SALES AND USE TAX EXEMPTION CLAIM PROCEDURES AND FORMATS

(Replaces Revenue Administrative Bulletin 2022-19)

Approved: July 18, 2024

Note: A taxpayer may rely on this Revenue Administrative Bulletin (“RAB”) until it is revoked by Treasury or until a law on which this RAB is based is altered by legislation or by binding judicial precedent. See MCL 205.6a and RAB 2016-20.

RAB 2024-11. This RAB updates the general procedures sellers and purchasers should follow when claiming exemptions under Section 12 of the General Sales Tax Act (“GSTA”), MCL 205.62, and Section 14b of the Use Tax Act (“UTA”), MCL 205.104b, which were previously described in RAB 2022-19. This RAB also updates the general procedures sellers and purchasers should follow for keeping records related to those exemption claims under Section 18 of the GSTA, MCL 205.68, and Section 14a of the UTA, MCL 205.104a, which were previously described in RAB 2022-19. RAB 2022-19 had updated prior guidance to address the enactment of Public Acts 3 and 4 of 2022. The update in this RAB is limited to addressing the enactment of Public Acts 61 and 63 of 2024, which will become effective on the 91st day after final adjournment of the 2024 Regular Session. Public Acts 61 and 63 add “micro brewers” to the list of persons for which sellers are only required to obtain (and maintain) a record of the purchaser’s liquor license number issued by the Michigan Liquor Control Commission (“MLCC”) to properly document an exempt sale.

This RAB is not intended to address specific exemptions or the additional requirements that may be applicable under those specific exemptions. Information relating to common sales and use tax exemptions and requirements may be found on Treasury’s website at www.michigan.gov/taxes.

ISSUES

1. How do purchasers claim an exemption?
2. What formats can a purchaser use to make an exemption claim?
3. Can a purchaser provide a blanket exemption form?
4. Is a seller required to obtain a state-issued tax exemption number from a purchaser?
5. Under what conditions may a purchase order be used to document an exemption?
6. When can a seller be liable for the sales or use tax on a transaction on which an exemption was claimed?
7. How long must a seller retain a Certificate of Exemption or other supporting information?
8. How does Treasury interpret the phrase “by other means” in sections 12(7) and 14b(7) of the GSTA and UTA, respectively?

CONCLUSIONS

1. How Purchasers May Claim an Exemption. The burden of proving entitlement to an exemption rests on the taxpayer asserting it. Andrie Inc v Dep’t of Treasury, 496 Mich 161 (2014). When making a claim for an exemption, a purchaser must comply with all statutory requirements. The general statutory provisions applicable to sales and use tax exemption claims, under MCL 205.62 and MCL 205.104b, require the purchaser to provide a seller with the following information:

A. The identifying information of the purchaser, including the purchaser’s name and address.

B. The exemption type (or reason for the exemption) claimed by the purchaser.

C. Any other information required for the specific exemption being claimed.

When engaging in an exempt transaction, sellers and purchasers should always check the applicable exemption statute to determine whether there are any additional requirements with which they must comply, as noted above. For example:

• In the case of a “for resale at retail” claim, the seller must obtain the sales tax license number of the purchaser if the purchaser has a sales tax license. MCL 205.68(1); MCL 205.104a(1).
• A lessor who elects to pay use tax on rental receipts rather than sales tax on the price of the property acquired for rental must provide the seller with the lessor’s sales tax license number or use tax registration number. Mich Admin Code, R 205.132.

Notably, Public Acts 3 and 4 of 2022 revised (and Public Acts 61 and 63 of 2024 when effective will revise) the general statutory requirements described above for certain beer, wine, and liquor wholesalers. Wholesalers should take note that they may sell sacramental wine at retail to churches under MCL 436.1113(8). Those transactions are also exempt from both sales tax and use tax, MCL 205.54a(1)(b) and MCL 205.94(1)(i), respectively. For such sales, wholesalers should still obtain the name of the purchaser and the reason for claiming the exemption unless the church is licensed by the MLCC.

Thus, the following sellers are only required to obtain (and maintain) a record of the purchaser’s liquor license number issued by the MLCC to properly document an exempt sale under MCL 205.62(1) and 205.68(1), (6) for sales tax purposes and MCL 205.104a(1), (6) and 205.104b(1) for use tax purposes:

• A person licensed by the MLCC as a “wholesaler” for purposes of sales of “alcoholic liquor” to another person licensed by the MLCC.
• The MLCC or a person certified by the MLCC as an “authorized distribution agent” for purposes of the sale and distribution of “alcoholic liquor” to a person licensed by the MLCC.

Note: Under MCL 205.68(6)(a) and MCL 205.104a(6)(a), the terms “alcoholic liquor,” “authorized distribution agent,” and “wholesaler” have the same meaning given those terms under the Michigan Liquor Control Code of 1998, 1998 PA58, (“Liquor Control Code”).

• A person licensed by the MLCC as a “micro brewer” for purposes of sales of “alcoholic liquor” to another person licensed by the MLCC.

Note: Under MCL 205.68(6)(c) and MCL 205.104a(6)(c), a “micro brewer” has the same meaning given that term under section 109 of the Liquor Control Code, MCL 436.1109.

2. Acceptable Formats for Claiming an Exemption. Treasury will accept a variety of exemption formats. A claim using any one of the following formats, if properly completed, will constitute a valid “Certificate of Exemption”:

A. Form 3372, Michigan Sales and Use Tax Certificate of Exemption, which is available at www.michigan.gov/treasuryforms.

Note: Contractors may not use Form 3372 to claim an exemption from sales or use tax related to a transformational brownfield. Instead, such an exemption claim must be made using Form 5555 (Michigan Certificate of Exemption for Transformational Brownfield Plan), as further explained in RAB 2019-15.

B. Any exemption certificate format contained in a current Sales and Use Tax administrative rule.

C. The Uniform Sales and Use Tax Certificate approved by the Multistate Tax Commission.

D. A purchase order issued by the purchaser meeting the requirements set forth in Part 5 of this RAB.

E. The Streamlined Sales and Use Tax Agreement Certificate of Exemption.

F. The required statutory information in another format, such as in a signed letter on the purchaser’s letterhead.

A purchaser is not required to provide a signature to claim an exemption, unless the purchaser uses a paper Certificate of Exemption. MCL 205.62(3); MCL 205.104b(3).

3. Use of Blanket Certificates of Exemption. A purchaser may provide a Blanket Certificate of Exemption to a seller. A Blanket Certificate of Exemption remains in effect for a four-year period unless the seller and the purchaser indicate on the Blanket Certificate of Exemption or otherwise in writing that a period of less than four years will apply. If the seller and the purchaser have a recurring business relationship, there is no requirement that the Blanket Certificate of Exemption be renewed or that the data elements be updated. A recurring business relationship exists when a period of not more than 12 months elapses between sales transactions. MCL 205.68(7); MCL 205.104a(6).

4. Obtaining Exemption Numbers from Purchaser. Treasury does not issue tax exemption numbers. Consequently, sellers do not need to obtain a state-issued tax exemption number as evidence of a purchaser’s ability to claim an exemption from sales and use taxes. As noted in Part 1 of this RAB, a seller may need to obtain the sales tax license number of the purchaser in a sale “for resale at retail.”

5. Use of Purchase Orders. A purchaser may use, and a seller may accept, a purchase order as a Certificate of Exemption provided it contains all the information and attachments required for a valid Certificate of Exemption for a single purchase, such as the purchaser’s name and address, exemption type (or reason for the exemption claimed) and any other information or documentation required for that exemption. For example, if the purchaser is claiming the resale/lease exemption, the seller must also obtain the purchaser’s sales tax license number (or use tax registration number) if the purchaser has one.

A purchase order intended to serve as a Blanket Certificate of Exemption for multiple purchases must expressly state that intention on the purchase order. A purchase order does not terminate a previously issued Blanket Certificate of Exemption unless the purchase order makes specific reference to the date of the Blanket Certificate of Exemption and states what was covered in the certificate it is intended to terminate.

6. Limitation on Seller Liability When Purchaser Improperly Claims an Exemption. Generally, a seller who obtains a properly completed Certificate of Exemption (or the required data elements) within 120 days after the date of sale is not liable for sales or use tax on the transaction, even if a purchaser improperly claims an exemption. MCL 205.62(6); MCL 205.104b(6). If a seller does not obtain the Certificate of Exemption or required data elements within this 120-day period, the seller may prove that the transaction was not subject to sales or use tax, as explained in Part 7 of this RAB. In such cases, the purchaser will be liable for the tax if the exemption claim is later found to have been improperly made. There are certain limited situations in which a seller can be liable for the tax, such as those involving fraud on the part of the seller. MCL 205.62(5); MCL 205.104b(5).

7. Recordkeeping Requirements. All sellers are required to maintain accurate and complete sales records. MCL 205.68; MCL 205.104a. If an exemption from tax is claimed by a purchaser, the seller must keep a record of the name and address of the person to whom the sale is made, the date of the sale, the article purchased, the type of exemption claimed, the amount of the sale, and, if the claim is for the resale/lease exemption, the purchaser’s sales tax license number/use tax registration number if the purchaser has one. MCL 205.62(4); MCL 205.104b(4).

Sellers must retain all data required to substantiate an exempt sale for a period of not less than four years from the date tax was due on the transaction. MCL 205.68(1); MCL 205.104a(1). A seller may comply with this requirement by either retaining the completed Certificate of Exemption or by maintaining a record of the required information in another format, such as in a spreadsheet. If a seller fails to maintain or preserve the records as required, the statutes authorize Treasury to assess the tax due based on an indirect audit procedure or any other information that is available or that may become available to Treasury. Such an assessment is considered prima facie correct, and the burden of refuting the assessment will be upon the seller. MCL 205.68(4); MCL 205.104a(4).

The seller shall obtain the same information for a claimed exemption regardless of the medium in which the transaction occurs. Consequently, a seller must maintain adequate records to substantiate exemption claims made by its purchasers, whether the sale occurs over the internet or in the seller’s physical presence. MCL 205.62(1); MCL 205.104b(1).

Do not send Certificates of Exemption to Treasury unless requested by Treasury to do so.

If at the time of a transaction the seller does not obtain a Certificate of Exemption (or the relevant data elements) from a purchaser, the seller may prove that the transaction was not subject to tax “by other means,” (see Part 8 of this RAB) or obtain a fully completed Certificate of Exemption from the purchaser, by the later of the following dates as provided in MCL 205.62(7) and MCL 205.104b(7):

A. 120 days after a request by Treasury;

B. the date an assessment becomes final;

C. the date a denial of a claim for refund is issued;

D. in the instance of a credit audit, the date an audit determination letter or informal conference decision and order of determination is issued; or

E. the date of a final order of the Michigan Court of Claims or the Michigan Tax Tribunal, as applicable, with respect to a Treasury assessment, order, or decision.

Treasury may, in its discretion, allow a seller additional time.

A certified service provider is considered a seller for all purposes covered by this RAB. MCL 205.62(10). A “certified service provider” means that term as defined in section 3 of the Streamlined Sales and Use Tax Administration Act, 2004 PA 174, MCL 205.803.

8. Treasury’s Interpretation of the Phrase “By Other Means.” As noted in Part 7 of this RAB, a seller may, under certain circumstances, prove that a transaction was not subject to tax “by other means.” Neither the GSTA nor the UTA expound on the meaning or application of this phrase. Treasury interprets this phrase as “curative” such that it is intended to provide a post-transaction way to establish an exemption when the taxpayer has not complied with the other methods to document particular sales or use tax exemptions. Accordingly, the phrase is not intended to supplant the general requirements for claiming an exemption that are described in this RAB, including the requirements regarding the use of blanket certificates.

The limited scope of the “by other means” language also does not circumvent the general requirements for claiming an exemption even where another statutory scheme appears to be based on wholesale (resale) transactions. For example, fuel wholesalers should obtain Certificates of Exemption (or the identifying information described in this RAB) from retailers to support purported resale transactions even if the wholesalers collected the prepaid sales tax imposed under section 6a of the GSTA, MCL 205.56a, from the retailer on the fuel sale.