed concern about who the bills would benefit, noting that many
of the items that may require delivery (e.g., new furniture, kitchen appliances, etc.) are less
likely to be purchased by those most in need of tax relief.
FISCAL IMPACT:
The bills would reduce sales and use tax revenues by an indeterminate amount. Purely as an
order of magnitude, combined sales and use tax revenue in FY 2023-24 is expected to total
about $12.8 billion. If delivery and installation costs comprise 0.5% of total collections, the
revenue reduction would approach $65.0 million. Given the hold harmless language, the
School Aid Fund will be protected from the revenue reduction, although general fund revenue
and sales tax revenue constitutionally earmarked to local revenue sharing will decline.
Legislative Analyst: Alex Stegbauer
Fiscal Analyst: Jim Stansell
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
House Fiscal Agency HBs 4039 and 4253 as enacted Page 3 of 3


Statutes affected:
Substitute (H-1): 205.51, 205.75
House Introduced Bill: 205.51, 205.75
As Passed by the House: 205.51, 205.75
As Passed by the Senate: 205.51, 205.75
House Concurred Bill: 205.51, 205.75
Public Act: 205.51, 205.75
House Enrolled Bill: 205.51, 205.75