Michigan’s House Committee on Tax Policy is currently working through multiple bills related to an exemption from sales and use tax for delivery and installation charges, provided certain requirements are met.
For financial perspective, as stated in the legislative summary, Michigan’s combined sales and use tax revenue in FY 2023-24 is expected to total approximately $12.8 billion. If delivery and installation costs comprise 0.5% of total collections, the revenue reduction would be almost $65.0 million.
“Because of their retroactive application, the legislative track of the bills is worth monitoring.”
The Exemption
Specifically, House Bills 4039 & 4253 would amend the General Sales Tax Act and the Use Tax Act to exempt certain delivery and installation costs from the sales price in the Sales Tax Act as well as from the purchase price in the Use Tax Act.
Provided the charges are separately stated on the invoice given to the purchaser and the seller maintains its books and records to show separately the transactions used to determine the applicable tax, sales and use taxes would not be imposed on delivery or installation charges.
It should be noted that the exemption would not apply to delivery or installation charges related to the sale of electricity or gas by a utility.
related relief from intent to assess & Final Assessment
Interestingly, the bills would require Michigan’s Department of Treasury (Department) to cancel any outstanding balances on notices of intent to assess or final assessments that were issued before the applicable bill’s effective date that are related to delivery or installation charges that would be exempted under the bills.
The Department would be required to cancel these balances within 90 days of the bill’s effective date and would be prohibited from issuing any new assessments on these activities for any tax period before the bill took effect.