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Michigan Expands Tax To Include Specific Services. Effective December 1, 2007, certain specified services will be taxable (6%) in a manner similar to tangible personal property. For a complete list of impacted services, please refer to the law referenced below. Services specifically identified include: consulting services, office administration services, business service center services, investment advice services, landscaping services, travel and reservation services, carpet/upholstery cleaning services, warehousing and storage services, packaging and labeling services, specialized design services, courier and messenger services, janitorial services and certain personal and personal care services. Many of the services are described and linked to specific North American Industry Classification System (NAICS) codes. (Act 93 (H.B. 5198), Laws 2007, effective December 1, 2007)


In order to conform to existing statutory provisions, including provisions of the Streamlined Sales and Use Tax Agreement, the Michigan Department of Treasury has amended several sales and use tax rules. The modified rules explain the tax treatment of bakeries, milk and dairy products, vending machines, water, and food for consumption. In addition, the rules provide examples of nontaxable food items. (Rules R205.56, R205.72, R205.126, R205.127, and R205.136, Michigan Department of Treasury, effective March 23, 2007)


A recently enacted amendment to Michigan’s tax law provides exemptions of retail sale of tangible personal property provided in a sponsor contract if the event meets certain criteria. To qualify, the organizing entity must already be exempt as a 501(c)(6) organization, the organizing entity must provide the state with a notice of its intent to acquire corporate sponsors (within 60 days of the event), and an itemized schedule or property and services that will be provided under the contracts. Qualified athletic events include international competitions, postseason professional football playoffs, professional golf championships, collegiate basketball championship playoffs and collegiate hockey championship playoffs. (H.B. 6387, Act No. 590, Laws 2006)


Fees paid by customers to reinstate rental purchase agreements after a contract default are subject to Michigan use tax. The fees were not considered to be paid as a separate service, but rather part of the total price paid for the use and consumption of goods. The main purpose of the transaction was the rental and sale of goods and, therefore, taxable. (Continental Rental, Inc. v. Michigan Department of Treasury, Michigan Tax Tribunal, No. 297569)


The State of Michigan announced a change in the prepaid gasoline sales tax rate. Effective May 1, 2006, the new rate will be 12.7 cents per gallon. The Department is required to establish a new rate every six months unless the change in the price of a gallon of gasoline has been less than 10% during the prior six months. This rate is used by a purchaser (or receiver) of gasoline to calculate its required sales tax prepayment responsibility at the time of purchase or shipment from a refiner, pipeline terminal operator, or marine terminal operator. (Michigan Department of Treasury, Revenue Bulletin 2006-2, February 28, 2006)



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