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SB 986

Sales tax: collections; collection of sales tax on utility bills; prohibit. Amends sec. 4n of 1933 PA 167 (MCL 205.54n).

2025-2026 Regular Session Introduced by Kevin Daley and 5 co-sponsors

The bill maintains the residential exemption for the 2% utility tax and sets prorating rules based on customer count, tying implementation to a May 1, 1994 baseline.

SENATE CO-SPONSOR(S) NAMED: LANA THEIS
#publicutilities:other #salestax:collections
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Bill Summary · SB 986

Overview

Senate Bill 986 (2025-2026) would amend section 4n of the General Sales Tax Act (1933 PA 167, MCL 205.54n) to address how the additional 2% sales tax on certain utility bills is applied. The bill preserves the existing exemption for residential electricity, natural gas, and home heating fuels from the additional 2% tax, but it revises rules governing how the tax applies to utility bills for taxpayers with different customer counts.

Purpose and intent

  • Clarify and modify the application of the additional 2% sales tax (approved by voters on March 15, 1994) to residential utility services.
  • Provide specific prorating or timing options for when the additional 2% tax applies to utility usage, depending on the utility company's customer base size.

Key provisions

  • Existing exemption: The sale for residential use of electricity, natural gas, artificial gas, or home heating fuels remains exempt from the additional 2% sales tax.
  • Proration/timing rules for the additional 2% tax:
    • For taxpayers with 100,000 or more customers in Michigan:
    • If applying the additional 2% tax, the taxpayer must prorate usage for a period that includes May 1, 1994, based on the days after April 30, 1994.
    • For taxpayers with fewer than 100,000 customers:
    • The taxpayer has two options: 1) Pro-rate usage for the period that includes May 1, 1994 (based on days after April 30, 1994), or 2) Begin applying the additional 2% tax with the first bill that covers a usage period beginning after April 30, 1994.

Who is affected

  • Utilities and energy providers that sell electricity, natural gas, artificial gas, or home heating fuels to residential customers.
  • The entities that determine and collect the 2% additional sales tax on those utility bills.
  • Residential utility customers, who would either be fully exempt from the 2% or subject to it based on the applicable prorating rules (as implemented by the utility).

Procedural and timeline aspects

  • The provision references a historical baseline related to the May 1, 1994 period for prorating usage in applying the additional tax.
  • The bill establishes a tiered approach based on the utility’s Michigan customer count (≥100,000 vs. <100,000).
  • Committee status: Introduced and referred to the Committee on Government Operations (as of 2026-05-20).

Practical impact

  • The bill would not change the fundamental exemption for residential utility purchases from the additional 2% tax but would standardize (and potentially simplify) how utilities determine when the 2% applies, especially with respect to the May 1994 baseline.
  • Utilities with large customer bases would implement prorated calculations tied to the May 1, 1994 date for determining applicability.
  • Utilities with smaller customer bases would have the option to start the additional tax with the first bill covering a usage period after April 30, 1994, providing flexibility in implementation.

If you’d like, I can add a brief comparison to the current law text or draft a plain-language FAQ for impacted utilities and customers.

Compiled from official sources — confirm details with the bill’s official record.

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