Michigan – Single Mixed Transaction Rule Proposed

SALT Report 1964 – The Michigan Department of Treasury has proposed a new sales and use tax rule regarding single mixed transactions.  A single mixed transaction would be defined as a transaction in which taxable and nontaxable services, taxable and nontaxable personal property, or taxable and nontaxable services and personal property are sold together for a single price.

The rule states that if a transaction is predominantly a transfer of taxable services or taxable tangible personal property, the entire transaction would be deemed taxable.  However, if the transaction is predominantly the transfer of nontaxable services or nontaxable personal property, the entire transaction would be exempt.

The Department will use the following 6 factor “incidental test” to determine whether a single mixed transaction is predominantly the sale of personal property or predominantly the sale of a service:

  • What the buyer sought as the object of the transaction,
  • What the seller or service provider is in the business of doing,
  • Whether the taxable item was provided as a retail enterprise with a profit-making motive,
  • Whether the taxable item was available for sale without the exempt item,
  • The extent to which the nontaxable item has contributed to the value of the taxable item, and
  • Any other factors relevant to the particular transaction

Also, if a single mixed transaction is not subject to sales tax, the seller who consumes the taxable tangible personal property or service to create the single mixed transaction will be subject to use tax unless an exemption applies.

For Further Information:

Michigan Department of Treasury – Proposed Administrative Rule 205.29