Michigan recently revised its Sales and Use Tax guidance for lease transactions, introducing key updates that impact tax obligations for lessors and lessees.
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- Use Tax on Rental Receipts:
- Lessors opting to pay use tax on rental receipts instead of purchase costs must pay tax on the total rental receipts.
- Exclusion of Delivery and Installation Charges:
- Delivery and installation charges are excluded from the taxable base if they are separately stated in the lease agreement or invoice.
- School Bus Exemption Expansion:
- The sale or lease of a school bus, as well as transportation-related services and adaptive equipment, are exempt from tax when the school bus is primarily used under a contract with a public school or academy representative.
- Definition of “Lease” for School Bus Exemptions:
- The provision of an operator along with the school bus no longer disqualifies the transaction from being considered a lease for tax exemption purposes.
- To make a Lessor Election (From Michigan Revenue Administrative Bulletin 2024-18)
- In order to properly make a lessor election, a purchaser may complete form 3372, Michigan Sales and Use Tax Certificate of Exemption, selecting “For Lease” as the basis for the exemption along with providing the lessor’s sales tax license or use tax registration number. This form is not required to be submitted to Treasury unless requested and should be provided to the seller to be retained for their records. Alternatively, a lessor may provide the same information required by form 3372 in a different format. See RAB 2024-11 for more general information regarding claiming an exemption.
A taxpayer that makes the lessor election will lose that election if tangible personal property is used in anyway other than leasing it, including any personal use. MCL 205.97(2). If this occurs, tax is due at the time of conversion to a taxable use on the original purchase price of the property. Id
- In order to properly make a lessor election, a purchaser may complete form 3372, Michigan Sales and Use Tax Certificate of Exemption, selecting “For Lease” as the basis for the exemption along with providing the lessor’s sales tax license or use tax registration number. This form is not required to be submitted to Treasury unless requested and should be provided to the seller to be retained for their records. Alternatively, a lessor may provide the same information required by form 3372 in a different format. See RAB 2024-11 for more general information regarding claiming an exemption.
- Use Tax on Rental Receipts:
For more information, consult the Michigan Department of Treasury or a qualified tax professional.
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