Michigan – Newly Amended and Rescinded Sales and Use Tax Rules

SALT Report 2519 – The Michigan Department of Treasury has amended and rescinded the following sales and use tax rules in order to conform to current law.

Rule R205.1 – Sales Tax Licenses

This rule is amended to reflect that all sales tax licenses expire on September 30 of each year regardless of the date the license is issued. Also, a person that is licensed to sell at retail is not automatically exempt from sales tax on its own purchases.

Rule R205.8 – Consumer

This rule is amended to clarify that a consumer is any person purchasing tangible personal property through the mail, the Internet, or a catalog. Consumer also includes

  • A person acquiring tangible personal property if engaged in the business of constructing, altering, repairing, or improving the real estate of others, and
  • A person who converts tangible personal property or services that were exempt to a use that is not exempt

A seller is deemed a consumer if they remove goods from inventory for personal use or consumption or in the course of business. Or, the seller uses tangible personal property that was purchased for an exempt uses in a non-exempt use.

Rule R205.16 – Returned Goods

This rule has been amended to clarify that if a seller provides a full refund or credit of the purchase price and tax on returned goods, the seller may claim a refund or credit of the tax paid to the Department within four years of the date the original return was filed. If the seller provides a partial refund or credit on returned goods the seller may seek a refund of the tax paid to the Department for the amount the seller refunded or credited its customer. A refund or credit of tax will not be given on returned goods without proof that tax was paid on the original sale.

Rule R205.136 – Food for Human Consumption

This rule is amended to include the definition of “prepared food” as defined in the Streamlined Sales and Use Tax Agreement. Prepared food means:

  • Food that is sold in a heated state or that is heated by the seller,
  • Two or more food ingredients mixed by the seller for sale as a single item, or
  • Food sold with eating utensils provided by the seller

Rule R205.22 – Discounts

This rule is amended to conform to the definition of “sales price” as defined in the Streamlined Sales and Use Tax Agreement. A discount or rebate offered by the seller, with no reimbursement by a third party, reduces the sales price. However, a discount or rebate does not reduce the sales price and does not reduce the tax base when the following conditions are found:

  • The seller receives consideration from a party other than the purchaser and the consideration is directly related to the price reduction,
  • The seller is obligated to pass the price reduction to the purchaser,
  • The amount of consideration attributable to the sale is fixed and determinable by the seller at the time of sale, and
  • The purchaser presents documentation to the seller claiming a price reduction granted by a third party with the understanding that the third party will reimburse the seller, or the purchaser identifies him/herself as a member of a group entitled to a reduction or discount, or the price reduction is identified as a third-party discount on the invoice received by the purchaser

Rule R205.26 Use Tax Registration

This rule is amended to clarify that persons involved in the following activities are require to register under the use tax act:

  • A business within the state buying tangible personal property from non-registered sellers,
  • A provider of rental accommodations to the public,
  • A provider of interstate/intrastate telecommunications services that has nexus with the state, and
  • A provider of laundering or textile cleaning services under a sale, rental, or service agreement with a term of five days or more that has nexus with the state

Rescinded Rules

R205.5 – Tangible Personal Property
R205.9 – Sales for purposes of resale
R205.23 – Records

For Further Information

Michigan Department of Treasury – General & Specific Sales Tax Rules