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Michigan has enacted legislation stating that medical services provided by Medicaid managed care organizations are no longer subject to use tax after December 31, 2016. From April 1, 2014 through December 31, 2016, these medical services were taxed in the same manner as sales of tangible personal property.  Beginning on July 1, 2020 or on the effective date of the repeal of section 3 of the health insurance claims assessment act, or the effective date of the amendatory act that amended section 3 of the health insurance claims assessment act and reduced the assessment to 0.0%, whichever is sooner, use tax will be reinstated on these services notwithstanding any other provision or exemption under this act.(Act 390 (S.B. 1172), Laws 2016, effective December 28, 2016, applicable January 1, 2017)


The Michigan Department of Treasury has made a statement of non-acquiescence regarding the Court of Appeals decision, Central Michigan Cementing Services LLC v. Department of Treasury, which means that the Department will not follow the decision in similar circumstances for other taxpayers. The Central Michigan Cementing Services decision held that a taxpayer that provided custom cement and pumping services to oil and gas well companies qualified for an industrial processing exemption and was exempt from use tax on its purchases of materials. The court had concluded that the taxpayer was engaged in industrial processing since it used cement mix and chemical compounds and processed the compounds into custom cement for retail sale. The court also held that the taxpayer used its acid mixers and pumps to clean wells and therefore qualified for exemption on its equipment since the equipment was used to provide maintenance services and materials for customers who engaged in industrial processing. Taxpayers who provide similar services should be cautious about claiming the industrial processing exemption based on the court decision. (Treasury Update, volume 1, issue 4, Michigan Department of Treasury, August 2016)


In its August 2016 newsletter, the Michigan Department of Treasury has clarified that sales of digital goods, including e-books, podcasts, electronic music, and telephone ringtones, are not subject to Michigan sales tax. This applies whether the digital goods are downloaded, streamed, or accessed through a subscription service.This clarification seems to be in line with the Department of Treasury’s decision recently about the taxability of cloud transactions. See our prior tip on this topic: Michigan Clarifies Policy on Taxability of Cloud Computing. (Treasury Update, volume 1, issue 4 Michigan Department of Treasury, August 2016)


On August 25, 2016, House Judiciary Committee Chairman Robert Goodlatte released a discussion draft of the Online Sales Simplification Act of 2016. The legislation would implement a “hybrid origin” approach for remote sales. Under the legislation, states could impose sales tax on remote sales if the origin state participates in a clearinghouse.In this case, the tax is based on the origin state’s baseand taxability rules. The rate would be the origin state rate, unless the destination state participates. In that case, the rate used would be a single state-wide rate determined by each participating destination state. A remote seller would only remit sales tax to its origin state for all remote sales. Only the origin state would be able to audit a seller for remote sales. Non-participating states would not be able to receive distributions from the clearinghouse. Sellers would be required to provide reporting for remotes sales into participating states to the Clearinghouse so it can distribute the tax to the destination state. We will continue to monitor activity and update when the official bill is introduced.  (Discussion draft of Online Sales Simplification Act of 2016)


On July 14, 2016, Rep. Jim Sensenbrenner (R-WI) introduced the No Regulation Without Representation Act of 2016.  Taking the opposite approach of the Marketplace Fairness Act and Remote Transactions Parity Act, this proposed bill would limit the ability of states to require remote sellers to collect use tax. If enacted, the Act would codify the physical presence requirement established by the US Supreme Court in Quill Corp v. North Dakota.  The bill would define physical presence and create a de minimis threshold. If enacted, the bill would preempt click-through nexus, affiliate nexus, reporting requirements and marketplace nexus legislation. The bill would be effective as of January 1, 2017. The bill defines “seller” and provides that states and localities may not:


  • Obligate a person to collect a sales, use or similar tax; 
  • Obligate a person to report sales; 
  • Assess a tax on a person; or 
  • Treat the person as doing business in a state or locality for purposes of such tax unless the person has a physical presence in the jurisdiction during the calendar quarter that the obligation or assessment is imposed.


Persons would be considered to have a physical presence only if during the calendar year the person: 


  • Owns or leases real or tangible personal property in the state; 
  • Has one or more employees, agents or independent contractors in the state specifically soliciting product or service orders from customers in the state or providing design, installation or repair services there; or 
  • Maintains an office in-state with three or more employees for any purpose.


Physical presence would not include: 


  • Click-through referral agreements with in-state persons who receive commissions for referring customers to the seller; 
  • Presence for less than 15 days in a taxable year; 
  • Product delivery provided by a common carrier; or 
  • Internet advertising services not exclusively directed towards, or exclusively soliciting in-state customers.


The bill defines seller to exclude marketplace providers; referrers; third-party delivery services in which the seller does not have an ownership interest; and credit card issuers, transaction or billing processors or financial intermediaries.Marketplace Providers are defined as any person other than the seller who facilitates a sale which includes listing or advertising the items or services for sale and either directly or indirectly collects gross receipts from the customer and transmits the amounts to the marketplace seller. (No Regulation Without Representation Act of 2016 (H.R. 5893))


UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.



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