Michigan Provides New Sales and Use Tax Apportionment Rules for Industrial Processing Exemption

Tuesday, March 13th, 2018

Close-up of an electrical tower.

The Michigan Department of Treasury (DOT) has released a publication that explains how electricity and natural gas providers should apply the industrial processing exemption when their property is used in both taxable and exempt activities.

Michigan provides a sales and use tax exemption for tangible personal property used or consumed in industrial processing. The exemption includes property used in the distribution and transmission of electricity and natural gas. However, when property eligible for the exemption is used for taxable and exempt purposes, the DOT must supply a reasonable method for electricity and natural gas providers to use in determining what percentage of their property is exempt.

As a result, the DOT has created rules that designate what percentage of a particular system is exempt: (1) electricity transmission systems are 60% exempt; (2) electricity distribution stations, substations, transformers, and related equipment are 90% exempt; (3) electricity distribution wire, cable, poles, pole top equipment, and customer meters are 25% exempt; (4) distribution tools and supplies, quality control equipment, and personal safety equipment are 50% exempt; (5) interstate natural gas lines are 100% exempt; and (6) intrastate natural gas lines are 50% exempt.

Note that electricity and natural gas providers may submit alternative methods of apportionment along with supporting documentation and evidence demonstrating that its calculation of exempt use is reasonable.

https://www.ttrus.com/Rules for Industrial Processing Exemption

About TTR

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TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at www.ttrus.com or call 866.578.8193.

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