Revenue Administrative Bulletin 1989-7

Approved: March 31, 1989

SALES TAX - FEDERAL CREDIT UNIONS

RAB-89-7. The purpose of this Bulletin is to clarify the sales tax exemption granted to federal credit unions in the decision of U.S. v State of Michigan, 851 F 2d 803 (6th Cir. 1988).

In this decision, the Sixth Circuit United States Court of Appeals held that the incidence of Michigan sales tax falls upon federal credit unions as purchasers rather than upon retailers selling tangible personal property to them. Therefore, the federal credit unions, as instrumentalities of the federal government, are not subject to sales tax on their purchases of tangible personal property for their own use.

Note: This exemption does not extend to state chartered credit unions.

Sales Made by Federal Credit Unions

Sales made by federal credit unions are subject to tax. This includes sales of checks or drafts by the credit unions to their customers. When a credit union provides checks to customers and assesses a "service charge," it is making a sale. A credit union purchasing checks for resale to customers may claim exemption by providing the statement "for resale at retail" to the seller, along with the credit union's sales tax license number. If the credit union does not make a valid exemption claim "for resale," the purchase of checks is taxable.

Exempt Sales Made to Federal Credit Unions

A federal credit union is easily recognized, as its name must end with the three words "Federal Credit Union," in that order. For example, a credit union with the name “_____ County Employees Federal Credit Union” is a federal credit union. Purchases of tangible personal property by the credit union for its use are exempt from tax. However, a credit union with the name “_____ County Federal Employees Credit Union” is not a federal credit union. Purchases of tangible personal property by the latter credit union for its own use are subject to tax.

Michigan Sales and Use Tax Rules 1979 AC, R 205.79 provide that sales to the federal government are not taxable when ordered on a purchase order and paid for by warrant on government funds. A federal credit union may also claim exemption by providing the seller, at the time of purchase, with a signed statement to the effect that the purchaser is a federal credit union. A sample of such a statement that is acceptable for claiming exemption is printed below.

CERTIFICATE TO BE EXECUTED WHEN TAX EXEMPT SALE

IS MADE TO EXEMPT FEDERAL CREDIT UNION

The undersigned hereby certifies that the tangible personal property being purchased is not for resale and is to be used in connection with the operation of the federal credit union named in the space below. The consideration for this purchase moves from the funds of the federal credit union. Purchases by federal credit unions are exempt from tax in accordance with the decision in U.S. v State of Michigan, 851 F 2d 803 (6th Cir. 1988). In the event this claim is disallowed, the purchaser promises to reimburse the seller for the amount of tax involved.

Name of Federal Credit Union

Signature and Title of Claimant                                                Date

Refund Procedure for Taxes Paid

The tax paid by credit unions for the periods June 1, 1976 through December 31, 1988 is being refunded directly to the federal credit unions by the Department of Treasury. Refunds of tax paid by federal credit unions after this period should be requested from the vendor. The vendor may then apply to the Department for a refund or credit.

A credit union may request a refund or credit of use tax paid by the credit union directly to the Department of Treasury after January 1, 1989.