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SB 997

Sales tax: collections; credit for trade-in vehicles; modify. Amends sec. 1 of 1933 PA 167 (MCL 205.51). TIE BAR WITH: SB 0998'26

2025-2026 Regular Session Introduced by Rosemary Bayer and 12 co-sponsors

SB 997 modifies how trade-in credits and related charges are included in the sales tax base, affecting how net price is calculated for purchases.

REFERRED TO COMMITTEE ON FINANCE, INSURANCE, AND CONSUMER PROTECTION
#salestax:collections #trade:vehicles
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Bill Summary · SB 997

Summary of Bill: SB 997 (2025-2026) – Sales tax: collections; credit for trade-in vehicles; modify

Purpose and overall intent

SB 997 proposes amendments to the Michigan General Sales Tax Act (1933 PA 167, MCL 205.51) to modify how sales price and related credits are treated for tax purposes. The bill appears to adjust definitions and treatment of certain credits and charges within the sales price, with tie-bar language indicating SB 998 of the same session as a companion measure. The changes focus on refining what constitutes gross proceeds/sales price and how trade-in credits and other deductions are accounted for in calculating sales tax.

Key provisions and changes

  • Definitions (Section 1(1))

    • The bill reiterates and clarifies core definitions relevant to the sales tax act:
    • “Person,” “Sale at retail,” “Gross proceeds,” and “Sales price” definitions are restated, including how total consideration is measured.
    • The sales price includes various components and excludes certain items. Subparagraph (vi) specifically addresses credits for trade-ins, indicating how such credits interact with the taxable amount.
    • Subparagraphs detail numerous inclusions and exclusions that influence the calculation of the tax base (e.g., delivery/installation charges, third-party price reductions, interest, taxes passed through to consumers, etc.).

  • Credit for trade-in (Subparagraphs under (d))

    • The text reflects existing treatment of trade-in credits within the sales price framework. Subparagraphs (vi) and related items indicate that credits for trade-ins are treated as part of the considerations that may impact the sales price, with specifics that could limit or modify how these credits reduce the taxable base in certain scenarios.
    • The amendments appear to modify or reaffirm requirements for when or how trade-in credits are deducted from the sales price for tax purposes.

  • Delivery and installation charges (Subsection (1)(d))

    • Delivery and installation charges are addressed as part of the sales price calculations, with exceptions for charges related to certain utilities. There are clarifications around whether delivery/installation charges constitute part of the gross proceeds and how they are treated when separately stated.

  • Credits and exemptions timeline (Subsection (e)-(m))

    • The bill lists several specific credits that affect the sales price, including:
    • Employee discounts (with nuances about third-party reimbursement, particularly for motor vehicle sales since 2000).
    • Credits for trade-in-related reductions (vehicles, watercraft, and recreational vehicles) with specific dollar thresholds and escalation schedules through 2019 and beyond.
    • Core charge credits for recycling/fees on vehicle parts (starting 2017).
    • Recreational vehicle trade-in credits (starting 2018) with separate invoicing considerations.
    • The amendments reference scheduled increases or thresholds (e.g., vehicle trade-in value credits starting with fixed dollar caps that adjust over time).

  • Delivery/installation charge carve-outs (1)(d)(xiv) and (xv)

    • These provisions reiterate the condition that separately stated delivery or installation charges can be excluded from the taxable sales price if the seller maintains records demonstrating the transactions used to determine the tax.
    • These provisions do not apply to the sale of electricity, natural gas, or artificial gas by a utility.

  • Administrative and enforcement notes (2)-(3)

    • The department may treat unlicensed sales personnel as agents of licensed dealers for purposes of retail sale classification if necessary for efficient administration.
    • Provisions specify timelines and actions related to the treatment of certain delivery/installation charge balances (citing historical acts) and clarify that the department should not issue new assessments for certain charges after the effective date of the act adding subsection (3).

  • Effective date and tie-bar

    • Enacting clause notes that this amendatory act does not take effect unless SB 998 is enacted into law, indicating a tie-bar between SB 997 and SB 998.

Who is affected

  • Taxpayers subject to Michigan sales tax: The changes affect how trade-in credits, delivery/installation charges, and various consumer price reductions are treated in calculating the sales tax base.
  • Dealers, distributors, and service providers: Especially motor vehicle dealers, watercraft dealers, and dealers of recreational vehicles, given the detailed provisions on trade-ins, third-party discounts, core charges, and related invoicing requirements.
  • Consumers: Indirectly affected through how their trade-ins, discounts, and separate charges are reflected in the amount of sales tax collected on purchases.
  • Tax administration (Michigan Department of Treasury): Implementing the clarified rules and maintaining records to distinguish taxable amounts from excluded credits and separately stated charges.

Procedural and timeline aspects

  • Introduction and referral: Introduced May 21, 2026; referred to the Committee on Finance, Insurance, and Consumer Protection.
  • Companion legislation tie-bar: Final effectiveness contingent on the enactment of SB 998 from the same session.
  • Historical references: The bill cites existing statutes and prior amendments (e.g., 2023 PA 20) and ongoing administrative practices regarding delivery/installation charges and various credits.
  • Administrative actions: Provisions specify deadlines related to cancellation of old balances on notices and final assessments tied to past treatment of delivery/installation charges (with dates linked to July 25, 2023 and earlier acts).

Practical takeaway

SB 997 aims to refine the calculation of the sales tax base in Michigan by detailing how trade-in credits and other charge categories are treated, updating thresholds and treatment for various vehicle-related credits, and clarifying administration rules for delivery/installation charges. The act is conditional on the passage of SB 998, indicating the two bills function as a package. If enacted, taxpayers and dealers should anticipate changes in how net price for tax purposes is computed, particularly in motor vehicle and recreational vehicle transactions.

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

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