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Exemptions FAQ

Can a customer instruct a seller not to charge sales or use tax because they will pay it directly to Michigan?

Yes, if the customer is authorized by Treasury and has a "direct pay permit" that covers the property purchased or leased.  The customer must provide to the seller a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption, or the required information in another acceptable format.  See Revenue Administrative Bulletin (RAB) 2016-14.  When stating its basis for claiming an exemption, the customer should state, "Authorized to pay sales or use taxes on purchases of tangible personal property directly to the State of Michigan" and must include its account number.

Does Michigan issue tax exempt numbers? If not, how do I claim an exemption from sales or use tax?

The Michigan Department of Treasury does not issue tax exempt numbers. In order to claim an exemption from sales or use tax, a purchaser must provide a valid claim of exemption to the vendor by completing one of the following:

  • Michigan Sales and Use Tax Certificate of Exemption (Form 3372)
  • Multistate Tax Commission's Uniform Sales and Use Tax Certificate
  • Streamlined Sales and Use Tax Agreement Certificate or the same information in another format.

Note: A seller should not solely accept an FEIN as evidence of exemption from sales and use taxes.

How do I claim a valid exemption with my supplier?

To claim exemption, a purchaser must provide the supplier with one of the following:

  • Michigan Sales and Use Tax Certificate of Exemption (Form 3372)
  • Multistate Tax Commission's Uniform Sales and Use Tax Certificate
  • Streamlined Sales and Use Tax Agreement Certificate or the same information in another format

Is manufacturing equipment tax exempt?

Michigan provides an exemption from sales or use tax on machinery or equipment used in industrial processing and in their repair and maintenance. The exemption does not include tangible personal property affixed to and becoming a structural part of real estate.

For further information on exemptions refer to Revenue Administrative Bulletin 2000-4.

Are purchases made for agricultural production tax exempt?

Michigan provides an exemption from sales or use tax on tangible personal property used in tilling, planting, caring for or harvesting things of the soil, in the breeding, raising or caring of livestock poultry or horticultural products for further growth. The exemption does not include tangible personal property affixed to and becoming a structural part of real estate.

For further information on exemptions refer to Qualified Agricultural Property Exemption Guidelines.

Is my purchase of a truck or trailer considered "rolling stock" and exempt from tax?

NOTE: Your first tractor/trailer lease/purchase IS NOT EXEMPT from Michigan sales or use tax.

In order to be exempt from Michigan sales or use tax certain criteria must be met. Exemption is allowed in Michigan on the sale of rolling stock purchased by an interstate motor carrier or for the rental or lease of rolling stock to an interstate motor carrier and used in interstate commerce.

According to MCL 205.54r,

  • Rolling stock means a qualified truck, a trailer designed to be drawn behind a qualified truck, and parts affixed to either a qualified truck or a trailer designed to be drawn behind a qualified truck. 
  • Interstate motor carrier means a person engaged in the business of carrying persons or property, other than themselves, their employees, or their own property, for hire across state lines, whose fleet mileage was driven at least 10% outside of this state in the immediately preceding tax year. 
  • Qualified truck means a commercial motor vehicle power unit that has 2 axles and a gross vehicle weight rating in excess of 10,000 pounds or a commercial motor vehicle power unit that has 3 or more axles.

Motor carriers who qualify may claim exemption from sales or use tax by providing the seller or lessor with the prescribed Form 3372, Michigan Sales and Use Tax Certificate of Exemption. The buyer or lessee would check the box "Rolling Stock purchased by an Interstate Motor Carrier".

Is a vehicle purchased by a church tax exempt?

ONLY vans or buses may be purchased exempt if the manufacturer's rated seating capacity is 10 or more and it is used primarily for transportation of persons for religious purposes.

I am a 501(c)(3)/501(c)(4) Organization, how do I claim exemption from Michigan Sales and Use Tax?

Organizations exempted by statute, organizations granted exemption from federal income tax under Internal Revenue Code Section 501(c)(3) or 501(c)(4), or organizations that had received an exemption letter from the Michigan Department of Treasury prior to June 1994 are entitled to sales and use tax exemption in the State of Michigan.

Please refer to Revenue Administrative Bulletin (RAB) 1995-3 for more information on the exemption from Michigan sales and use tax as it relates to nonprofit entities. 

In order to claim exemption, the nonprofit organization must provide the seller with both:

  • A completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption
  • Evidence of nonprofit eligibility:
    • Either the letter issued by the Department of Treasury (prior to June 1994),or
    • Your federal determination as a 501(c)(3) or 501(c)(4) organization.

How do I obtain a tax exempt number to claim an exemption from Sales or Use Tax?

The Michigan Department of Treasury does not issue "tax exempt numbers". 

Form 3372, Michigan Sales and Use Tax Certificate of Exemption, is used to claim exemption from Michigan Sales and Use Tax.  The buyer must present the seller with a completed form at the time of purchase.  For more information on exemption requirements and the procedures to claim an exemption see Revenue Administrative Bulletin 2002-15.

A customer is providing me with their tax exempt number as proof that they do not have to pay sales tax on their purchase; is this correct/valid?

The Department of Treasury does not issue or accept tax exempt numbers. Sellers should not accept a tax exempt number as evidence of exemption from sales and use tax.

To claim exemption for purchases, the buyer must present the seller with a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption. The seller will retain the certificate in their records.

I am a retailer, how do I claim a resale exemption with my supplier?

To claim exemption, a retailer must provide the supplier with a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption, indicating that the purchase is for "Resale at Retail". Their sales tax license number must be included in the space provided.

NOTE:  A seller should not accept a FEIN as evidence of exemption from sales and use taxes without Form 3372.

Common Exemptions

501(c)(3) and 501(c)(4) Organizations

501(c)(3) and 501(c)(4) organizations must provide proof that they are exempt under these codes by the Internal Revenue Service. In addition to this they must provide a certificate of exemption stating that the property will be used or consumed in carrying out the operations of the organization. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Churches

Sales to organized churches or houses of religious worship are exempt from sales tax. These exempt sales must not involve property used in commercial enterprises. Vans or buses may be purchased exempt if the manufacturer's rated seating capacity is 10 or more and it is used primarily for transportation of persons for religious purposes. Churches may not purchase any other type of vehicle exempt. Anyone who is directly engaged in the business of constructing, altering, repairing, or improving real estate for a church or a house of religious worship is liable for the sales tax on the inventory value of the materials affixed to the property, even if the church purchases the materials. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Government

Sales to the United States government, the State of Michigan and its political subdivisions, departments and institutions are not subject to tax, if the sales are ordered on the government form or purchase order and are paid for directly to the seller by warrant on government funds. Sales to the American Red Cross, and its chapters and branches are exempt. All sales to other states or countries are subject to Michigan sales tax. Sales to employees of the government for their own use are subject to tax. The exemption certificate is 3372 Michigan Sales and Use Tax Certificate of Exemption.

Hospitals

Sales to hospitals are exempt from sales tax when the organization is not operated for profit. The income or benefit from the operation must not inure to any individual or private shareholder, directly or indirectly. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Industrial Processors

An industrial processing exemption is allowed for property which is used or consumed in transforming, altering, or modifying tangible personal property by changing the form, composition, or character of the property for ultimate sale at retail or for sale to another processor for further processing and ultimate sale at retail. The industrial processing exemption does not include property which is or becomes affixed to real estate, office supplies, administrative office equipment, or vehicles licensed for public highway use, except when the vehicle is used to mix and agitate materials added at the plant or job site in the concrete manufacturing process. Industrial processing also does not include the receipt or storage of raw materials extracted by the user or consumer or the preparation of food or beverages by a retailer for retail sale. The exemption certificate is 3372 Michigan Sales and Use Tax Certificate of Exemption .

Retailers

Retailers purchasing for resale should provide a signed exemption certificate by completing form 3372 Michigan Sales and Use Tax Certificate of Exemption and check box 1. For Resale at Retail in Section 3, Basis for Exemption Claim. Their sales tax license number must be included in the blank provided on the exemption claim. However, a seller should not accept the sales tax license number alone as a claim of exemption. The department does not issue tax-exempt numbers.

Schools

Sales to schools and parent cooperative preschools are exempt from sales tax when the organization is not operated for profit. The income or benefit from the operation must not inure to any individual or private shareholder, directly or indirectly. PTA, PTO, and all other groups and organizations must qualify separately for exemption when making purchases for their organizations. Sales to teachers are subject to tax. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Wholesalers

Wholesalers purchasing for resale should provide the seller with a completed form 3372 Michigan Sales and Use Tax Certificate of Exemption and check the box for Resale at Wholesale. Sales tax licenses are not issued to wholesalers.

Additional Exemptions and Deductions

Third-Party Lenders - Bad Debt Deductions

Effective October 1, 2009, a bad debt deduction may be claimed by a third-party lender or a retailer, provided that the retailer who reported the tax and the third-party lender financing the sale execute and maintain a written election designating which party is entitled to claim the deduction. There is no Treasury form to make this election.  However, the election must be written, must be signed by both parties, and must clearly and unequivocally state which party is entitled to the deduction; the mere assignment of the right to the debt alone does not satisfy the written election requirement.  The election must be executed before the bad debt is incurred.  

The written election must be retained by the parties and made available to the Department upon request or audit.  In addition to the written election, the following conditions must also be met:

  • No deduction or refund was previously claimed or allowed on any portion of the account receivable.
  • The account receivable has been found worthless and written off by the seller that made the sale or by the lender on or after September 30, 2009.
  • The bad debt is eligible to be claimed, in accordance with the taxpayer’s accounting method, as a deduction under Section 166 of the Internal Revenue Code, 26 USC 166, or would be recognized as a bad debt if the claimant were a corporation.

A party making a refund claim must provide the written election to the Department with its refund request. A request for a refund based on bad debt incurred from the sale of motor vehicle must include a copy of the RD-108 for that vehicle.

For purposes of this deduction, “lender” includes any of the following:

  • A person that holds or held an account receivable that was purchased directly from the taxpayer that reported the tax.
  • Any person that holds or held an account receivable pursuant to that person's contract directly with the taxpayer that reported the tax.
  • The issuer of a private label credit card that may only be used to make purchases from the vendor whose name or logo appears on the card or instrument.

The following amounts shall not be included as bad debt:

  • Interest or finance charges.
  • Sales or use tax charged or collected on the original sale.
  • Uncollectible amounts on property that remains in possession of the seller until the full purchase price is paid, e.g., property placed on layaway.
  • Expenses incurred in attempting to collect any account receivable or any portion of an account that is subsequently recovered.
  • Sales tax charged on property that is subsequently repossessed.
  • Any debt or account receivable that was sold, assigned, or transferred to, and remains in the possession of, a third party for collection.
  • A sale where the tax was remitted to the Department after the expiration of the applicable statute of limitations.

Source MCL 205.54iMCL 205.99.

Interstate (Fleet) Motor Carriers Exemption

Michigan provides a sales and use tax exemption to interstate (fleet) motor carriers for rolling stock and parts affixed to rolling stock that are purchased, rented or leased by an interstate (fleet) motor carrier and used in interstate commerce. The exemption is for the purchase or use of qualified trucks and trailers (and parts affixed to them) that are purchased, leased, or rented after April 30, 1999. For additional information please refer to Internal Policy Directive 2003-1 and Internal Policy Directive 2010-1.

Interstate (fleet) motor carriers who qualify for exemption may claim exemption from sales or use tax by providing the seller or lessor with the prescribed Michigan Sales and Use Tax Certificate of Exemption, form 3372. The buyer or lessee would check the box "Rolling Stock purchased by an Interstate Motor Carrier".

Use Tax Exemption on Vehicle Title Transfers

Michigan grants an exemption from use tax when the buyer and seller have a qualifying family relationship.

Read the brochure for details