2937 Atrium Drive, Suite 201, Okemos, Michigan, 48864s(517) 381-1732 sFax: (517)381-1796  
E-mail: contactmaa@miagg.org sWebsite: www.miagg.org  
Submitted Via Email to TreasPolicyDirOfc@michigan.gov  
December 12, 2022  
Michigan Department of Treasury  
Bureau of Tax Policy  
Attn: Debbie Lange  
PO Box 30828  
Lansing, MI 48909  
RE: Administrative Rules for Sales and Use Tax Rules, Rule Set 2022-9 TY  
Dear Sir/Madam:  
The Michigan Aggregate Association is submitting comments in opposition to the proposed rule  
set 2022-9 TY, specifically MCL 205.71, referred to as Rule 21.  
As proposed, the revised rule would extend the Use Tax base, contradict existing statutory  
language and result in taxation inapposite to current law. Further, the proposed rule would  
impose higher costs on road repairs, and result in tax being paid twice for road projects (once on  
the equipment used to manufacture aggregate produced from recycling HMA and Concrete  
pavements/products, and again on the recycled aggregate when used in the state). This thwarts  
public policy, artificially inflates the cost of roadwork in the state, and increases the  
administrative burden of doing business in Michigan.  
Michigan manufacturers have long been able to purchase machinery and equipment used in  
industrial processing activities exempt from sales and use tax. See, MCL 205.54o and 205.94o.  
Qualification for the exemption is based upon the activities performed by the machinery and  
equipment. However, Treasury has contested qualification of the exemption for aggregate  
producers, and has limited the exemption to the extent that sales tax will be paid on the product  
produced by the machinery and equipment or if the product is used to improve realty out-of-  
state. It is immaterial that contractors have paid use tax on the product produced.  
As noted in the proposed draft at MCL 205.71(3), there is a disconnect between the Use Tax Act  
and the Sales Tax Act. When a contractor purchases materials to be affixed to and made a  
structural part of real estate in another state (such as aggregate), the purchase is not subject to the  
general rule that contracts must pay use tax on the materials, as sales/use tax will be due based  
Mission Statement  
Michigan Aggregates Association is the recognized advocate of the aggregate industry. We promote best practices  
for safe and efficient aggregate production, responsible environmental stewardship and reasonable material  
specifications for our members. Through community involvement, we educate the public as we create a sustainable  
industry for future generations by providing materials used by Michigan citizens in their daily lives.  
2937 Atrium Drive, Suite 201, Okemos, Michigan, 48864s(517) 381-1732 sFax: (517)381-1796  
E-mail: contactmaa@miagg.org sWebsite: www.miagg.org  
on the state of destination/use. However, as noted in the subsection, there is no corresponding  
sales tax exemption. Without a corresponding sales tax exemption, the Department limits the  
permitted industrial processing exemption on purchases of the machinery and equipment used to  
manufacture the recycled aggregate, and requires the manufacturer to substantiate that the  
product will be sold at retail or “used to improved realty, but only if in another state.”  
This is illogical and unworkable. If a contractor manufactures recycled aggregate for self-use,  
use tax will be paid by the contractor when he/she uses the recycled aggregate in a project in the  
state. However, due to the acknowledged disconnect, Treasury will only permit the industrial  
processing exemption to the extent that the machinery and equipment, over its useful life,  
produces product that will be sold or installed out of state. As the recycled aggregate will be  
subject to use tax upon the contractor’s use, the state has collected tax on the product and the  
machinery and equipment is permitted to be purchased with a full industrial processing  
exemption.  
Qualification for the industrial processing exemption should not be determined based on where  
the recycled aggregate is laid (whether in the state or out-of-state). Nor is it possible for a  
contractor to know, at the time they purchase the machinery and equipment, what will be the  
percentage of the product produced by the machinery and equipment used in-state or out-of-state.  
The proposed rule set should address this issue and confirm that qualification for the industrial  
processing exemption is based upon the activities performed by the machinery and equipment,  
and if “sales or use tax” is paid on the product. Location of where the product is laid should not  
matter, as the state will receive use tax on all product laid in Michigan.  
Critically, the failure to address this interpretation by the proposed rule set will increase costs for  
Michigan roadwork, and lead to higher costs of living and doing business in the state.  
Sincerely,  
Douglas E. Needham, P.E.  
Executive Director  
Mission Statement  
Michigan Aggregates Association is the recognized advocate of the aggregate industry. We promote best practices  
for safe and efficient aggregate production, responsible environmental stewardship and reasonable material  
specifications for our members. Through community involvement, we educate the public as we create a sustainable  
industry for future generations by providing materials used by Michigan citizens in their daily lives.  
Submitted Via Email to TreasPolicyDirOfc@michigan.gov  
December 12, 2022  
Michigan Department of Treasury  
Bureau of Tax Policy  
Attn: Debbie Lange  
PO Box 30828  
Lansing, MI 48909  
RE:  
Dear Sir/Madam:  
Dean Transportation is submitting comments in opposition to the proposed rule set 2022-9 TY,  
Administrative Rules for Sales and Use Tax Rules, Rule Set 2022-9 TY  
specifically MCL 205.132, referred to as Rule 82.  
As proposed, the revised rule would extend the Use Tax base, contradict the existing statutory  
language, and result in taxation inapposite to current law. Further, the proposed rule would impose  
higher costs for the providing of school buses to tax-exempt public-school districts, which would thwart  
public policy and result in a reduction of funding to the School Aid Fund.  
For a number of years, Treasury, has taken the position that companies leasing buses to school  
districts must pay use tax on the buses if drivers are also provided. This is incorrect and has been  
previously resolved in favor of the use tax not being applicable, regardless of the operator of the vehicle,  
which is also consistent with current legislation. Buses are purchased for, and leased to specific public-  
school districts, with title to the vehicles issued in the name of the districts as Lessee by the Michigan  
Secretary of State. The decision whether to also request drivers is separately made by the districts. It is  
not the same as the leasing of equipment for which an operator must be provided, which is subject to  
use tax. Districts may choose to use their own drivers, may request us to furnish drivers, or a  
combination of both. The mere fact that a district also requests drivers does not change the nature of  
purchasing or leasing school buses that are dedicated to a specific district.  
This issue was further clarified in 2018, when the Michigan Legislature enacted 2018 PA 673 and  
679, effective March 29, 2019, amending MCL 205.54a and MCL 205.94. The purpose of the  
amendment was to specifically provide sales and use tax exemptions for the purchase, sale or lease of a  
“school bus or transportation-related services” and “parts or adaptive equipment affixed or to be affixed  
to a school bus which are used in the repair, maintenance, accommodation, or modification of a school  
bus” so long as the school bus or services “are primarily used in the performance of a contract entered  
into with an authorized representative of a school for the transportation of pre-primary, primary, or  
secondary school pupils to or from a school or school-related events authorized by the administration of  
the school.”  
Page 1 of 2  
The proposed rule, MCL 205.132, referred to as Rule 82, contravenes the existing statutory  
language and would impose use tax on the lessor of school buses. The lessor would pass this use tax  
through as a cost of leasing school buses, thus taxing what is currently exempt, and increasing leasing  
costs to Michigan public school districts. Such proposed revision is contrary to the impetus for the 2018  
clarifying legislative amendment and represents a Department interpretation that is inconsistent with the  
Legislature’s action.  
Dean Transportation appreciates the opportunity to offer comments on Administrative Rules for  
Sales and Use Tax, Rule Set 2022-9 TY. If you have any questions, or if further clarification on our  
comments is required, please do not hesitate to contact me at 517-319-3300, or via email at  
patrickd@deantrans.com.  
Sincerely,  
Patrick Dean  
President  
Dean Transportation  
Page 2 of 2  
Submitted Via Email to TreasPolicyDirOfc@michigan.gov  
December 12, 2022  
Michigan Department of Treasury  
Bureau of Tax Policy  
Attn: Debbie Lange  
PO Box 30828  
Lansing, MI 48909  
RE:  
Opposition to Administrative Rules for Sales and Use Tax Rules, Rule Set 2022-9 TY (Rule 82)  
Dear Sir/Madam:  
The National School Transportation Association (NSTA) takes this opportunity to submit comments in  
opposition to the proposed rule set 2022-9 TY, specifically MCL 205.132, referred to as Rule 82.  
About The National School Transportation Association  
NSTA has been the leading resource for school transportation solutions and the voice for private school  
bus operators for over 57 years. We are a membership organization for school bus contract-operators  
engaged primarily in transporting students to and from school and school-related activities. Members  
range from small family businesses to large multi-state operators. Private school bus contractors  
account for 38 percent of the nation’s pupil transportation services and employ more than 250,000  
individuals as bus drivers, mechanics, maintenance workers, dispatch, and office workers. School  
transportation represents the largest form of mass transportation in the United States, and daily, almost  
26 million K-12 students are transported by an estimated 480,000 yellow school buses.  
NSTA Opposes the Extension of the Use Tax Base  
As proposed, the revised rule would extend the Use Tax base, contradict the existing statutory language,  
and result in taxation inapposite to current law. Further, the proposed rule would impose higher costs  
for third-party district partners providing school buses to tax-exempt school districts—this would thwart  
public policy and effectively result in a reduction of funding to the School Aid Fund.  
Michigan public schools have always been able to purchase or lease school buses, free of sales or use  
tax, regardless of from whom the school district elects to acquire or lease its buses. This should not be  
impacted by the mere coincidence of a district’s determination that the same vendor is most  
appropriate to both provide buses to the district, as well as to provide drivers to operate those buses.  
Districts may choose to use their own drivers, or at their sole discretion under the law, they may request  
a third-party to furnish drivers, or a combination of both. The mere fact that a district also requests  
drivers does not change the nature of purchasing buses that are dedicated to a specific district.  
This issue was clarified in 2018, when the Michigan Legislature enacted 2018 PA 673 and 679, effective  
March 29, 2019, amending MCL 205.54a and MCL 205.94. The purpose of the amendment was to  
specifically provide sales and use tax exemptions for the purchase, sale or lease of a “school bus or  
transportation-related services” and “parts or adaptive equipment affixed or to be affixed to a school  
bus which are used in the repair, maintenance, accommodation, or modification of a school bus” so long  
as the school bus or services “are primarily used in the performance of a contract entered into with an  
2022-12-12C | 7302.0  
authorized representative of a school for the transportation of pre-primary, primary, or secondary  
school pupils to or from a school or school-related events authorized by the administration of the  
school.”  
The proposed rule contravenes the existing statutory language and would impose use tax on the lessor  
of school buses. The lessor would pass this use tax through as a cost of leasing the school buses, thus  
taxing what is currently exempt, and increasing leasing costs to Michigan public schools. Such proposed  
revision is contrary to the impetus for the 2018 legislative amendment.  
Most importantly, the consequence of this contradictory interpretation and new rule will be to reduce  
vehicle acquisition options for Michigan public schools, while increasing the cost of providing student  
transportation. Hidden within this interpretation is the simple fact that Michigan public schools will  
effectively, even if not directly, incur the cost of the proposed Sales/Use Tax assessment, while only a  
fraction of the revenue received by the state from the tax would return to schools. The Department of  
Treasury’s proposal has the effect of taking money out of Michigan K-12 classrooms, and it redistributes  
it to non-education purposes - based on the mere randomness of who operates a school bus.  
In conclusion, NSTA opposes this proposal, and it respectfully points out that the rule, if implemented,  
will become a de facto tax increase for Michigan citizens, because public school transportation,  
regardless of whether it is done by a public or private operation, remains funded by Michiganders. We  
thank you for the opportunity to voice these concerns, and please feel free to contact me at 703-684-  
3200, or via email at cmacysyn@yellowbuses.org, if you need further clarification.  
Sincerely,  
Curt Macysyn  
Executive Director  
National School Transportation Association  
Submitted Via Email to TreasPolicyDirOfc@michigan.gov  
December 12, 2022  
Michigan Department of Treasury  
Bureau of Tax Policy  
Attn: Debbie Lange  
PO Box 30828  
Lansing, MI 48909  
RE:  
Dear Sir/Madam:  
Shiawassee RESD is submitting comments in opposition to the proposed rule set 2022-9 TY,  
Administrative Rules for Sales and Use Tax Rules, Rule Set 2022-9 TY  
specifically MCL 205.132, referred to as Rule 82.  
As proposed, the revised rule would extend the Use Tax base, contradict the existing statutory  
language, and result in taxation inapposite to current law. Further, the proposed rule would impose  
higher costs for third-party district partners providing school buses to tax-exempt school districts—this  
would thwart public policy and effectively result in a reduction of funding to the School Aid Fund.  
Michigan public schools have always been able to purchase or lease school buses, free of sales  
or use tax, regardless of from whom the school district elects to acquire or lease its buses. This should  
not be impacted by the mere coincidence of a district’s determination that the same vendor is most  
appropriate to both provide buses to the district, as well as to provide drivers to operate those buses.  
Districts may choose to use their own drivers, or at their sole discretion under the law, they may request  
a third-party to furnish drivers, or a combination of both. The mere fact that a district also requests  
drivers does not change the nature of purchasing buses that are dedicated to a specific district.  
This issue was clarified in 2018, when the Michigan Legislature enacted 2018 PA 673 and 679,  
effective March 29, 2019, amending MCL 205.54a and MCL 205.94. The purpose of the amendment was  
to specifically provide sales and use tax exemptions for the purchase, sale or lease of a “school bus or  
transportation-related services” and “parts or adaptive equipment affixed or to be affixed to a school  
bus which are used in the repair, maintenance, accommodation, or modification of a school bus” so long  
as the school bus or services “are primarily used in the performance of a contract entered into with an  
authorized representative of a school for the transportation of pre-primary, primary, or secondary  
school pupils to or from a school or school-related events authorized by the administration of the  
school.” See also, Michigan Senate Fiscal Agency, Finance Committee, Bill Analysis of Senate Bills 906  
and 907, March 29, 2018.  
The proposed rule contravenes the existing statutory language and would impose use tax on the  
lessor of school buses. The lessor would pass this use tax through as a cost of leasing the school buses,  
thus taxing what is currently exempt, and increasing leasing costs to Michigan public schools. Such  
proposed revision is contrary to the impetus for the 2018 legislative amendment and represents an  
intent to circumvent the Legislature in order to impose Treasury’s “interpretation” as law.  
Most importantly, the only possible effect of this contradictory interpretation and rule is to  
reduce the vehicle acquisition options for Michigan public schools and increase the cost. Further,  
Michigan public schools will effectively, even if not directly, incur the cost of the proposed sales / use tax  
assessment, while only a fraction of the revenue received by the state from such tax would come back  
to the schools. Treasury’s proposal takes money out of Michigan classrooms and redistributes it to non-  
education purposes based on the mere randomness of who operates a school bus.  
Sincerely,  
Shiawassee RESD, Superintendent  
From:  
To:  
Michael Bannasch  
TreasPolicyDirOfc  
Subject:  
Attn: Debbie Lange - Comments re: Department of Treasury, Bureau of Tax and Economic Policy, Administrative  
Rules for Sales and Use Tax Rules, Rule Set 2022-9 TY  
Date:  
Monday, December 12, 2022 2:57:53 PM  
CAUTION: This is an External email. Please send suspicious emails to abuse@michigan.gov  
Ms. Lange:  
I am writing to provide comments on the proposed rules referred to in the subject line. My  
comments are made individually on my own behalf, and do not represent the position or thoughts of  
my employer (RKL LLP) or any professional organizations of which I am a member (AICPA, Michigan  
Association of Certified Public Accountants, or Pennsylvania Institute of Certified Public  
Accountants).  
·
·
·
R 205.26 Use tax registration – It would be helpful if this rule, or another rule yet to be  
written, addresses the use tax registration requirement in light of the changes to the statute  
of limitations from PA 3 of 2014. I do not mean to suggest that use tax registration is not  
required if a taxpayer is registered for and/or remitting sales tax or withholding tax on a  
combined return, but a succinct statement in the rules for the sake of clarity about the  
consequences for lack of registration would be appreciated. Specifically, what is the statute  
of limitations for an assessment for a SUW combined return filer that is not registered for  
use tax, and what civil or criminal penalties apply for failure to register.  
o Additionally, in light of the proposed rescission of R 205.91 Interstate commerce,  
subrule (1)(a) should provide definition or example of when a sale is made into  
Michigan but the transfer of ownership occurs outside Michigan.  
R 205.68 Containers, cartons, and wrapping materials – The example addresses a situation  
where golf balls are packaged by the dozen for sale to a retailer, who will then resell the  
packaged dozen to customers. In the example, the larger box that the golf ball manufacturer  
uses to ship the packaged golf balls to the retailer is taxable, as the example is presented as  
the manufacturer picking the packaged golf balls from finished inventory. But what if the  
manufacturer instead packages a gross of golf balls (a dozen boxes of a dozen) for shipment  
to retailers, with the gross packaging being done before the dozen packs of balls come to  
rest in finished goods inventory. In that case, it seems the larger box that holds the gross  
would also be exempt because it becomes a component part of the product that is sold to  
retailers before the manufacturing process is complete. I would ask that Treasury consider  
this situation and provide a second example discussing the tax exemption ramifications.  
R 205.71 Contractors – While I do not think the existing rule should be retained, given its last  
revision date in 1979, I am confused and troubled by Treasury’s decision to gut this rule  
down to nothing more than a surface-level definition of what a contractor is. Contractors  
face extremely complex sales and use tax issues, yet the proposed ruleset now provides the  
industry even less guidance than it does for, for instance, “fairs, circuses, carnivals, and other  
public exhibitions.” Possibly Treasury is considering that a robust rule for contractors is not  
needed because it has issued several Revenue Administrative Bulletins for the industry in the  
past six years. While that type of guidance is appreciated, Treasury’s usage of that type of  
guidance runs contrary to what is needed here for a significant and complex industry in our  
state, which is transparency of, and an ability for the industry to comment on, the rule-  
making process. Far from essentially rescinding this rule, I would encourage Treasury to  
rewrite this rule to specifically address issues of when tangible personal property is  
presumed affixed to real estate or not, so that the industry can avoid having to try to apply  
fact-specific court cases to their circumstances. I would suggest Treasury could look to 61  
Pennsylvania Code §31.11 as an example of how it could provide presumptive rules on this  
exceptionally important and controversial issue.  
·
General comment – There are numerous instances of rules containing language like “unless  
otherwise exempt…” I would encourage Treasury to take the time in this re-write project to  
try to minimize instances where this or similar language is used, and instead actually provide  
the instances where the sale or purchase in question is exempt. The rules should be written  
in a balanced way to address both situations of taxability and situations of exemption, but as  
written there are too many instances where a taxpayer is left to wonder whether an  
exemption applies because the rules allude to the possibility of one.  
I appreciate your, and Treasury’s, attention to these comments.  
Regards,  
Michael R. Bannasch, CPA, MST  
STATE AND LOCAL TAX PRACTICE LEADER  
phone: 717.409.8847 | fax: 717.394.0693 | cell: 517.262.5923  
email: mrbannasch@rklcpa.com | website: rklcpa.com  
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Comments on Michigan Department of Treasury’s Proposed Rewrite of Sales and Use Tax Rules  
Michael R. Bannasch, CPA  
April 16, 2021  
•
•
Will/can the rewritten rules be renumbered? Currently, R205.1 through R205.141 exist, but  
there are already only 84 active rules within that range, and that is proposed to decrease to 42  
active rules with this rewrite. On the one hand, consolidation would be beneficial for taxpayers  
and practitioners to have a concise set to work with. On the other hand, might there be  
confusion if a renumbering results in a rule number being used post-renumber that is currently a  
rescinded rule number?  
Regarding rescinding many industry-specific rules, I actually think more might be able to be  
rescinded. This rewrite is such a substantial project that it may be beneficial to think not just  
from a perspective of “This rule exists – do we want to keep it?” but maybe more from a  
perspective of “If no rules existed at all yet, which ones would we write (taking into  
consideration other existing guidance like RABs)?”. I think that blank slate perspective, if not  
already considered by Treasury, might lead to an even more concise and coherent set of rules  
regarding industry-specific matters. For instance, to the extent that jewelers and animal  
breeders know of existing Rules 42 and 43, the rescission of the jeweler rule but only revision of  
the animal breeder rule could cause confusion beyond simply the concern about losing “special  
guidance.” Might jewelers interpret this as a sign that Treasury is no longer much interested in  
their industry, thus emboldening some to be less rigorous in their adherence to sales/use tax  
laws? Might animal breeders think they are being targeted by Treasury in some way such that  
they need a rule to keep them in line? What does it mean for some industries to have rules  
while others have RABs? I think with the (much-appreciated) resurgence in Treasury’s issuance  
of RABs, it should be carefully considered why something ends up in an RAB vs. in a rule, and  
consistency should be a goal. I don’t know that I would say the ruleset should not contain any  
industry-specific rules, but rather that there should be a clear reason why some industry-specific  
guidance rises to the level of a rule vs. other guidance that goes in an RAB. And I wouldn’t say,  
given the current context, that “because the rule already exists” is a clear enough reason to  
keep it.  
o
I see a number of industry-specific rules (e.g. R 205.51 Agricultural producing and R  
205.53 Auctioneers, agents, factors, and brokers) are not being revised or rescinded.  
Agricultural producing, and likely others not being revised or rescinded, has been  
affected by legislation since it was last revised in 1979. Is there a planned second round  
of rule revisions coming soon? If not, can these obsolete rules be rescinded? R 205.136  
needs to be rescinded in light of the recent Emagine Entertainment case.  
•
Where a rule is being updated to be consistent with current statutory language / recent  
legislation, might it be prudent or beneficial for the rule to reference the MCL which it relates  
to? This would go beyond the Rule 20 blanket statement about how to interpret rules. For  
instance, Rule 1 could say something like “Pursuant to MCL 205.53…” or “As required by MCL  
205.53…” I realize there is a slight risk the reference itself could become outdated by a statutory  
revision – although the likelihood of this is decreased by referring only to the section of MCL  
205.53 instead of the subsection of MCL 205.53(1) – but it seems there could be benefit that  
outweighs the risk. By providing the statutory reference, the reader of the rule is easily able to  
look at the statute to see if it has been amended more recently than the rule has, thus allowing  
them to analyze whether there may be a conflict between the statute and the rule such that the  
rule is obsolete. Historically speaking, this has been an issue.  
•
•
Might it make sense to have a definitions rule? Yes, it would largely, if not completely, just  
restate definitions per statute, but might be helpful to a reader of the rules to know what is  
meant by, for instance, “sales at retail” or “person.” Possibly instead of terms defined here, just  
a reference to the appropriate MCL sections for words not otherwise defined in a particular  
rule?  
Although noted in one or more rule-specific comments below, I wanted to provide a blanket  
statement that I feel these rules could do better on explaining exemptions. There are a number  
of instances where language is added, such as “unless otherwise exempt” or “unless an  
exemption applies.” While the rules do in many instances adequately address exemptions, this  
type of language tends to read like the emphasis of the rules is on a priority of Treasury to  
declare things taxable and then let the reader try to find whether any exemptions apply. In at  
least some instances of this type of “unless…” language, there might not even be a pertinent  
exemption applicable to the topic at hand, in which case the language feels a bit like Treasury  
saying “we couldn’t figure out whether an exemption might apply here, but we didn’t want to  
go so far as to say there couldn’t possibly be an exemption.” This diminishes the value of the  
rules as a binding source of departmental interpretation of statute. Overall, the rules should be  
more fairly weighted to discussion of taxable vs. non-taxable/exempt items/transactions, and if  
Treasury has an exemption in mind that applies to a topic it should state its position as opposed  
to just a broad and ambiguous “unless…” statement that leaves the reader to wonder whether  
an exemption applies. Note that I do not mean that each rule should contain  
•
R 205.1 –  
o
Subrule 1 – Consider that an application for a license is generally done online these  
days. Possibly reword “on a form prescribed by…” to “in a manner prescribed by…”  
Subrule 2 – Renewals of licenses happen automatically, so revise language indicating the  
taxpayer shall “furnish[] such information as the Michigan department of treasury may  
require”?  
o
o
Subrule 3 – Consider revising or removing the partnership example so that there is some  
mention of LLCs, since those are more prevalent than partnerships? Possibly some  
differentiation that the adding or dropping of a partner creates a new partnership,  
whereas a change of member of an LLC does not create a new entity? Possibly tie the  
requirement for a new license to whether a new FEIN is created, since Michigan does  
not assign sales tax account ID numbers? It seems the primary reason for Treasury  
wanting a new sales tax license to be issued would be to gather information through the  
registration process about owners and officers for purposes of the “responsible person”  
provisions of MCL 205.27a(5), but in practice does Treasury look first or only to the  
persons listed on Form 518 as responsible persons? Since Treasury is not restricted to  
individuals listed on Form 518, the requirement to obtain a new license upon an  
ownership change of a partnership seems unnecessary and onerous.  
o
Subrule 8 – This is not a complete sentence and reads awkwardly since not just part of a  
list. Consider adding “are not required to obtain a sales tax license” to the end.  
•
R 205.8 – Yes, the current rule does mostly just restate statute, but the conversion concept  
could use some clarity, and I would consider retaining this rule in revised form. The issues that  
could be clarified here include:  
o
The base for use tax remittance upon conversion is the original price paid by the  
consumer to the seller. Some may think that if the conversion happens at a time when  
the TPP has less value than it did when originally purchased, that the value at time of  
conversion should be the base.  
o
A taxable conversion occurs even if the post-conversion taxable use is “in whole or in  
part, or permanent or not permanent.” MCL 205.92(q). It would be great to have clarity  
(including possible examples) of how this provision interacts with, for instance, MCL  
205.94o(2) re: partial exemption for mixed-use property. For example, if an industrial  
processor purchases a forklift for use exclusively in industrial processing activities (e.g.  
moving WIP throughout the process) and then two years later moves that forklift to use  
exclusively in its warehouse for shipping functions, is that a conversion that makes the  
forklift entirely taxable upon its original purchase price or is it mixed use as measured  
during the entire life of the forklift such that MCL 205.94o(2) allows only partial  
taxability? To further the example, what if the timeframe is shorter and the forklift  
moves back and forth – for six months out of the year it is used exclusively for  
manufacturing and for six months it is used exclusively for warehousing/shipping?  
•
R 205.13 – Subrule 2 should also include reference to ORVs and manufactured housing in  
accordance with MCL 205.179. Also consider a definition of “retail dollar value” so that  
taxpayers understand the equalization tax might be based on an amount greater than what they  
paid for the item. This is currently addressed in Rule 85, which is slated to be rescinded. Yes, the  
issue is also addressed in RAB 2017-26, but the non-binding nature of an RAB may make it  
prudent to keep the definition of “retail dollar value” in a rule.  
•
•
R 205.15 – Subrule 2(b) states that if an RV is traded in as partial payment for a motor vehicle,  
there is no trade-in allowance to reduce the sales tax base. I do not believe this is supported by  
statute. MCL 205.51(1)(d)(xii) provides a trade-in allowance for either “a motor vehicle or  
recreational vehicle” used as partial payment on the purchase of “a new motor vehicle or used  
motor vehicle or recreational vehicle…”  
R 205.16 – Subrule 2 states that a seller shall refund collected tax on returned goods if the seller  
refunds some or all of the purchase price within the sooner of 180 days after the initial sale or  
the seller’s stated return policy. What about if the seller refunds some or all of the purchase  
price after the expiration of either the 180 days or their stated return policy (i.e. they allow a  
refund even though their return policy does not require it, as a gesture of goodwill)? In that  
case, may the seller also refund the collected tax and claim their own refund or credit from  
Treasury? Or is the seller prohibited from refunding collected tax at that point (in which case  
they certainly couldn’t claim their own refund/credit from Treasury, in order to avoid unjust  
enrichment)? Consider whether these rules re: returned goods are in accordance with the  
provisions of Streamlined Sales Tax in order to not be out of compliance with that agreement.  
•
R 205.22 – Subrule 2 is mostly just a restatement of MCL 205.51(1)(d)(vii). Might there be more  
value in discussing one or both of the following:  
o
What does it mean to be a member of a group or organization entitled to a price  
reduction or discount? For instance, I am a member of AAA because I pay annual dues,  
and I utilize the benefit of discounted AAA rates at participating hotels. I presume a  
participating hotel receives some form of compensation from AAA when I take  
advantage of the discounted AAA rate. Is this the type of group/organization  
membership contemplated by MCL 205.51(1)(d)(vii)(D)(II)?  
.
Particularly in the context of hotels because of the benefit they receive by filling  
unfilled rooms, but maybe also applicable to sellers of TPP as well, consider  
discussion of whether all the conditions are met in a fact pattern like this… The  
normal room rate is $110 per night. The AAA room rate is $100 per night. But  
AAA does not provide $10 of consideration to the hotel, they only provide $6.  
That is, the hotel is willing to take a $4 haircut on the rate in order to get a AAA  
member in as a guest because they are wanting to fill rooms that might  
otherwise go unoccupied. It could be interpreted that the sales tax base is either  
of the following, so guidance is welcomed here:  
•
$106 – The hotel actually received $106 as $100 from the guest and $6  
from AAA, and everything received, from whatever source, is part of the  
sales price.  
•
$100 – MCL 205.51(1)(d)(vii) does not cause inclusion of the $6 from  
AAA because not all conditions are met. The consideration received  
from AAA is not directly related to a price reduction or discount on the  
sale because the discount was $10 instead of just the $6 from AAA.  
Note that $110 should not be a possible answer because even though  
the normal rate is $110, the hotel only received $106 and the other $4  
differential was a discount they provided out of their own pocket.  
•
o
The example in this subrule is appreciated. Possibly there could be some discussion  
(whether through the example or on its own) of what tax could/should be charged to  
the customer. It is understood that a seller’s liability exists even if they don’t charge any  
or all of the sales tax to the customer. But in a case where the base for the seller’s  
liability exceeds the price charged to the customer (because the difference will be made  
up by third-party consideration), can the seller charge the customer tax on the whole  
base? From your example, if the seller’s base is $10, can they charge $0.60 tax to the  
customer even though the receipt/invoice to the customer only shows an $8 sale price?  
•
R 205.26 –  
Consider whether there should be any discussion about the interplay of the use tax  
o
registration requirement of MCL 205.95 and the changes brought about at MCL  
205.27a(13) by Public Act 3 of 2014 regarding the statute of limitations for taxes that  
are reported on a combined return, as use tax is with sales and withholding tax. While a  
seller holding a sales tax license does not need to register for use tax, what about a  
business not registered as a seller because, for instance, all their sales are of nontaxable  
services. Presuming they are registered for and remitting Michigan withholding tax, they  
cannot be audited for use tax for more than the four year statute of limitations,  
regardless of whether they are registered for use tax. I understand this rule cannot  
contradict the use tax registration requirement at MCL 205.95, but I am wondering how  
much could be written into this rule to reflect the reality of lack of consequence for  
failure to register for use tax as long as the taxpayer is filing combined SUW returns?  
Arguably, even filing without registering for any of S, U, or W starts the running of the  
statute for purposes of deficiency assessments, so the only real consequence for lack of  
use tax registration would be if there is a civil or criminal penalty specifically associated  
with failure to be registered, or a broad-based penalty for failure to comply with statute  
administered under the Revenue Act.  
.
Consider that one purpose of rules can be to provide binding information from  
the agency tasked with administering statute in a way that helps those subject  
to those laws tie together the disparate parts of statute in a meaningful way.  
For instance, statute will say things like “failure to comply with Section X,  
Subsection Y, or Subclause 82(a)(3)(x)(D)(VIII) will result in a penalty equal to  
10% of the amount determined under Section A of Part III of Chapter 99, but  
without consideration of Part II of Title 4…” These rules are an opportunity for  
Treasury to tie all of that together to say something like “If you are required to  
but do not register for use tax, you will be subject to a penalty of $1,000.” I  
think, looking at the entire scope of what is being done with these rules, any  
opportunity along these lines should be taken so that Michigan taxpayers can  
have the best chance for a clear understanding of law that can be difficult at  
times to determine if just relying on statutory language.  
o
Subrule (1)(a) – For clarity, please define, or provide examples of, when a sale is made  
into Michigan but the transfer of ownership occurs outside Michigan such that an out-  
of-state seller should be registered for use tax instead of sales tax. For instance, Amazon  
makes sales into Michigan and has warehouses in Michigan but does not make over-the-  
counter sales such that possession of the TPP is transferred directly from Amazon to the  
buyer in Michigan. How do you determine where the transfer of ownership occurs?  
Does it occur in Michigan if it comes from a Michigan warehouse? And if so, does that  
mean Amazon should be registered for sales tax instead of use tax? What about a seller  
that has no Michigan warehouses – is transfer of ownership based on legal FOB terms &  
conditions or on something else? Is it even possible for a seller in that situation to have  
situations where the transfer of ownership occurs in Michigan?  
o
Subrule (1)(c) – The statement re: use tax registration required if purchases are made  
for which the seller does not provide proof of sales/use tax due and paid seems to be in  
response to the Michigan Supreme Court’s decision in Andrie. Could there be some  
discussion of what constitutes said proof and/or when said proof can/must be obtained  
by the buyer from the seller? Is there anything that needs to be considered here to  
ensure compliance with SSUTA?  
•
R 205.54 –  
o
Subrule 3 re: vehicle transfers between individuals is already covered at R 205.13(2),  
and there are some differences here (use tax vs. equalization tax) that could create  
confusion. I would remove this, considering the subject of this rule is Automobile and  
Other Vehicle Dealers.  
In subrule 10 re: demonstrators, please state, in instances where the number of vehicles  
a dealer sells in the current year falls into a different range than the number sold in the  
prior year, whether the dealer is allowed to use the higher range of the two years or  
must use the lower range of the two years. For example, in 2019 a dealer sold 125  
vehicles, but in 2020 only sold 75. For 2020, is that dealer allowed 20 tax-free  
demonstrators or only 7?  
o
•
R 205.55 – Consider renaming (and reworking the content) to be more specific to Automobile  
Service/Repair Shops. As currently named, some might think the rule is not pertinent to them  
because it is for places like AutoZone that just sell parts. Service/repair shops need guidance  
more than just an over-the-counter parts store, so they can understand when they are selling  
TPP vs. using TPP in the provision of a service. This rule could cover everything from oil changes  
to auto body repairs, and could include discussion of how the way a shop invoices its customers  
can impact how much tax should be charged.  
•
R 205.62 –  
o
Subrules 1 and 2 could be improved in regard to how the domestic air carrier provisions  
of MCL 205.54x are addressed. I believe Treasury is trying to avoid having the rules  
simply restate statute, but many existing rules (even some being kept) substantially do  
that, even if they also then put some more meat on the bones of the statute. Thus the  
way MCL 205.54x is simply being referenced here instead of any discussion of what type  
of business can be exempt under 205.54x seems jarring and almost “lazy” where the  
reader of the rule might think “this is unhelpful… I have to go look this up and interpret  
it myself.” I suggest that unless there is going to be a mass rewrite to prevent other  
rules from restating statute, that it would be better for this rule to do more than  
reference an MCL section. Also, this is particularly problematic re: subrule 2 where both  
taxable and exempt items are listed and the message to the reader is essentially “here is  
a list of things someone might buy in connection with operating aircraft, now go to MCL  
205.54x to figure out whether these things are exempt or not.”  
o
o
Subrule 6 could benefit from a non-exhaustive list of taxable uses and/or an example or  
two. For instance, defining what constitutes non-taxable demonstration (e.g. a potential  
buyer must be in the aircraft, but is there any criteria to determine who is a potential  
buyer and may any other people be in the aircraft at the same time?). Also, being clear  
that personal use is a taxable use resulting in tax due on the original purchase price,  
even if de minimis.  
Subrule 8 should reference that the retail value on which equalization tax is owed for a  
qualified aircraft is the retail value at the time the aircraft first enters Michigan. In all  
other instances of application of sales, use, and equalization tax, the value is determined  
at time of sale/purchase, so this special rule merits attention.  
•
R 205.68 – Regarding the example, I believe there are circumstances under which the larger box  
would also be exempt. If Treasury also has this view, an example of those circumstances would  
be appreciated. For instance, if the golf ball manufacturer does not put golf balls into finished  
goods inventory and then pick and pack out of inventory upon receiving an order from a retailer,  
but instead the manufacturer’s industrial process packages the balls into dozen-size boxes and  
the dozen-size boxes into larger boxes (say a dozen dozen per larger box as a standard size to  
sell to retailers) before those larger boxes become the finished goods inventory, then even the  
larger boxes are exempt because the industrial process has not ended until the larger boxes are  
packed.  
o
Also, I think another example (or two) in which there is no subsequent sale by a  
separate retailer would be helpful. For instance, does it make a difference for container  
taxability if a manufacturer makes parts that it will sell to another company to repair  
their own equipment? In this case, manufacturer makes 20 widgets and packages them  
into a box for sale to a customer who will use the widgets in its business. Does Treasury  
view the box as taxable or exempt simply based on there not being another sale of the  
widgets by the manufacturer’s customer? Does it matter whether the manufacturer put  
the widgets straight into the box at the end of the processing line before the widgets  
went into finished goods inventory? And what about the taxable vs. exempt status of  
any bubble wrap, etc. that goes in the box to protect the widgets but which is not the  
box itself to fall within the definition of “container” nor is it “dunnage” as that term is  
commonly used?  
•
R 205.71 –  
o
What about writing something into the rules to address affixation to real estate so that  
there is something more definitive and binding than the combination of a 1936 non-tax  
case in Sequist v. Fabiano and RAB 2016-4? I realize the 2017 Court of Appeals ruling in  
Brunt Associates provides recent, binding, tax-specific guidance on this issue, but I’m  
wondering if the rules could provide something along the lines of Pennsylvania Code 61  
§31.11 with a list of things that are presumed to be real property.  
o
Could we get one more example under subrule 5 regarding where a manufacturer  
purchases materials and provides those to the contractor? Some people may think a  
manufacturer is not exempt as an entity from sales/use tax (just that certain of their  
activities are exempt) and therefore the contractor is not liable for use tax even if the  
manufacturer incorrectly claimed an exemption on those materials, while others may  
think a manufacturer is exempt from sales/use tax and therefore the contractor is liable  
for use tax regardless of whether the manufacturer already paid sales/use tax.  
For subrule 11, maybe the example could be expanded or modified to include discussion  
of the tax ramifications of ABC providing the materials for the job and just hiring XYZ as  
a sub to provide labor to install the materials provided by ABC.  
o
•
•
R 205.76 – For the rewards program described in subrule 4, while the payment from the  
employer to the company for the points redeemed is not a taxable transaction, can the  
company and employer agree that the company will charge the employer the sales tax for the  
value of the taxable TPP received by the employees by redeeming points? This way when  
redeeming points, the employees are not unexpectedly hit with sales tax they have to pay on an  
incentive they thought they were getting from their employer.  
R 205.88 –  
o
Subrule 2(a) regarding one month defined as 30 days seems reasonable, and I would  
even suggest removing the language about a month meaning “the calendar month of  
the rental period, whichever is shorter.” While this obviously is intended to encompass  
February, I would imagine the circumstances under which someone rents lodging for  
literally just February 1 – 28 (or 29) are very limited. On the flip side, by defining to  
include February, do you open Pandora’s box for people saying their four-week rental  
should be non-taxable if the 28 day period of February is non-taxable? People renting  
for four weeks must happen much more often than people renting for February.  
Consider including in the rule a definition of “rooms or lodging.” On audit, Treasury is  
assessing use tax on rentals of banquet and conference rooms at hotels, and I think the  
only support for that currently is the SSUTA taxability matrix. The statute certainly can  
be interpreted that a conference room is a room and when a hotel rents it, it is taxable,  
but that does not seem to be the intent of the statute, as it seems to create a disparity  
between an identical room rental by a hotel vs. one rented by a conference center that  
does not provide overnight lodging like a hotelkeeper or motel operator. Not that  
Treasury has to write a rule that takes into account the apparent intent of the  
legislature, but without a rule clearly stating otherwise, it is much more likely that hotels  
o
will unknowingly not charge tax on room rentals that Treasury deems taxable, as those  
hotels will mentally make a distinction between overnight lodging vs. day use rooms.  
•
•
R 205.91 – Retaining and revising this rule specific to interstate commerce while rescinding the  
rule on foreign commerce seems inconsistent, as some, if not all, of the issues contemplated  
here apply just as much if the other jurisdiction is a foreign country. Maybe consolidate these  
rules under a broader “sourcing” rule?  
R 205.98 – Could this rule provide a safe harbor that can be used to determine taxable sales  
based on either transit distance or mileage for sales made while in interstate travel? For  
instance, a ferry crossing Lake Michigan to Wisconsin may sell taxable goods throughout the  
journey and not know exactly when they have crossed the border into Wisconsin mid-lake.  
Could a safe harbor be provided to say that a percentage of their sales are deemed taxable  
based on the scheduled route for that trip being a certain percentage in Michigan waters vs.  
Wisconsin waters?  
•
R 205.104 – Subrule 2 states that examination or other service charges to complete the sale of  
eyeglasses are taxable, but I’m wondering if this is supposed to be about contact lenses and/or  
specific to non-prescription eyeglasses. Since prescription eyeglasses are non-taxable as  
prosthetic devices, shouldn’t all charges associated with the sale of that non-taxable item also  
be non-taxable (e.g. not just exam/service charges, but also shipping)? I’m not aware of  
anything special about prescription eyeglasses or even the broader category of prosthetic  
devices dispensed pursuant to a prescription which would make the exam/service charges  
taxable even when the underlying product is exempt. If the rule for eyeglasses is written as  
proposed, then arguably wouldn’t virtually any “charges by the seller for any services necessary  
to complete the sale” – MCL 205.51(1)(d)(iii) – for any type of tangible personal property  
become taxable even though the underlying TPP is not taxable by virtue of its nature or exempt  
by virtue of the nature of the purchaser?  
•
R 205.108 – I think this rule should still contain some discussion regarding coins. MCL  
205.54s(2)(b) defines investment coins as being certain coins “with a fair market value greater  
than the face value of the coins.” But does this mean that to be an exempt investment coin, the  
coin’s FMV must be greater than face value when issued by the government? Or is the sale of a  
coin by anyone at any amount greater than face value considered to be exempt as an  
investment coin? By changing from a clear statement in the rule that coins sold for collectible  
purposes are taxable to not saying anything at all, some may interpret this to mean all  
collectible coins sold for greater than face value are now exempt from tax, which may not be  
Treasury’s interpretation of the issue.  
•
R 205.132 – Subrule 4 maybe should include the March 29, 2019, effective date re: school buses,  
considering that subrule 2 contains the September 1, 2004, effective date (rule as proposed says  
2014, but statute says 2004) re: the definition of leases. I realize the 2004 date is right in the  
statute, while the 2019 date for school buses is not, but a rewrite of the rules at this time is  
more likely to have a bearing on school bus issues pre-3/29/19 than it is to have a bearing on  
leases of TPP that began before 9/1/04.  
o
P.S. Thank you for the change to an item-by-item lessor election in subrule 5.  
•
Rule 205.XX1 – I agree with the position that a transaction between a supplier and a medical  
provider is not exempt under the prescription statutes, but possibly this rule could more fully  
incorporate the language of Letter Ruling 2019-2 that this transaction may be exempt for resale.  
The rule could clearly state that the purchase by the provider is exempt for resale if the provider  
subsequently sells the TPP to the patient by invoicing the patient for that TPP as a separate  
invoice or line item and dispenses the TPP to the patient by either administering the TPP to the  
patient or delivering the TPP to the patient.  
;