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Revenue Administrative Bulletin 1991-11

Approved: October 10, 1991



(Replaces Revenue Administrative Bulletin 1990-1)

RAB-91-11. This bulletin updates Revenue Administrative Bulletin 1990-1 by incorporating the changes made by Act 87 of the Public Acts of 1991 to the "agricultural production" exemption. Public Act 87 of 1991, effective (retroactively) January 1, 1987, exempted subsurface irrigation pipe from the General Sales Tax Act.

This bulletin also restates the discussion contained in Revenue Administrative Bulletin 1990-1 concerning prior amendments to the "agricultural production" exemption to both the sales and use tax acts (MCL 205.54a(f); MSA 7.525(f) and MCL 205.94(f); MSA 7.555(4)(f), respectively). The General Sales Tax Act was amended by 1988 PA 519, effective January 18, 1989, to exempt commercial fishing, portable grain bins, and land tiles from the sales tax. Likewise, the Use Tax Act was amended by 1989 PA 141, effective (retroactively) January 1, 1989, to exempt portable grain bins and land tiles from the use tax.

Commercial Fishing

Public Act 519 provided a sales tax exemption for commercial fishing activities. These activities are now considered to be "agricultural producing" for purposes of the General Sales Tax Act. The exemption is for the purchase of tangible personal property used "in the direct gathering of fish, by net, line, or otherwise, only by an owner-operator of the business enterprise." The provision specifically directs that a charter fishing business enterprise is not an exempt business.

Tangible personal property that may be purchased exempt from sales tax includes nets of all types, bottom stakes, hook lines, baits, winches, lines, ropes, commercial fishing boats, oil and fuel, fish and depth finders, buoys, markers, anchors, any safety equipment required by law to be on board, and any other property used in the direct gathering of fish.

To qualify for the exemption, the purchaser must be licensed as a commercial fishing business by the Department of Natural Resources. When claiming this exemption the purchaser must complete and present to the seller an exemption certificate containing the following:


The undersigned hereby certifies that all items purchased on the date indicated below, except items specifically listed, are for use or consumption in connection with the direct gathering of fish by an owner-operator of a licensed commercial fishing business enterprise. The undersigned agrees to reimburse the seller for sales tax if the items are used or consumed otherwise.

Date ______  Signed ________________


Address ___________________________


Portable Grain Bins, Land Tiles, and Subsurface Irrigation Pipe

Public Acts 519 of 1988 and 141 of 1989 extended the sales and use tax "agriculture producing" exemption to cover portable grain bins and land tiles. Public Act 87 of 1991 provides an exemption from sales tax for subsurface irrigation pipe used in agricultural production.

As defined in the statutes, a portable grain bin "means a structure that is used or is to be used to shelter grain and that is designed to be disassembled without significant damage to its component parts." Prior to the amendments, all grain bins were considered a part of realty and not exempt from tax for use in agricultural production. The exemption covers grain bins that are not permanently affixed to realty.

The land tile exemption is applicable to either "fired clay or perforated plastic tubing used as part of a subsurface drainage system . . . ." This means that the drain tile itself can be purchased tax-free. Any other product used in the tiling process is not exempt. A taxable item of a drain field will include a metal outlet pipe or culvert, if used.

The exemption applies only to drainage tile in land used for agricultural production. Tile used in areas or for purposes other than agricultural production are taxable. For example, tile used in a residential area or in the yard around a farmhouse is taxable.

The exemption for subsurface irrigation pipe applies only where such pipe is used in the production of agricultural products as a business enterprise. The exemption applies to the purchases of such pipe beginning January 1, 1987.

Land tile, portable grain bins (as described above), and subsurface irrigation pipe are usually installed by a contractor rather than by the agricultural producer. Therefore, a contractor with a sales tax license may make a claim for exemption for resale when purchasing grain bins, tile, or irrigation pipe for installation on another's farm. To perfect this exemption, the contractor must present the sales tax license number and the statement "for resale at retail" to the seller at the time of sale. The sale of the tile or grain bin to the agricultural producer is then exempt from tax under these new provisions. To claim exemption, the agricultural producer must sign and present the following certificate to the contractor. [Michigan Sales and Use Tax Rules, 1979 AC, R 205.51]


The undersigned hereby certifies that all items purchased, except as indicated hereon, are purchased for use or consumption in connection with the production of horticultural or agricultural products as a business enterprise, and agrees to reimburse the seller the sales tax if used or consumed otherwise.

Date ______  Signed ________________


Address ___________________________


Use Tax Act

The Michigan Use Tax Act [MCL 205.91 et seq.; MSA 7.555(l) et seq.] was not amended to include the exemption for commercial fishing or subsurface irrigation pipe. Therefore, these items continue to remain taxable under circumstances where the use tax applies. Purchases made from out-of-state sellers are not exempt. Also, lease arrangements where use tax is collected by the lessor on rental receipts are not exempt from tax.

Refunds of Tax Paid on Purchases of Subsurface Irrigation Pipe

Public Act 87 of 1991 provides for a refund of sales tax paid on the purchase of subsurface irrigation pipe. Agricultural producers seeking refunds under this provision are required to provide proof that sales tax was paid to the seller. Approved refunds will be paid without interest. The amendment requires that refund claims under this provision be filed by September 30, 1991.