Revenue Administrative Bulletin 1989-64

Approved: October 5, 1989

SALES TAX - FEDERAL CREDIT UNIONS AND FEDERAL HOME LOAN BANKS

(Replaces Revenue Administrative Bulletin 1989-7)

RAB-89-64. 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, which are exempt from direct state taxation by federal law, are not subject to sales tax on their purchases of tangible personal property for their own use.

Note: A federal home loan bank is a federal instrumentality and its purchases of tangible personal property are exempt from sales and use taxes according to a stipulated consent judgment entered in the Federal District Court for the Western District of Michigan.

This exemption does not extend to state chartered credit unions, national or state banks, or state or federally chartered savings and loan institutions.

Sales Made by Federal Credit Unions or Federal Home Loan Banks

Sales made by federal credit unions and federal home loan banks are subject to tax. This includes sales of checks or drafts by the federal credit unions or federal home loan banks to their customers. When a federal credit union or federal home loan bank provides checks to a customer and assesses a "service charge," it is making a sale. A federal credit union or federal home loan bank purchasing checks for resale to customers may claim exemption by providing the statement "for resale at retail" to the seller, along with the federal credit union's or federal home loan bank's sales tax license number.

Exempt Sales Made to Federal Credit Unions or Federal Home Loan Banks

An exempt 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 an exempt federal credit union. Purchases of tangible personal property by the federal credit union for its use are exempt from tax. However, a credit union with the name "________________ County Federal Employees Credit Union " is not an exempt 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 or federal home loan bank 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 or federal home loan bank. 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 OR

FEDERAL HOME LOAN BANK

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 or federal home loan bank named in the space below. The consideration for this purchase moves from the funds of the federal credit union or federal home loan bank. 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
or Federal Home Loan Bank

Refund Procedure for Taxes Paid

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