Revenue Administrative Bulletin 1988-32

Approved: June 10, 1988

SALES TAX EXEMPTION AND SINGLE BUSINESS TAX CREDIT FOR HIGH TECHNOLOGY BUSINESSES

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:

1. Exempt from the sales tax certain retail sales of tangible personal property used in a "high technology activity," and
    
2. Grant a single business tax credit to certain taxpayers engaged in "high technology activities."

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.

Eligibility Requirements

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

1. 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.
    
2. 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.

1. 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.
    
2. Not engaged in:

1. The manufacturing of goods or materials,
2. Agricultural processing, or
3. 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: