Michigan Sales And Use Tax Certificate Of Exemption (Page 3 of 4) in pdf

Sales and Use Tax Exemptions and Requirements

Page 3 of 5

4. A seller accepts a blanket exemption claim from a particular customer. On a subsequent sale, a purchase order is issued in

which the customer states that the purchase is taxable. The customer's purchase order will overrule the blanket exemption for

that specific purchase, and the sale does subject the seller to tax.

5. A seller of bolts accepts a blanket exemption claim from a manufacturer who purchases a large quantity of bolts on a weekly

basis. The seller makes this decision based on his knowledge of the purchaser's business activity, the nature of the item and the

specific quantity being purchased.

NOTE: These examples illustrate situations in which blanket exemption claims may be used and the tax effect. The examples are

not intended to be all-inclusive or restrictive.

VARIOUS STATUTORY EXEMPTIONS

An exemption claim must be presented to the seller prior to or when tangible personal property is sold. The buyer must state a

valid reason for claiming exemption. The more common exemptions allowed by the General Sales Tax Act and the Use Tax Act

are listed below.

Sales for Resale

Section 2 of the General Sales Tax Act [MCL 205.52; MSA 7.522] imposes the sales tax only upon sales at retail. Thus, sales of

property intended for resale are exempt. A Certificate of Exemption, any exemption certificate contained in a Sales and Use Tax

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

(where applicable) should indicate the reason for claiming exemption as "For resale at retail." Retailers in Michigan are issued

sales tax license numbers. The purchaser's sales tax license number must also be included on the exemption form.

Wholesalers, that make no retail sales, are not licensed with the Department and are not issued numbers. Wholesalers buying

for resale should indicate on the Certificate of Exemption, any exemption certificate contained in an Administrative Rule, the

Uniform Sales and Use Tax Certificate approved by the Multistate Tax Commission, or purchase order (where applicable) "For

resale at wholesale."

Sales to Agricultural Producers

A sale to a person for use or consumption in agricultural production is exempt from tax, provided the items are used or consumed

in connection with the production of horticultural or agricultural products as a business enterprise. [MCL 205.54a(f); MSA 7.525

(f) and MCL 205.94(f); MSA 7.555(4)(f), and Department of Treasury Sales and Use Tax Rule, 1979 AC, R 205.51]

Sales to Industrial Processors (Manufacturers)

Industrial processing is the act of transforming, altering, or modifying tangible personal property by changing the form,

composition, or character of the property for ultimate sale at retail, or sale to another industrial processor for further processing

and ultimate sale at retail. The sale of property to a manufacturer or industrial processor for use or consumption in industrial

processing is exempt from sales tax. [MCL 205.54a(g); MSA 7.525(g)] and [MCL 205.94(g); MSA 7.555(4)(g)]

Sales to Governmental Entities

Section 4 of the General Sales Tax Act [MCL 205.54(6); MSA 7.524(5)] and Michigan Sales and Use Tax Administrative Rule,

1979 AC, R 205.79, provide that sales to the United States government, the State of Michigan, and their political subdivisions,

departments and institutions, and the American Red Cross and its chapters and branches are not taxable when ordered on a

governmental purchase order and paid for by warrant on government funds. At the time of purchase the governmental entity

should indicate on the Certificate of Exemption, any exemption certificate contained in an Sales and Use Tax Administrative Rule,

or Uniform Sales and Use Tax Certificate approved by the Multistate Tax Commission that payment is from funds of the

governmental entity. Sales to other States or their departments are subject to tax.

Sales Not for Resale to Nonprofit Schools, Nonprofit Hospitals, and Churches

The sale of tangible personal property to a nonprofit school, parent cooperative preschool, nonprofit hospital, or regularly

organized church or house of religious worship is exempt, provided the property will be used or consumed in connection with

the operation of the institution or agency, and that the institution or agency qualifies as an exempt entity under the law. [MCL

205.54a(a),(b); MSA 7.525(a),(b); Department of Treasury Sales and Use Tax Rules, 1979 AC, R 205.74, R 205.87, and R 205.65]

Sales Not for Resale to Other Nonprofit Organizations

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Michigan Sales And Use Tax Certificate Of Exemption Page 3

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