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Revenue Administrative Bulletin 1994-8

Approved: April 29, 1994


RAB-94-8. This bulletin explains the application of sales and use taxes to electricity, natural or artificial gas, and home heating fuels. The treatment described in this bulletin is for periods after April 30, 1994 when sales and use tax rates increase from 4% to 6%.


Public Acts 325 and 326 of 1993 simultaneously amended the General Sales Tax Act and the Use Tax Act by increasing the sales and use tax rates from 4% to 6% effective May 1, 1994. Public Act 326 of 1993 added the following section to the Use Tax Act:

"The consumption of electricity, natural or artificial gas, and home heating fuel for residential use is exempt from the use tax at the additional rate of 2% approved by the electors on March 15, 1994." [MCL 205.94(n); MSA 7.555(4n)]

The same language was added to the General Sales Tax Act by Public Act 111 of 1994, it states:

"The sale of electricity, natural or artificial gas, or home heating fuels for residential use is exempt from the sales tax at the additional rate of 2% if a sales tax increase of 2% is approved by the electors on March 15, 1994." [MCL 205.54(n); MSA 7.525(14)]


Neither the General Sales Tax Act nor the Use Tax Act provide a definition of "residential use" of utilities. For purposes of administration, the Department of Treasury will define residential use of the subject fuel sales with a two-prong approach: regulated fuel providers and unregulated fuel providers.

Regulated Fuel Providers

Regulated fuel providers include those providers subject to the procedures of the Michigan Public Service Commission (MSPC) or other regulatory body in setting rate schedules, tariffs, and rules. Generally, regulated fuel providers are limited to providers of electricity and natural or artificial gas.

Residential use for regulated fuel providers is defined as follows:

Electricity or natural or artificial gas provided by a utility shall be considered to be "for residential use" if it is furnished to a customer under a rate classification as "residential" under the rate schedules, tariffs and rules for the utility approved by the MPSC or other regulatory body.

Therefore, an account with a rate classification of residential will pay 4% sales/use tax, whereas an account with any other rate classification will pay 6% sales/use tax. (Other exemptions such as industrial processing or agricultural producing may apply.)

Unregulated Fuel Providers

Unregulated fuel providers include the providers of home heating fuel oil, propane gas, liquefied petroleum gas, and home heating fire wood. This type of fuel frequently is referred to as deliverable home heating fuel.

Residential use for unregulated fuel providers is defined as follows:

Residential use means use in houses, buildings, structures, shelters or mobile homes used as dwellings, homes, residences, or living places by one or more human beings and includes apartment units, condominiums, cooperatives, boarding houses, rooming houses, mobile homes, and single or multiple family dwellings. To qualify for residential usage the residence must have the normal residential facilities such as a bathroom, kitchen sink and individual cooking facilities. Residential does not include hotels, motels, nursing homes, penal institutions, corrective institutions, motor homes or other temporary accommodations for guests or tourists.

Unregulated fuel sales to residences as defined above qualify for the 4% sales/use tax rate, whereas sales for any other use qualify for the 6% sales/use tax rate. (Other exemptions such as industrial processing or agricultural producing may apply.)

Sellers of unregulated fuels from a retail location for residential use must obtain a written statement from the purchaser that the fuel qualifies for the 4% tax rate. The following is suggested language for the statement:


The undersigned hereby certifies that the fuel being purchased is to be used and consumed as a residential home heating fuel and, therefore, qualifies for the 4% tax rate. In the event that this certification is disallowed, the transferee promises to reimburse the seller for the amount of additional tax involved at the full 6% tax rate.

Date __________________________________________
Purchaser's: __________________________________________
Name __________________________________________
Street Address __________________________________________
City, State, ZIP Code __________________________________________
Telephone Number ( ) __________________________________________


Questions can be addressed by calling (517) 373-3190 or writing:

Sales, Use and Withholding Taxes Division
Michigan Department of Treasury
Treasury Building
Lansing, MI 48922

All pertinent facts must accompany any request for a ruling.

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