The Michigan Department of Treasury has issued an updated Revenue Administrative Bulletin (RAB) explaining sales and use tax exemption claim procedures and formats.
This release updates and replaces the general procedures sellers and purchasers should follow when claiming exemptions under the General Sales Tax Act (GSTA) and the Use Tax Act (UTA), which were previously described in Michigan Revenue Administrative Bulletin No. 2021-18, 11/22/2021.
The updated RAB is limited to addressing the enactment of Public Acts 3 and 4 of 2022, which became effective February 1, 2022.
Key Areas Discussed in the Updated RAB
1. How Do Purchasers Claim an Exemption?
The RAB explains the proper procedures purchasers must follow to claim sales and use tax exemptions in Michigan.
2. What Formats Can a Purchaser Use to Make an Exemption Claim?
Acceptable formats for providing exemption claims are outlined, clarifying how businesses can comply.
3. Can a Purchaser Provide a Blanket Exemption Form?
The bulletin addresses the use of blanket exemption forms for ongoing transactions, helping businesses understand when these forms are appropriate.
4. Is a Seller Required to Obtain a State-Issued Tax Exemption Number from a Purchaser?
Clarification is provided on whether sellers must obtain a state-issued exemption number from purchasers when processing exemption claims.
5. Under What Conditions May a Purchaser and Seller Use a Purchase Order to Document an Exemption?
Guidance is given on the use of purchase orders as sufficient documentation for exemptions in certain scenarios.
6. When Can a Seller Be Liable for the Sales or Use Tax on an “Exempt” Transaction?
The RAB explains circumstances in which a seller may still be held liable for taxes on transactions that were presumed exempt.
7. How Long Must a Seller Retain a Certificate of Exemption or Other Supporting Information?
Specific record retention requirements for exemption certificates and related documents are outlined to ensure compliance.
8. How Does the Department Interpret the Phrase “By Other Means”?
Interpretation is provided for the phrase “by other means” found in Mich. Comp. Laws Ann. § 205.62(7) and Mich. Comp. Laws Ann. § 205.104b(7), clarifying how alternative documentation may be used to substantiate exemption claims.
Frequently Asked Questions
What is the purpose of the updated Revenue Administrative Bulletin?
The updated RAB provides revised procedures for claiming sales and use tax exemptions in Michigan, reflecting changes from Public Acts 3 and 4 of 2022.
Can a business use a blanket exemption certificate for multiple transactions?
Yes, the RAB allows the use of blanket exemption certificates for recurring purchases, provided the documentation remains accurate and applicable.
Is it mandatory for sellers to collect a state-issued tax exemption number?
No, sellers are not required to obtain a state-issued tax exemption number from purchasers, but they must maintain sufficient supporting documentation.
How long must exemption certificates be retained?
Sellers must retain exemption certificates and related documentation for at least four years to comply with Michigan’s recordkeeping requirements.
What does “by other means” mean in exemption documentation?
The phrase refers to alternative methods of substantiating an exemption claim beyond standard certificates, as long as the documentation clearly supports the exemption.