Michigan Sales And Use Tax Certificate Of Exemption (Page 2 of 4) in pdf

Sales and Use Tax Exemptions and Requirements

Page 2 of 5

Reasonable care would include such activities as consulting the Michigan Sales and Use Tax Acts and Administrative Rules or

submitting facts to the Department for an opinion. In conjunction with consulting Michigan's sales and use tax laws and specific

rules, reasonable care could also be demonstrated by the seller's consideration of the buyer's business activity, the nature of the

item, its intended use, and the specific quantity being purchased.

BLANKET EXEMPTION CLAIMS

Blanket exemption certificates are accepted by the State of Michigan. The statutory language of Section 17 of the General Sales

Tax Act [MCL 205.67; MSA 7.538] requires that the blanket exemption certificate cover a three year period, unless the buyer and

the seller mutually agree upon a shorter period.

A blanket exemption claim is limited to a completed Certificate of Exemption, any exemption certificate contained in a Sales and

Use Tax Administrative Rule, or the Uniform Sales and Use Tax Certificate approved by the Multistate Tax Commission, filed

once and maintained in the seller's records, which states that all of the defined purchases made by the presenter of the certificate

are exempt from tax. This claim is subject to the good faith provisions as described previously. Therefore, the seller must exercise

reasonable care and effort to determine that the purchaser is entitled to the exemption. If the seller becomes aware that an item

will be used in a taxable manner rather than the exempt use stated on the certificate, the items purchased must be taxed.

For example, a purchaser, who usually buys widgets, submits a blanket exemption certificate to the seller for industrial

processing and subsequently purchases a coffee pot from the same seller. It is reasonable for the seller to determine that the

coffee pot will not be used in industrial processing. Tax must be charged on the sale of the coffee pot. However, if the purchaser

uses some of the widgets, covered by the blanket certificate, to repair a delivery truck, the purchaser incurs the incidence of the

tax and must compute its use tax liability and pay the tax due directly to the State of Michigan.

PURCHASE ORDERS

Statements of taxability or exemption contained on purchase orders that are given to a seller after a Certificate of Exemption or

any exemption certificate contained in a Sales and Use Tax Administrative Rule, but before consummation of the sale

transaction, will take precedence and be controlling for tax purposes. If such a purchase order states that the purchase is subject

to tax and the purchaser has also previously issued a blanket exemption claim, the seller is liable for sales tax on the purchase.

The seller cannot rely on the blanket claim of exemption for the taxable sale, because he had knowledge of the taxability of the

sale and the statute imposes a good faith responsibility on the seller. It should be noted that purchasers should carefully review

their use of blanket exemption claims, and limit situations where conflicting purchase orders are not anticipated or expected.

Single Purchases

For a single purchase from a seller, a purchase order may support a tax exemption claim by making a clear statement of exemption

that includes all the information required by Section 17.

Multiple Purchases

Blanket exemption certificates may be used when the purchaser makes multiple purchases of exempt items from a seller.

When a purchaser buys both exempt and taxable items from the same seller, the certificate must identify the exempt items

covered. The seller remains liable for tax on items not specifically listed on the exemption certificate.

If a purchaser submits a blanket exemption claim for all items being acquired, but purchases both exempt and taxable items from

the same seller and the seller accepts the claim in good faith, the purchaser is liable for the use tax on the items subject to tax.

EXAMPLES OF BLANKET EXEMPTION CLAIMS

1. The sale of electricity on a monthly basis to a customer is not considered to be a continuous sale but rather numerous

individual retail sales. The sale each month of a specific amount of electricity is a retail sale subject to tax. A seller of electricity

may accept blanket exemption certificates if the use of the electricity is exempt.

2. An exempt nonprofit hospital continually purchases supplies and equipment for its own use from a specific seller. The seller

may accept a blanket exemption claim from the hospital.

3. A seller accepts a blanket exemption claim provided by a school. However, school employees are making personal purchases

for cash under the school name. These personal purchases are not covered by the blanket exemption claim and will not be

exempt. In this instance, the seller must use reasonable care in making this determination.

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Michigan Sales And Use Tax Certificate Of Exemption Page 2

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