Michigan Provides Guidance on Taxability of Delivery and Installation Charges

Effective April 26, 2023, delivery and installation charges are excluded from the “sales price” and “purchase price” for purposes of Michigan sales and use tax if both of the following conditions are met:

      • The charges are separately stated on the invoice, bill of sale, or similar document provided to the purchaser, and
      • The seller maintains its books and records to show separately the transactions used to determine the sales tax or use tax, as applicable.

Delivery and installation charges that fail to satisfy the above conditions remain subject to tax unless otherwise exempt. Additionally, delivery and installation charges related to the sale of electricity, natural gas, or artificial gas by a utility remain subject to tax.

For the purposes of the state’s notice, “delivery charges” means charges by the seller for preparation and delivery to a location designated by the purchaser of tangible personal property or services and includes, but is not limited to, transportation, shipping, postage, handling, crating, and packing.

The Michigan Department of Treasury (DOT) is required to cancel all outstanding (unpaid) balances related to delivery and installation charges on Notices of Intent to Assess and Final Assessments issued by the DOT before April 26, 2023. Unpaid balances are considered outstanding even if they are in an Informal Conference or on appeal before a court. The DOT also is prohibited from issuing any new assessments for delivery or installation charges for tax periods occurring before April 26, 2023. By law, purchasers will not be able to seek refunds from retailers or the DOT for periods prior to April 26, 2023. After April 26, 2023, if a retailer improperly charges tax on delivery or installation charges, the customer may seek a refund of tax from the retailer.

(Notice, Michigan Department of Treasury, April 26, 2023)

Posted on May 15, 2023