Update alert: Michigan sales and use tax exemption of delivery and installation charges

On April 26, 2023, Michigan Gov. Gretchen Whitmer approved House Bills 4039 and 4253, which amend the state’s General Sales Tax Act and the Use Tax Act and exempt certain delivery and installation charges from the sales price and the purchase price. The amendments provide clarity to both businesses and the Michigan Department of Treasury.

Under the bills, delivery and installation charges are excluded as long as both of the following apply:

• The delivery and installation charges are separately stated on the invoice provided to the customer.
• The seller maintains its books and records to show how the tax collected was calculated for these transactions.

The exemption does not apply to delivery or installation charges related to the sale of electricity, natural gas or artificial gas by a utility. A utility is a person regulated by the Michigan Public Service Commission as a utility or a person that operates equipment or facilities for producing, generating, transmitting, delivering or furnishing electricity within the state for the public for compensation.

Additionally, the bills require the Michigan Department of Treasury to cancel within 90 days any outstanding balances on notices of intent to assess or final assessments that were issued before the bills’ effective date and are related to delivery or installation charges that would be exempted under the bills.

Taxpayers with unpaid balances related to delivery or installation charges that have received notices of intent to assess or final assessments should email the Treasury to have the assessments adjusted.

The acts do not establish a right to a refund for sales tax or use tax on delivery or installation charges that a taxpayer has already remitted to the Treasury prior to the effective date of April 26, 2023. Consequently, purchasers will not be able to seek refunds for sales or use tax paid on delivery or installation charges.

Going forward, businesses with customers in Michigan should update their sales and use tax processes and procedures appropriately so tax is not applied to exempt delivery or installation charges. Any questions on this matter can be directed to the Wipfli state and local tax team. Contact Caroline McDonnell and Austin DeMoss for more information.