This guidance can be used to determine if you qualify for Michigan’s use tax exemption, under MCL 205.93(3)(a), when transferring a vehicle title to a qualifying relative.
*Marriage status rule: The step‑parent/parent relationship still qualifies if the parent died while married. The relationship does not qualify if the parent divorced before the title transfer.
The Michigan Department of Treasury (Treasury) is responsible for administering the collection of use tax, which includes the review of tax exemption claims made by individuals on vehicle transactions through the Secretary of State.
Anyone claiming a use tax exemption based on a family relationship must be able to provide documents supporting the claim if requested by Treasury. You are not required to bring the supporting documentation to the Secretary of State office when you transfer the title. However, if your claim is selected for review by Treasury after the title transfer, you will be required to provide documentation.
Documents to properly support your claim must show the relationship between you (the buyer) and the seller.
If an exemption claim is found to be invalid or cannot be proven, a penalty of up to 100% of the tax will be imposed for making a fraudulent claim.
Scenario:
Kathy transfers a vehicle to her sister Mary.
Required Proof:
Purpose:
Establish that Kathy and Mary share the same parents.
Scenario:
A parent gifts a vehicle to their child.
Required Proof:
Purpose:
Confirm direct parent-child relationship.
Scenario:
A woman transfers a vehicle to her sister-in-law.
Required Proof:
Purpose:
Show the chain of relationships (marriage and sibling link).
Scenario:
A step-sibling transfers a vehicle to another step-sibling.
Required Proof:
Michigan charges a 6% use tax on the greater of the vehicle’s purchase price or its retail value. The Department of Treasury makes the final decision on the amount you owe. If you underpay, you may have to pay the difference plus interest and penalties. If you make a false claim, you could face a penalty of up to 100% of the tax due.
Automobile manufacturers offer an employee benefit program that allows their employees to buy new vehicles at a discount. A common manufacturer stipulation is that the vehicle title must remain in the purchasing employee's name for at least six months.
Frequently an employee will use the discount program to buy a vehicle for a friend, who will make all payments and accept transfer of the title after the six-month period. The friend, who paid sales tax on the original purchase, will also have to pay use tax on the retail value of the vehicle when title is transferred six months later.
When such transactions involve relatives, the criteria and documentation required for the use tax exemption are the same as those for other vehicle transfers.
