Whether fuel is a "purchase from other firm" under MCL 108.1113(6) depends upon whether the taxpayer's use of the fuel powers inventory or a depreciable asset acquired by the taxpayer during the tax year.

"Purchases from other firms" includes in pertinent part:

(a) inventory, as defined in MCL 208.1111(4), acquired during the tax year;

(b) assets acquired during the tax year of a type that are or will become eligible for depreciation, amortization, or accelerated capital cost recovery under the internal revenue code for federal income tax purposes; and

(c) to the extent not included in inventory (subparagraph (a)) or depreciable assets (subparagraph (b)), materials and supplies, including repair parts and fuel.

Materials and supplies in subparagraph (c) are those items taxpayer acquired during the tax year to be used or consumed in, and directly connected to, producing or managing inventory acquired (subparagraph (a)) or operating or maintaining depreciable assets acquired (subparagraph (b)) during the tax year. Therefore, fuel acquired in the tax year to be used in, and directly connected to, producing or managing inventory purchased in the tax year or operating and maintaining depreciable assets purchased in the tax year would be a "purchase from other firms" and deducted from gross receipts when determining the modified gross receipts tax base.

"Fuel" is not expressly defined in the MBT, but the term commonly refers to material used to produce heat or power by burning. In the example posed, gasoline purchased to power automobiles the taxpayer uses is not a "purchase from other firms" because automobiles used by taxpayer are not taxpayer's inventory. Gasoline purchased to power taxpayer's automobiles might be a "purchase from other firms" to the extent that such automobiles acquired during the tax year are depreciable assets for federal income tax purposes. Passenger automobiles, both owned and leased, are included as "listed property" under section 280F of the internal revenue code and may be eligible for depreciation deductions for federal income tax purposes, subject to specific rules and limitations. 26 USC § 280F; Treas. Reg § 1.280F-1T et seq.

Equipment and furnaces are generally depreciable assets for federal income tax purposes. Consequently, propane or natural gas purchased to run the equipment or furnace might be "purchases from other firms" if the equipment or furnace powered by the fuel was purchased during the tax year. Natural gas consumed for general space heating of a commercial office building would not be a "purchase from other firms;" however, natural gas purchased to run equipment or furnace designed to maintain temperature or dryness specifications necessary to preserve the quality and integrity of inventory purchased during the tax year might be a "purchase from other firm." Therefore, whether a certain fuel purchased constitutes a "purchase from other firms" will depend upon the facts and circumstances of its use.