Use tax: collections; credit for trade-in vehicles; modify. Amends sec. 2 of 1937 PA 94 (MCL 205.92). TIE BAR WITH: SB 0997'26

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

Clarifies use tax definitions and treats delivery/installation charges; cancels old related balances and halts new assessments for pre-2023 charges if SB 997 passes.

REFERRED TO COMMITTEE ON FINANCE, INSURANCE, AND CONSUMER PROTECTION

#trade:vehicles #usetax:collections

Main purpose and intent

Clarify and refine the statutory definitions used to administer the Michigan use tax.

Address and resolve prior issues related to delivery and installation charges that are separately stated on invoices.

Provide transitional cleanup by canceling certain outstanding balances and preventing new assessments for specific charges as of certain dates.

Key provisions and changes

Definitions (Sec. 2(1)): The bill reiterates and compounds existing definitions for terms such as “person,” “use,” “purchase,” “purchase price,” “consumer,” “sale,” “tangible personal property,” and other terms used to administer the use tax. It reinforces what constitutes a taxable use, what counts as a purchase, and how trade-ins, credits, and third-party discounts are treated in calculating the purchase price for use tax purposes.

Delivery and installation charges (Sec. 2(2)):

Special transitional provisions apply to delivery or installation charges that are separately stated on the invoice, with exclusions for electricity, natural gas, or artificial gas sold by a utility.
The Department of Treasury must:
Cancel all outstanding balances related to such delivery/installation charges on notices of intent to assess issued before April 26, 2023, by July 25, 2023.
Cancel all outstanding balances related to such charges on final assessments issued before April 26, 2023, by July 25, 2023.
Refrain from issuing new assessments for these charges for any open tax period before April 26, 2023, beginning April 26, 2023 (to the extent allowed by statute of limitations).

Enacting clause: The act’s effective date is contingent upon the enactment of SB 997 of the 103rd Legislature.

Who/what is affected

Taxpayers subject to Michigan use tax, including individuals and businesses that purchase tangible personal property or services for storage, use, or consumption in Michigan.

Sellers and the department (Treasury) responsible for collecting and administering use tax, especially in relation to:

Calculation of purchase price for use tax purposes.
Handling of delivery/installation charges that are separately stated on invoices.
Transitions related to trade-ins, credits, and third-party price reductions as reflected on invoices.

Procedural and timeline aspects

Transitional cleanup for delivery/installation charges:

Cancelled balances for certain pre-April 26, 2023 assessments by July 25, 2023.
No new assessments on these charges for open periods as of April 26, 2023, starting from that date forward, subject to the statute of limitations.

Effective date is contingent on SB 997 becoming law; if SB 997 does not pass, SB 998 would not take effect.

Potential impact

Clarifies and potentially broadens administrative clarity around use tax calculations, especially how delivery/installation charges and various credits/discounts are treated.

Provides temporary relief to taxpayers by canceling certain outstanding balances tied to specific delivery/installation charges, reducing potential retroactive assessments.

Could affect how retailers price and itemize charges on invoices, given the interplay between stated charges and their tax treatment.

The combined effect with SB 997 may influence the overall timing and scope of the reform package.

Bill