Revenue Administrative Bulletin 1987-8

Approved: August 31, 1987

 

SALES AND USE TAX PURCHASES MADE WITH FEDERAL FOOD STAMPS

RAB-87-8. The majority of items eligible to be purchased with food stamps have long been exempt from Sales and Use Tax. In June 1987, the State of Michigan enacted P.A. 121 and P.A. 120, amending the Sales Tax Act and the Use Tax Act, respectively. These amendments exempt those few items which were previously taxable when purchased with food stamps. These amendments to the Sales and Use Tax Acts place Michigan in compliance with the Federal Food Security Act of 1985. The amendments take effect October 1, 1987.

Edible Fruit and/or Vegetable Seed and/or Plants

Under these amendments, purchases of fruit or vegetable seeds and fruit or vegetable plants shall be exempt from Sales and Use Tax whether purchased with food stamps or other consideration, if they are purchased at a business:

  1. Authorized to accept food stamps by the federal government, or
     
  2. Which has made a complete and proper application for authorization to accept food stamps but has been denied authorization and which provides proof of denial to the Department of Treasury.

For example, a purchase of a raspberry plant at a business as defined above would be exempt from Sales or Use Tax, while a purchase of an ornamental flowering plum tree would be taxable. A purchase of carrot seeds at a business as defined would be exempt from Sales or Use Tax, while a purchase of zinnia seeds would be taxable.

Bottled Water

The amendments add bottled water as an item contained within the definition of "food for human consumption," exempting it from Sales and Use Tax for all purchasers when primarily intended for human consumption and when not sold or served for immediate consumption.

"Meals-on-Wheels"

The amendments provide that purchases of "meals-on-wheels" and other meals eligible for purchase with food stamps shall be exempt from Sales and Use Tax whether purchased with food stamps or other means.

Ice

Under P.A. 121 and P.A. 120, purchases of ice shall be exempt from Sales and Use Tax only when purchased with food stamps. Because ice remains taxable if purchased with cash, the following rule must be followed if ice is part of a groceries purchase paid for with a combination of cash and food stamps. The food stamps shall be applied to the purchase of ice first, and next to the other grocery items which are eligible to be purchased with food stamps.

 

Example A:

$49.00   Food items (exempt from sales tax)
$1.00   Bag of ice
$50.00   Total purchase cost (before tax)

The purchaser presents food stamps with total value of $48 and $2 cash. The cashier charges no tax on the ice, considering it was paid for with part of the food stamps.

Example B:

$39.00   Food items (exempt from sales tax)
$10.00   Cleaning supplies and toiletries (taxable)
$1.00   Bag of ice
$50.00   Total purchase cost (before tax)