Revenue Administrative Bulletin 1988-37

Sales and Use Taxes – Taxability of Energy Supplied to Public Assistance Recipients

Approved: June 10, 1988

(Replaces Position Paper SUW 84-004)

Note: This RAB was replaced by RAB 1992-1 on January 9, 1992.

RAB-88-37. The Michigan Department of Treasury has established the following guidelines for the taxability of Energy as defined in the General Sales and Use Tax Acts and the General and Specific Sales and Use Tax Rules. These guidelines are effective June 1, 1985.

All energy transactions after June 1, 1985, will be subject to these guidelines without regard to previous positions taken by the Department of Treasury.

Guidelines

Taxable Sales

A supplier of energy must remit sales tax on all energy sales made to the recipient. Energy sales are taxable when a recipient orders, is billed for, or pays for the energy. Energy transactions are also taxable if a recipient authorizes a reduction in his or her basic grant to pay for energy consumed.

A supplier of energy must remit tax on all sales of electricity, natural or artificial gas, or steam when the Final Consumer is the Recipient, even if paid for by the Department of Social Services (DSS) or other nonprofit organization.

Examples:

1. The supplier bills directly to the recipient.
2. The supplier bills in the recipient's name but mails the bill to the agency or organization.
3. The agency or organization pays past due billings to prevent service shut-off.
4. The supplier bills the agency, but the recipient had previously ordered the energy.
5. The supplier bills the agency, but the recipient is the final customer of the electricity, natural or artificial gas or steam.

Nontaxable Sales

A supplier of energy to an assistance recipient will not be liable for sales tax when all the following conditions are met:

1. The sale is for wood, home heating fuel (oil), propone, or kerosene (sales of electricity, natural or artificial gas, or steam are all taxable when the recipient is the final customer.); and
2. A purchase order or request for service or product delivery is made by the governmental agency or qualified nonprofit organization to the energy supplier; and
3. The billing for the product or service is prepared in the name of the governmental agency or qualified nonprofit organization by the energy supplier (an information billing may be sent to the recipient); and
4. Payment is made by the governmental agency directly to the supplier by warrant on government funds, or by the qualified nonprofit organization directly to the supplier by organization check.

See the Michigan Sales Tax Act, MLC 205.54(5).

Public Assistance Programs and Billing Methods

General Information

The following energy assistance programs are administered by the Michigan Department of Social Services (DSS):

• Home Heating Credit
• Special Heating Allowance – ADC
• Special Heating Allowance – GA
• Emergency Needs Program
• Heating Assistance Plan and Electric Assistance Plan
• Voluntary Payment Plan

The Michigan Department of Labor administers the Targeted Fuel Assistance program which makes a lump sum payment to the nonprofit agencies for fuel assistance. The nonprofit agency in turn distributes the money to low income households.

Energy Drafts. Effective January 1, 1985, DSS issues a draft to the recipient to pay his/her fuel bills. The draft can be used to pay only enrolled energy providers. (The recipient can, however, turn the draft in to the Michigan Department of Treasury for a negotiable warrant.) The individual is billed directly for the duel; DSS does not pay the bill. Any time an energy draft is presented of fuel, the transaction is taxable.

Specific Information – Assistance Programs and Billing Methods

Home Heating Credit

Special Heating Allowance – ADC:

Special Heating Allowance GA (recipient receives additional payment separate from grant (January, February, March):

Emergency Needs Program:

Heating Assistance Plan and Electric Assistance Plan:

Voluntary Payment Plan ADC/GA (a portion of the recipient’s grant goes directly to a fuel provider; their grant is decreased by the amount of this allowance:

Department of Labor (DOL)

Targeted Fuel Assistance (DOL makes lump sum payment to the nonprofit agencies for fuel assistances; the nonprofit agency then distributes the money to low income households):

These guidelines, although addressing the specific topic of energy assistance, also apply to the purchase of all tangible personal property (clothes, shoes, furniture, food, etc.) under the same circumstances.

Address specific questions about these guidelines to:

Sales, Use and Withholding Tax Division

Michigan Department of Treasury

Treasury Building

Lansing, MI 48922

Phone: 517-373-3190