Understanding tax compliance procedures can be a complicated and time consuming process, especially when it comes to refunds and prepayment rates. The Michigan Department of Treasury (Department) has issued a Revenue Administrative Bulletin (RAB) to explain the procedures for claiming sales or use tax refunds, as well as to provide sales tax prepayment rates for gasoline and diesel fuel effective January 2024.
“[A Revenue Administrative Bulletin’s] purpose is to promote uniform application of tax laws throughout the State by the Bureau of Tax Policy personnel and provide information and guidance to taxpayers.”
Simplifying the sales tax refund Process
Filing a sales and use tax refund claim requires specific steps for both sellers and purchasers. Sellers seeking a refund must show proof that they did not collect the tax from a customer, or that they refunded the tax within a specific time from when the original tax return was filed. Notably, however, sellers are not obligated to seek refunds on behalf of their purchasers unless certain circumstances apply.
After addressing who can claim a refund and under what circumstances, the RAB also explains how to file a claim. There is no specific form to file, but sellers are required to provide information such as account number, tax type, and a schedule of the transactions for which a refund is being claimed. Further, the seller must file the claim within 4 years of the filing due date for the original tax return when tax was paid in error.
The Department also outlines three scenarios in which the purchaser or customer may file a refund claim. First, the purchaser may be entitled to a refund if he or she paid tax directly to the Department or any other state department, as opposed to paying tax to the seller. Second, purchasers can seek a refund if tax was collected and remitted by the seller. Finally, if the purchaser believes a seller wrongfully charged tax, they can directly request a refund from the seller.
Prepayment Rates
In another Revenue Administrative Bulletin, the Department also addressed tax prepayment rates for gasoline and diesel fuel. The Department calculates these rates monthly based on the statewide average retail prices. As such, a Bulletin is released each month to set forth the rates for that period.
Effective January 1, 2024 through January 31, 2024, the prepaid sales tax rates for the purchase or receipt of gasoline will be $0.17 per gallon, and $0.22 cents per gallon for diesel. This is significantly lower than the same period in 2023, during which the rates were $0.20 per gallon for gasoline and $0.29 for diesel.
Seeking help
Administrative Bulletins are a great starting point for those doing business in Michigan. However, if you have further questions about sales tax compliance in Michigan as an individual or for your business, contact us for additional support with your tax strategy and refund queries.