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A Michigan lessor of an aircraft was not liable for Michigan use tax on the purchase price of an aircraft because it was entitled to make an election to pay use tax on the lease payments it received. The Michigan Tax Tribunal found that the taxpayer was engaged in the business of leasing tangible personal property for purposes of the rental receipts election. There was no evidence that the rental rate that the taxpayer charged was inconsistent with market rates. The taxpayer did not personally use the aircraft, indicating an absence of a personal motive for the purchase. The aircraft was only used for six months before it fell into disrepair, but the low amount of flight time and low rental receipts did not necessarily mean that the leasing business was not entered into with the purpose of generating profit. As such, the taxpayer was not liable for use tax on the purchase price of the aircraft. (Caledesi Holdings, LLC v. Department of Treasury, Michigan Tax Tribunal, No. 358183, March 13, 2012)


An assessment for Michigan use tax due on the purchase of an aircraft was upheld because the taxpayer did not qualify as a lessor for the rental receipts election. The taxpayer paid use tax on rental receipts from leases entered into with related and unrelated parties, but the overall activities of the taxpayer showed that it was not truly “engaged in the business of renting or leasing tangible personal property to others.” The leases were not considered arm’s length transactions because they reflected below-market rates. The taxpayer also did not make substantial efforts to advertise itself as a leasing business. Instead, the taxpayer’s advertisements made references to partial ownership. The number of hours that the aircraft was leased to related parties far outnumbered the hours the aircraft was leased to unrelated parties. All of these actions reflected a fractional or joint ownership rather than a leasing business. As such, the use tax assessment on the purchase price of the aircraft was upheld. (Heidrich Aviation LLC v. Department of Treasury, Michigan Tax Tribunal, No. 358557, December 9, 2011)


The Michigan Department of Treasury is reminding residents that use tax may be owed on online purchases made from out-of-state retailers during the holiday shopping season. Use tax may be due on purchases from e-commerce retailers, television home-shopping networks, and catalog retailers. Michigan consumers are required to pay use tax on purchases when the retailer does not collect Michigan use tax. Michigan’s use tax rate is 6% and has been in effect since 1937. The easiest way to report use tax is on the individual income tax return, which is due for most filers on April 15. For retailers, the use tax is to be reported on the retailer’s regular sales and use tax return. (Release, Michigan Department of Treasury, December 14, 2011)


The Michigan House of Representatives has passed and Michigan Governor Jennifer Granholm has signed legislation creating a tax amnesty period for Michigan in 2011. The amnesty period will begin on May 15, 2011 and end on June 30, 2011. During the amnesty period, all civil and criminal penalties will be waived for not filing a return, not paying a tax, and for excessive tax refund claims. Amnesty will not apply to taxes due after December 31, 2009. To take advantage of the amnesty program, a taxpayer must make a written request for waiver, file a return or amended return, and make full payment of the outstanding tax amount plus interest within the allotted amnesty period. Any tax that is determined due that should have been paid under the amnesty program will be subject to an additional 20% penalty. [Act 198 (S.B. 884), Laws 2010, effective October 5, 2010].


A Michigan steel manufacturer’s material handling conveyor system qualified for the industrial processing exemption from Michigan use tax. The exemption applied to production material handling because once the transportation of raw materials was initialized by the preliminary movement of the pellets from storage on to the hopper conveyors, the process of moving the pellets to the blast furnaces was continuous and part of the industrial process. During the audit period, the industrial processing statute was ambiguous, but was later amended to clarify that production material handling falls within the definition of industrial processing. Furthermore, a Department of Treasury rule had specifically cited production material handling as an example of an industrial processing activity. (Rouge Steel Company v. Department of Treasury, Michigan Tax Tribunal, No. 315388, November 30, 2009, release April 2010)



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