Advocacy News – April 27, 2023
In Michigan, and across the nation, many states have exempted taxes on services, such as the delivery and installation of various products and goods. Sound, competitive tax policy typically operates under the notion that sales and use taxes should be paid on goods, not services in order to avoid double taxation on a product.
Michigan had long practiced this tax policy, but in recent years Michigan companies exempting sales and use tax on delivery and installation charges purchased at the time of sale have received audits from the Michigan Department of Treasury claiming these costs are owed to the state. Ironically though, if delivery and installation services are purchased for a product at a separate time, they would be exempt from sales and use tax. The confusion arose in 2017 from a Treasury-issued Revenue Administration Bulletin, or RAB, that are often used to help business owners navigate Michigan’s tax system.
The Michigan Chamber of Commerce, and our internal Tax Policy and Economic Competitiveness Committee, have worked on clarifying language for multiple legislative cycles – hoping to ensure that these services remain untaxed, which is why this year we were strong supporters of House Bill 4039 and 4253, now Public Acts 20 of 2023 and 21 of 23, sponsored by Representatives Pat Outman (R-Six Lakes) and Kevin Coleman (D-Westland).
These bills would ensure delivery and installation services are exempt from sales and use tax and would cancel all outstanding audits. Unfortunately, Treasury was unwilling to include language that would refund the businesses and Michigan taxpayers who paid their outstanding audits in an attempt to ensure they were following the law. Nonetheless, the Michigan Chamber is thankful for House and Senate Republicans for negotiating a deal to allow this clarifying legislation to move forward and the bipartisan group of lawmakers who voted in support.
To view Treasury’s notice on the new law, click here.
For questions, more information, or if you are a member of the Chamber and interested in joining the Tax Policy and Economic Competitiveness Committee, please contact Leah Robinson at lrobinson@michamber.com.