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March 12, 2025
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Re: Request for Technical Advice Letter re: XXXXXXXX Venue
Dear XXXXXXXX:
Thank you for your letter, dated February 11, 2025, requesting guidance on the taxability of certain services and tangible personal property at a XXXXXXXX venue. Revenue Administrative Bulletin (RAB) 2016-20 describes procedures for issuing various types of guidance to taxpayers. Your request meets the requirements for issuance of a technical advice letter.
According to your letter, your client, XXXXXXXX (“Company”) owns and operates a XXXXXXXX venue and XXXXXXXX hall. The Taxpayer rents a XXXXXXXX venue (venue) and includes tangible personal property in each rental. For example, the venue will rent tables and chairs to customers. Currently, the taxpayer buys tables and chairs, and other tangible personal property from a vendor and pays sales tax on the full purchase price of those items at the time of acquisition. The venue does not provide for the rental of overnight accommodations.
Further, the Company provides alcohol and bartending services during the use of the hall. The services include the beverages themselves, and a separate, mandatory, base fee which includes the bartender service, cups, ice, etc.
The Company would like guidance on the following items:
Question 1:
MCL 205.94(1)(a) states that any property which was “sold in this state on which transaction a tax is paid under the general sales tax act…if the tax was due and paid on the retail sales to a consumer” is exempt from use tax. Based on the facts provided, the taxpayer pays sales tax upon the acquisition of the tangible personal property. As such, no use tax is due on the rental stream of the tables and chairs.
Question 2:
MCL 205.93a(1)(b) states, in relevant part,
Rooms or lodging furnished by hotelkeepers, motel operators, and other persons furnishing accommodations that are available to the public on the basis of a commercial and business enterprise, irrespective of whether or not membership is required for use of the accommodations, except rooms and lodging rented for a continuous period of more than 1 month.
Based on the information provided, the taxpayer simply provides a XXXXXXXX hall and venue. They do not furnish overnight accommodations such as rooms or lodging in any capacity. As such, they would not be subject to the Use Tax under MCL 205.93a(1)(b).
Question 3:
Based on the description of the bartending services provided, the cost of alcohol is separately itemized. The base fee, however, is a mandatory service fee, which is required to complete the sale of the alcohol. MCL 205.51(1)(d)(iii) provides:
(d) "Sales price" means the total amount of consideration, including cash, credit, property, and services, for which tangible personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise, and applies to the measure subject to sales tax. Sales price includes the following subparagraphs (i) to (vii) and excludes subparagraphs (viii) to (xv):
***
(iii) Charges by the seller for any services necessary to complete the sale, other than the following:
If a charge associated with the sale of tangible personal property is specifically included in the sales tax act’s definition of “sales price,” that charge is taxable regardless of if it would ordinarily be characterized as a service and Catalina is inapplicable in such situations. See Brusky v Dep’t of Treasury, 340 Mich App 42, 58-59 (2022). The mandatory service fee described is specifically included in the definition of “sales price” under MCL 205.51(1)(d)(iii), as such, the “base fee” is taxable.
Please feel free to reach out if you have any additional questions.
Sincerely,
/s/ Dave Matelski
Administrator
Indirect Tax Division
Bureau of Tax Policy