Preliminary information for the Wholesale Marihuana Tax is now available.
Approved: June 10, 1988
RAB-88-32. The General Sales Tax Act, MCL 205.51 et seq., and the Single Business Tax Act, MCL 208.1 et seq., were each amended in 1986 to:
These high technology exemptions and credits complement the Local Development Financing Act, MCL 125.2151 et seq., which was adopted to encourage local development to prevent conditions of unemployment and promote economic growth. Under the later Act, a portion of the tax base resulting from economic growth and development may be dedicated to financing certain public facilities, structures, or improvements.
The Use Tax Act was not amended by the 1986 legislation. Therefore, purchases were made by eligible businesses which are subject to the use tax are not exempt. Also, contractors making improvements to the real property of an eligible business are not exempt from paying the sales tax on materials used in such improvements.
A retailer may exclude from gross proceeds, utilized in computing its sales tax liability, a sale of tangible personal property to a business if that business (the purchasing business) meets the following requirements. A taxpayer may qualify for a Single Business Tax credit if it meets the following eligibility requirements.
1. Located in a city, which meets the criteria provided for in law. Currently, these cities are: Bay City, Detroit, Flint, Jackson, Muskegon, Pontiac, and Saginaw
2. Located initially in the city after the creation of the "authority District." An authority district is the area where a local development finance authority exercises its power.
3. Located within a local development finance authority district established under P.A. 281 of 1986.
Note: Location in a district created under the Tax Increment Finance Authority Act or the Downtown Development Authority Act (P.A. 450 of 1980 and P.A. 197 of 1975, respectively) does not qualify a business for either the exemption or credit.
4. Has high technology activity as its primary purpose. A high technology activity is defined as an activity that has as its primary purpose research, product development, engineering, laboratory testing or development of industrial technology.
5. Not engaged in:
A. The manufacturing of goods or materials,
B. Agricultural processing, or
C. Activity related to a manufacturer or agricultural processor located within a local development finance authority district.
When Treasury receives an application, the Department will evaluate it to determine whether it meets the above eligibility criteria. If these criteria are met, Treasury will issue a certificate of sales tax exemption and single business tax credit. This certificate is valid for 10 years for single business tax credit or until revoked. Tax exemption numbers are not issued by the Department. No certificates will be issued after December 31, 1991.
Once a business has been certified as eligible for the high technology sales tax exemption and single business tax credit, its certified status affords the following:
1. The sales tax exemption covers the purchase of tangible personal property used or consumed by the eligible business. For example, an eligible business's primary purpose may be the high technology activity of engineering. In that case, all materials used and consumed by the engineering business would be exempt from the sales tax when purchased by the engineering business. If the engineering business purchases construction materials which are for its own use, for example, these purchases will be exempt from sales tax, provided they are purchased for the construction contract. But as noted above, if a contractor purchases the construction materials to be affixed to real estate and used by the engineering business, the contractor must pay the sales tax at the time of purchase. The engineering business must also pay use tax on any out-of-state purchases.
To purchase goods without paying the sales tax, the certified business must present its letter of certification to the seller at the time the goods are purchased for the certified business.
2. The single business tax credit for an eligible business will be calculated by multiplying its net tax liability (after other single business tax credits) by a percentage. This percentage is calculated by taking the average of: (1) the ratio of the cost of eligible property used in the high technology activity to the cost of total Michigan property, and (b) the ratio of eligible payroll for the high technology activity to all payroll in Michigan.
