DEPARTMENT OF TREASURY

                             STATE TREASURER

                     GENERAL SALES AND USE TAX RULES

(By authority conferred on the department of treasury by  Act   No.  167   of 
the Public Acts of 1933, Act No. 94 of the Public Acts of  1937,  sections  3 
and 13 of Act No. 122 of the Public Acts of 1941, as amended, and sections  9 
and 83 of Act No. 380 of the Public Acts   of   1965,   being   SS205.51   et 
seq., 205.91 et seq., 205.3, 205.13, 16.109, and 16.183   of   the   Michigan 
Compiled Laws)


(By authority conferred on the Department of Treasury by section 3 of 1941 PA 
122, MCL 205.3).

                     

R  205.1   Sales tax licenses.
  Rule 1. (1) A Michigan sales tax license  shall  be   obtained   by   every 
person selling tangible personal property at retail. (See also  R  205.3,   R 
205.5, R 205.6, and R 205.7) A person shall not engage or   continue   in   a 
business taxable under the sales  tax  law  without   securing   a   license, 
regardless of the amount of sales or the manner  of   obtaining   goods   for 
sale. An application for a license before or  at  the   time   of   beginning 
business, shall be made to the  revenue  division  of   the   department   of 
treasury on the form prescribed by the department. All  licenses   shall   be 
displayed in full view on the licensed premises. Penalties  for  failure   to 
secure a license or for remaining in business without a   valid   sales   tax 
license are prescribed by R 205.19.
  (2) Every sales tax license expires on June 30 each year   and   shall   be 
renewed by furnishing such information  as  the   department   may   require, 
together with the annual license fee of $1.00. Regardless of   the   date   a 
license is issued, it expires on  the  following  June  30,   and   the   fee 
charged for it is the same, even if the license is used only  a  portion   of 
the year. Persons selling at retail at more than 1 location   or   place   of 
business shall obtain a license for each location. If a  valid   license   is 
lost or destroyed, it may be replaced  without  charge   by   notifying   the 
department.
  (3) A license is not transferable and a new  license   shall   be   secured 
immediately whenever there is a change of ownership of  the   business.   For 
example, if a partner is added or dropped, or if a corporation  is  formed or 
 dissolved,  this   constitutes   a   change   of   ownership   necessitating 
application in the name of the new ownership for a sales   tax   license   to 
sell at retail. If the new owner fails to apply for a  license,  that  person 
may be subjected to penalty  for  operating  without  a   valid   sales   tax 
license.
  (4) The department reserves the right to deny a license to an  applicant if 
 the  department  considers  the   applicant   to    be    the    agent    or 
representative of a principal required to be licensed  and  responsible   for 
filing the monthly sales tax returns.
  (5) Under the following circumstances the department   shall   require   an 
applicant for a sales tax license to submit a surety bond of  not  less  than 
$1,000.00, nor  more  than  $25,000.00,  payable  to  the   state.   At   the 
discretion of the department, a cash bond may be accepted in  lieu   of   the 
surety bond:
  (a) If the applicant, at any previous  time,  has   failed,   refused,   or 
neglected to pay a tax, interest, or penalty upon a tax due the state.
  (b) If the applicant has ever attempted  to  evade  payment   of   a   tax, 
interest, or penalty by petition in bankruptcy.
  (c) If the applicant is a corporation, and the department  has  reason   to 
believe the corporation is under the management or control of  a  person  who 
has failed to pay tax, interest, or penalty upon a tax.
  (d) Whenever the department deems it necessary to ensure the  collection of 
the tax.

  History:  1979 AC.


R  205.2   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.3   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.4   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.5   Tangible personal property.
  Rule  5.  Tangible  personal  property  embraces    all    goods,    wares, 
merchandise, products and commodities, all tangible  things  and   substances 
which are dealt in, capable of being possessed and exchanged.

  History:  1979 AC.


R  205.6   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.7   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.8   Consumer.
  Rule 8. (1)  "Consumer"  means  the  person  who   shall   have   purchased 
tangible personal property for storage, consumption or use.
  (2) A "consumer" is further defined as a person who   does   not   purchase 
goods for sale. The buyer who disposes of goods in any other  manner  than by 
resale becomes the final consumer. He is the last person in   the   chain  of 
transactions to make a purchase. The seller, who is the taxpayer   under  the 
sales tax act, is also the consumer for such articles used or consumed in the 
conduct of his business and sales made to him for  his   consumption  or  use 
are taxable.  The  fact   that   a   person   may   be   licensed   by   this 
department to sell at retail does not  in  itself  exempt   sales   to   such 
licensee.

  History:  1979 AC.


R  205.9   Sales for purposes of resale.
  Rule 9. Sales for purposes of resale include sales  of  tangible   personal 
property not to be consumed or used by the immediate purchaser,  but  to   be 
resold in the regular course of business by the  purchaser;   provided   that 
property purchased for resale purposes which is not resold, but  is  used  or 
consumed by the purchaser,  is  taxable  on  the  delivered   cost   to   the 
purchaser who shall remit the tax to the state.

  History:  1979 AC.


R  205.10   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.11   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.12   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.13   Casual or isolated sales.
  Rule 13. (1) Sales at retail shall not include  an   isolated   transaction 
made other  than  in  the  ordinary  course  of   repeated   and   successive 
transactions of a like character. Examples: A person  sells   his   household 
furniture, a farmer sells his farm machinery or other   farm   equipment,   a 
merchant sells his cash register, counters  or  other   store   fixtures   at 
auction or otherwise. Such sales are "casual or  isolated  transactions"  and 
are not subject to tax. However, any person who in any manner   or   at   any 
time advertises, solicits or offers tangible personal   property   for   sale 
for the purpose of repeated sales is deemed to  be   regularly   engaged   in 
business and his sales are not considered casual or  isolated,  even   though 
they may be few or infrequent.
  (2) Vehicles, airplanes,  snowmobiles  and  watercraft   acquired   in   an 
isolated transaction from a person not a retailer are subject to use  tax.
The use tax on vehicles, snowmobiles and watercraft shall be  paid   to   the 
secretary of state prior to the transfer of a   vehicle   title,   snowmobile 
registration or watercraft registration. The use tax on  airplanes  shall  be 
paid directly to the department of revenue by the purchaser.
  (See R 205.135. Isolated vehicle, aircraft,  watercraft,   and   snowmobile 
transfers.)

  History:  1979 AC.


R  205.14   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.15   Trade-in deduction.
  Rule 15. (1) No deduction from the gross proceeds of a  sale  is  permitted 
for any credit allowed by the seller for a trade-in taken  in   exchange   or 
part payment and the tax applies to the full selling price.
  (2) The retail sale of used tangible personal property   which   has   been 
acquired by the seller by purchase is taxable upon the full selling price.
When an article acquired by the taxpayer by trade-in is   sold,   this   sale 
also is taxable on the full selling price.
  (3) No deduction for a trade-in may be taken under  any  circumstances   in 
computing the use tax.

  History:  1979 AC.


R  205.16   Returned goods.
  Rule 16. (1) Credits or refunds for returned goods, the  sales   of   which 
have been  subject  to  tax,  may  be  deducted  only  if   the   goods   are 
voluntarily returned for full  exchange,  an  entire   refund   of   purchase 
price, or full credit. When the property is returned  within   a   reasonable 
time after the date of sale, and the purchase is made whole, a credit  may be 
had on the tax paid on the rescinded sale. The  term  "returned  goods"  does 
not   include   repossession   or   recapture   of   merchandise   by   legal 
process, abandonment of contract, voluntary surrender of  goods  without   an 
entire refund, or full credit being given for the amount paid  or  for  goods 
accepted in trade or barter.
  (2) A rehandling charge by the seller in connection with returned  goods is 
not deemed to be a reduction of  the  purchase  price  for  refund   purposes 
unless the charge includes cost attributable to use of the returned  goods by 
the purchaser.

  History:  1979 AC.


R  205.17   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.18   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.19   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.20   General application.
  Rule 20. For the convenience of the taxpayer these  rules  and  regulations 
are indexed, usually with reference to particular lines  of   business.   The 
taxpayer  is  responsible  for  obtaining  knowledge  of   all   rules    and 
regulations affecting his liability for tax,  in  order   that   the   proper 
amount of tax can be ascertained and paid to the state.   These   rules   and 
regulations must be read and interpreted in  their   entirety   rather   than 
merely acquainting yourself with a rule briefly stated  pertaining  to   your 
particular type of business.

  History:  1979 AC.

  Editor's note:  Former R 205.20 was abrogated by  1954  ACS  26.  Former  R 
205.21 was renumbered by 1954 ACS 26, to appear as present R 205.20.


R  205.21   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.

  Editor's note:  Former R 205.22 was renumbered by 1954 ACS 26 to  appear as 
present R 205.21.


R  205.22   Discounts.
  Rule 22. (1) Cash,  trade,  and  quantity  discounts   to   customers   are 
deductible in arriving at the  net  sale  price  which   is   taxable.   Such 
discounts must appear  on  the  invoices,  records  and   accounts   of   the 
retailer and be substantiated to the satisfaction of the department.
  (2) Trade and quantity discounts are usually known and  available  to   the 
purchaser at the time of sale,  and  are  deductible   immediately   on   the 
invoice before determining the tax. A cash discount is  usually  offered   by 
the seller as an inducement for payment within a specified   time   and   may 
not be deducted by the seller until it has been given  to  the  purchaser.
Such discounts will be allowed as a deduction on the  seller's   tax   return 
when there is sufficient evidence  in  the  records  of   the   taxpayer   to 
indicate that such discounts have been the regular policy   of   the   seller 
and have been given to the purchaser.

  History:  1979 AC.

  Editor's note:  Former R 205.23 was renumbered by 1954 ACS 26 to  appear as 
present R 205.22.


R  205.23   Records.
  Rule 23. (1) The  department,  through  its  field   auditors   and   other 
employees, may examine the books, records and papers of  any  person   liable 
for payment of the sales and use taxes. It may issue  a  subpoena   requiring 
any person to appear for examination and produce  any   books,   records   or 
papers within the scope of the inquiry.
  (2) It is the duty of every person engaging in any  business   subject   to 
the tax to keep and preserve suitable and adequate records of his business to 
enable such person, as well as  the   state,   to   determine   the   correct 
amount of the tax for which he is liable.
  (3) Failure to produce and keep records for the purpose  of  examination by 
the department will be considered willful noncompliance with the   sales  tax 
law and subject to its penalties. In the absence of  sufficient  records  the 
department may determine the amount of  tax  due  the  state  by  using   any 
information available whether obtained at the taxpayer's place of business or 
from any other sources, and assess the taxpayer for  any  deficiencies,  plus 
penalties.
  (4) Licensees are required to keep complete and accurate  daily  records of 
all sales, whether for cash or credit, bartered or  traded,  irrespective  of 
whether the seller regards the receipts  from  the  sales   as   taxable   or 
exempt. The taxpayer is also required to  keep  a   complete   and   accurate 
record of beginning and ending inventories, purchase  records,  daily   sales 
records, receipts, invoices, bills  of  lading  and   all   other   pertinent 
documents pertaining to the business.
  (5) If the seller claims sales for exemption on certain sales, it  shall be 
required that he will keep a record of  the   name   and   address   of   the 
person to whom the sale is  made,  the  date  of  the   sale,   the   article 
purchased, the amount of the exemption and the  use  to  be   made   of   the 
article sold. If exemption is claimed by reason of a sale  for  resale,   the 
taxpayer shall obtain the sales tax license number of the purchaser.
  (6) Records and files shall be kept on the  premises  of   the   place   of 
business and maintained in a legible manner. They shall also  be  kept  clean 
and as much as possible  free  from  deterioration.   All   invoices,   sales 
slips, bank statements and canceled checks should be  kept  in  chronological 
order so as to be balanced with the records to which they pertain.
  (7) Any person not having his principal place of   business   in   Michigan 
but  maintaining  within  this  state  a  branch    store,    warehouse    or 
distributing depot for the  sale  or  distribution   of   tangible   personal 
property is required to keep  complete  records  showing   all   sales   made 
within the state. If such records are not located in   Michigan,   then   the 
seller must defray the additional expense incurred by the state in  making an 
audit at the out-of-state location  of  the  seller.  Sellers   desiring   to 
follow  the  latter  method  must  make  suitable   arrangements   with   the 
department.

  History:  1979 AC.

  Editor's note:  Former R 205.24 was renumbered by 1954 ACS 26 to  appear as 
present R 205.23.


R  205.24   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.

  Editor's note:  Former R 205.25 was renumbered by 1954 ACS 26 to  appear as 
present R 205.24.


R  205.25   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.

  Editor's note:  Former R 205.26 was renumbered by 1954 ACS 26 to  appear as 
present R 205.25.


R  205.26   Use tax registration.
  Rule 26. (1) The following activities require a  registration   under   the 
use tax act:
  (a) An out-of-state seller, not  registered  as  a   retailer   under   Act 
No. 167 of the Public Acts of 1933 (sales tax   act),   actively   soliciting 
sales of tangible personal property in Michigan. (See  section   5   of   Act 
No. 94 of the Public Acts of 1937, as amended.)
  (b)  A  Michigan  consumer  buying  tangible   personal    property    from 
nonregistered sellers. (See section 6 of Act No. 94 of the  Public  Acts   of 
1937, as amended.)
  (c) A lessor of tangible personal  property  when   rental   receipts   are 
taxable under Act No. 94 of the Public Acts of 1937, as   amended.   (See   R 
205.132)
  (d) A seller of intrastate communication services. (See R 205.110)
  (e) A seller of rental accommodations to the public. (See R 205.88)
  (2) An application for a use tax registration shall be  obtained  from  the 
department of revenue upon a form prescribed by the  department.  A   license 
fee is not required.
  (3) A use tax registration is  not  transferable  from   1   ownership   to 
another. For  example:  if  a  partner  is  added  or  dropped,   or   if   a 
corporation is formed or dissolved, this constitutes a  change  in  ownership 
necessitating an application in the name of the new  ownership  for   another 
registration.
  (4) Registration under the use tax act requires the  filing   of   monthly, 
quarterly or annual tax returns on forms furnished  and   pre-identified   by 
the department. Failure to register  and  file  returns   can   subject   the 
taxpayer to heavy penalties.

  History:  1979 AC.

  Editor's note:  Former R 205.26 was renumbered by 1954 ACS 26 to  appear as 
present R 205.25.


R  205.27   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.28   Use tax included in gross proceeds.
  Rule 28. The use tax act requires a seller  to  collect  use   tax   as   a 
separate item and forbids the including of such  charge  as   part   of   the 
sales price. Therefore, a deduction cannot be taken, computed on the  "tax in 
gross" method, and  only  that   portion   of   the   gross   proceeds   that 
represents use tax actually collected  can  be  deducted   on   the   monthly 
return.

  History:  1979 AC.


                     SPECIFIC SALES AND USE TAX RULES


R  205.51   Agricultural producing.
  Rule 1. (1) For the purpose of this rule,  "agricultural  producing"  means 
the commercial production, for sale, of  crops,   livestock,   poultry,   and 
other products by  persons  regularly  engaged  in   business   as   farmers, 
nurserymen, or agriculturists.
  (2) Sales of tangible personal property are subject to the  sales  or   use 
tax under this rule,  if  the  sales  are  to  persons   other   than   those 
specified in subrule (1), or if the sales are made to  persons  specified  in 
subrule (1), but the property is used or consumed by those  persons   for   a 
purpose other than the commercial production of  agricultural  products   for 
sale.
  (3) Sales to farmers of fuel, clothing, and all  other  tangible   personal 
property for personal living or human  consumption  or  use  are  taxable.
Sales of tangible personal property to all persons are   taxable   when   the 
property is  used  in  producing  food  or  other   products   for   personal 
consumption and not for sale.
  (4) All sales to persons using land, but not included in the  definition of 
"agricultural producing" in subrule  (1),  are  taxable.   For   example,   a 
mowing machine is taxable when sold to the operator of a  riding  stable  for 
use in cutting hay to be fed to the operator's riding horses.  The  sale   of 
the machine is exempt, however, if made to a person  regularly   engaged   in 
business as a farmer for use in cutting hay to be fed to  the  farmer's  work 
horses or cattle.
  (5) Sales of the following are exempt only when   used   in   "agricultural 
producing" as defined in subrule (1):
  (a) Seeds and other propagative portions of plants.
  (b) Fertilizer and similar substances for improving quality of the soil.
  (c) Spray materials for insecticides, germicides, and fungicides.
  (d) Livestock, poultry, their feeds,  and   foodstuffs,   including   salt, 
bone meal, cod liver oil, limestone, grit, oyster shell,  and  other  similar 
substances used to sustain animals or poultry.
  (e) Sacks, wrappers, and  other  nonreturnable   containers   resold   with 
crops; also, binding twine and baling wire.
  (f) Machinery, tools, other equipment, repair parts,   motor   fuel,   oil, 
grease, and other tangible personal property necessary  for  their  operation 
and maintenance, except that sales of such equipment are  taxable  under  the 
following circumstances:
  (i) If the equipment is to be attached to and becomes  a   part   of   real 
estate.
  (ii) If a motor vehicle is used on a public highway and  is   required   by 
the motor vehicle law to have registration license plates.
  (iii) Gasoline, oil, tires, and parts for a motor  vehicle   specified   in 
paragraph (ii).
  (g) Electricity or gas used directly in producing agricultural products.
When a separate meter is not installed  for   recording   exempt   electrical 
use, an allocation for exemption may be utilized if  the   total   electrical 
consumption exceeds 1,500 kwh per month, or 2,500 kwh per  month  for   homes 
with electric heat during the months of November to March. (See R 205.115)
  (6) Sales of all tangible personal property used to improve real estate, or 
attached to and becoming a structural part of real estate, are taxable.
Sales of tangible personal property consumed or used  in  the   construction, 
alteration, repair, or maintenance of houses, barns,  water  supply  systems, 
fences, drains, and all other structures and appurtenances forming a  part of 
real estate are taxable. Readily movable equipment,  such  as   portable  hog 
houses and feeding troughs, is not considered a part  of  real  estate and is 
not taxable if used in commercial agricultural producing. Sales  of  tangible 
personal property used in clearing land  of  trees,  stumps,   and  rocks  or 
used in ditching, tiling, or otherwise improving real estate  are taxable.
  (7) Sales  of  seed,  fertilizer,  equipment,  and   all   other   tangible 
personal property to anyone  for  use  on  homes   or   other   noncommercial 
gardens, lawns,  parks,  boulevards,  and  golf  courses  or   for   use   by 
landscape gardeners are taxable.
  (8) Every person, including farmers, nurserymen,  and  agriculturists,  who 
sells tangible personal property, other than food at   retail,   to   persons 
for consumption or use, and not for  resale,  shall  obtain   a   sales   tax 
license and pay the tax to the state on the  entire   gross   proceeds   from 
those sales. It is immaterial whether the retail sales  are   made   at   the 
place of production, a roadside  stand,  a  market,  from   a   vehicle,   or 
elsewhere.
  (9) A retail sale of tangible personal property   used   for   agricultural 
production may be deducted from gross proceeds before  computation   of   the 
tax if, at the time of sale, the following certificate is   signed   by   the 
purchaser:

                        CERTIFICATE UNDER AGRICULTURAL
                            PRODUCING EXEMPTION

   The undersigned hereby certifies  that  all  items,  except  as  indicated 
hereon,  are  purchased  for  use  of  consumption  in  connection  with  the 
production  of  horticultural  or  agricultural  products   as   a   business 
enterprise, and agrees to reimburse the seller  the  sales  tax  if  used  or 
consumer otherwise.

DATE _______________________ SIGNED____________________________________
                                        Purchaser

ADDRESS _______________________________________________________________

  Unlawful use of this certificate subjects persons to   the   penalties   of 
the sales tax act.
  (10) A deduction for sales in agricultural producing shall  not  be   taken 
from gross sales for agricultural production in the absence  of  an  executed 
exemption  certificate,  as  specified  in  subrule   (9),   covering    each 
deductible sale. A blanket or so-called standing or continuous certificate is 
not acceptable, except for  continuous  sales  of   utilities   wherein   the 
taxability for consumption does not change from month to month. More  than  1 
item upon which a claim for exemption  is  made   may   be   covered   by   1 
certificate if all the items are purchased at the time of the given  sale.
Taxable and nontaxable sales may  be  listed  on  the   sales   invoice,   if 
taxable items are indicated. For example, the letter  "T"   may   be   placed 
before a taxable item.
  (11) Separate copies of the certificate may be used by  sellers,   or   the 
wording may be imprinted or rubber-stamped on sales  invoices.  All  language 
expressed in the certificate shall  be  used.  The  date   of   purchase   or 
address of the purchaser may be made to appear anywhere  on   the   invoices; 
however, provision for the signature of the  purchaser   shall   follow   the 
wording of the certificate. Selection of the size  of  type   used   in   the 
preparation of certificates is discretionary.
  (12) A deduction for agricultural producing shall not  be   considered   in 
the absence of the seller being in possession of executed certificates.

  History:  1979 AC.


R  205.52   Antiques, works of art, and artists.
  Rule 2. Sales  of  antiques  and  works  of  art   are   taxable,   without 
deductions for trade-in values or expenses of any kind. If  the   seller   is 
regularly engaged in the business of selling antiques or works  of  art,  his 
sales are taxable, regardless of the infrequency of the sales.

  History:  1979 AC.


R  205.53   Auctioneers, agents, factors, and brokers.
  Rule  3.  (1)  Auctioneers,  agents,  factors,   brokers,   etc.,   selling 
tangible personal property on a repeated basis from a  fixed  location,   are 
retailers regardless of whether the sales are on their own behalf  or  for  a 
principal.
  (2) Where an  auctioneer  is  engaged  by  a   manufacturer,   farmer,   or 
householder to act as his  agent  in  selling  tangible   property   at   the 
premises of the manufacturer, farmer, or householder,  the  auctioneer   will 
not be liable for sales tax on such sales unless  the   auctioneer   actually 
purchases the merchandise and then sells the property acquired  on  his   own 
behalf.

  History:  1979 AC.


R  205.54   Automobile and other vehicle dealers.
  Rule 4. (1) Sales of new and used automobiles,  buses,  trucks,   tractors, 
trailers, housetrailers, motorcycles, motor scooters,  and   other   vehicles 
for consumption or use are subject to the tax on the  full  original   retail 
sales price without any deductions for federal  taxes,   freight,   handling, 
delivery, commissions, trade-ins, repossessions,  advertising,  future   free 
service, or any expense incurred as part of the cost of doing business.
  (2) The sales tax shall be paid to the secretary of state   at   the   time 
application for title  is  submitted  by  the   dealer.   Vehicle   transfers 
between individuals are subject to use tax to be paid to  the  secretary   of 
state at the time application for title is submitted by the purchaser.
  (3) When a vehicle is sold by a dealer the same  delivered  selling  price, 
together with the amount of sales tax to  be  paid  to   the   secretary   of 
state, shall be indicated on the invoice, sales order,   the   statement   of 
Michigan retail sales tax paid (form RD 108), and on the   records   of   the 
dealer. Authorized  discounts  are  deductible  only  when   given   to   the 
purchaser at the time of sale and shown on the invoice,  sales   order,   the 
statement of sales tax paid (form RD 108),  and  on  the   records   of   the 
dealer.
  (4) The sale of a vehicle for  delivery  and  use   outside   Michigan   is 
exempt if all the following conditions exist:
  (a) The dealer, in order to consummate a sale, must  deliver   and   assume 
all responsibility for delivery without knowledge that such  vehicle  will be 
returned to Michigan except for a temporary use therein.
  (b) Title to the vehicle passes to the purchaser at a  point  outside   the 
state.
  (c) A Michigan vehicle title and license are not required.
  (d) The dealer's records substantiate each of the 3 preceding facts.
  (5) A dealer may claim exemption on the sale of a new   or   used   vehicle 
when the purchaser will license and title the  unit  for   use   in   another 
state. To obtain such an exemption, the  purchaser  shall   qualify   for   a 
special registration issued by  the  secretary  of  state   and   appear   in 
person, or by power of attorney, at an office of the secretary  of  state  to 
attest that he is  the  bona  fide  purchaser  and  that   the   vehicle   is 
dedicated for use in another state. If the  purchaser   later   returns   the 
vehicle to Michigan for registration, a use tax will apply on  the  value  of 
the vehicle at that time.
  (6) Vehicles which will be used in Michigan for a period of  more  than  30 
days are subject to sales tax irrespective of whether the purchaser may be  a 
legal resident of Michigan or whether the   vehicle   will   be   titled   in 
another state except when purchaser  is  an   active   nonresident   military 
person, a sworn statement of nonresidency is furnished  by   his   commanding 
officer and the vehicle is titled and registered by the  purchaser   in   his 
state of residency or domicile.
  (7) When a vehicle  that  has  been  sold  is  returned   to   the   dealer 
voluntarily by the purchaser and the dealer refunds  the   full   amount   of 
money or other consideration  given  by  the  purchaser,   the   dealer   may 
receive a refund or credit for the amount of sales tax paid  to  the   state, 
but only by submitting an affidavit in the following form:

     **** For application see attached file labeled "Figures" ****

  (8) Upon the sale of a new or used vehicle, the tax applies  to  the  total 
amount of the sale and no deduction is allowed for another  vehicle  taken in 
trade on such transaction. The total   amount   of   the   sale   means   the 
amount received in money, credits, property or other  money's   worth.   When 
credits, property or other money's  worth  becomes  all  or   part   of   the 
consideration, then the dollar value of such credits,   property   or   other 
money's worth must be determined and made a part of the  seller's  record.
For sales tax purposes the trade-in value of a vehicle shall  not   be   less 
than its wholesale dollar value at the time of trade. The dealer may  use, as 
a guide, the wholesale dollar value as shown in the  current  issue   of  any 
nationally  recognized  used  vehicle   guide   for   financial   institution 
appraisal purposes in Michigan. However, when such   traded-in   vehicle   is 
resold, the sales tax applied to the full  amount  of  the   sale   of   such 
traded-in vehicle and not upon  the  amount  originally   allowed   for   the 
trade-in.
  (9) Each franchised new car dealer shall be allowed a  certain  number   of 
tax-free demonstrators in accordance with the total number of  new  cars  and 
trucks sold in a calendar year as follows:

        Zero to 25                      2 tax-free demonstrators
        26-100                          7 tax-free demonstrators
        101-500                         20 tax-free demonstrators
        501 or more                     25 tax-free demonstrators
                                (Maximum allowable for each calendar year)

  (10) To qualify as a demonstrator the vehicle shall  be   titled   in   the 
name of a dealer upon submission of an affidavit in the following form:

     **** For application see attached file labeled "Figures" ****

  (11) Vehicle dealers may also be engaged  in  the   business   of   leasing 
vehicles wherein the use tax will  apply  on  rental  income.   It   is   not 
necessary that a dealer have a separate use tax registration to report tax on 
such rentals unless the ownership of the leasing company  is  different  from 
that of the dealership. It is  required,  however,  that  the  rental  income 
be reported in the use tax column of the combined sales and use  tax  return. 
Dealers leasing vehicles to salesmen or employees will be required  to  remit 
use tax on a base rental figure which cannot be  less   than   their  monthly 
costs of  ownership.  This  would  include  depreciation,   finance  charges, 
insurance charges and any  other  incidental  costs  involved   in  operating 
the vehicle. (See R 205.132--Rentals.)
  (12) The annual surety bond required of each new and  used  vehicle  dealer 
under the Michigan vehicle  code  shall  provide   for   indemnification   or 
reimbursement to the state for sales or use tax deficiencies for the  year in 
which the bond was in effect upon the entry of a final  judgment  in  a court 
of record against the dealer.

  History:  1979 AC.


R  205.55   Automotive parts dealers.
  Rule 5. (1) Sales at retail of automobile parts for  consumption   or   use 
are taxable. (See R 205.117--Repairers and servicers.)  Every   retailer   of 
automotive parts such as a garage, car dealer, service  station,   etc.,   is 
required to have a sales tax license. Sales for resale by  a  wholesaler   to 
such a licensed retailer are exempt. However, the wholesaler  is  liable  for 
the tax when he sells to the consumer or user, including a  person   with   a 
sales tax license who purchases automobile parts or  tools,   equipment   and 
supplies for consumption or use. For instance, the sale of piston rings to  a 
duly licensed garage operator is exempt if the rings are  to  be  resold over 
the counter to a person who will install  them;  sold   in   connection  with 
repair work for a customer;  or  installed   in   a   used   car   that   the 
retailer  has  purchased  or  taken  as  a  trade-in,    which    is    being 
reconditioned for sale. However, the sale of the rings to  the  retailer   is 
taxable if he installs them in a vehicle kept for his own use,  such   as   a 
wrecker used in his business or a car kept for use by his family.
  (2) All sales not for resale to a person not having a  sales  tax   license 
are taxable, regardless of what he buys, the nature of his  business  or  the 
manner in which he uses the material.
  (3) Any amount allowed or allowable as a trade-in, exchange  or  deposit is 
part of the gross proceeds subject to tax.

  History:  1979 AC.


R 205.56  Bakeries
  Rule 6. (1) Sales of bakery  products  for  home  consumption  are  exempt, 
except that sales of bakery products which are "prepared food," as defined in 
MCL 205.54g(4), are taxable.
  (2) Sales of bakery items described in MCL 205.54g(5)(d) are not  sales  of 
"prepared food" and are exempt.  (See R 205.136)
  (3) Tangible personal property is taxable, unless  that  tangible  personal 
property becomes an ingredient or component part of bakery products  produced 
for sale by a retailer for retail sale.

  History:  1944 AC; 1954 AC; 1979 AC; 2007 AACS.


R  205.57   Barber and beauty shops.
  Rule 7. (1) Barber or beauty shop operators  are   engaged   primarily   in 
rendering personal services not subject to tax. Sales  of  tangible  personal 
property to them are  taxable.  Sellers  of   cosmetics,   tonics,   lotions, 
shaving soaps, barber tools and supplies, barber  chairs,   shop   equipment, 
furniture and fixtures and other tangible personal  property  purchased   for 
use in barber and beauty shops are required to remit the tax thereon.
  (2) However, if a barber or beauty shop operator  sells  tangible  personal 
property separately from the rendering of personal  services,   these   sales 
are taxable but he may deduct in his tax return the amount   on   which   tax 
was paid at the time of purchase.

  History:  1979 AC.


R  205.58   Beer, wine, and liquors.
  Rule 8. (1) Sales of beer, wine, and spirituous  liquors  for   consumption 
and use are taxable. The seller shall also  include  in   the   gross   sales 
reported on his tax return all other retail sales.
  (2)  Sales  of  spirituous  liquor  and  wine   by   specially   designated 
distributors shall be included in  total  gross  sales   reported   by   such 
distributors. Sales of spirituous liquor and wine by a club  to  its  members 
and guests are subject to the  tax  on  the  full  retail   price   with   no 
deduction for the cost of such liquor and wine.  (See  R  205.68--Containers, 
cartons, and wrapping materials.)

  History:  1979 AC.


R  205.59   Rescinded.

  History:  1944 AC; 1954 AC; 1979 AC; 1996 AACS; 1997 AACS.


R  205.60   Bookbinders and paper cutters.
  Rule  10.  (1)  Persons  engaged  in  the  business   of   binding   books, 
magazines, and printed  matter  for  others,  wherein  the   value   of   the 
tangible property transferred is negligible, are considered to be  selling  a 
service and tax applies on the cost  of   the   equipment,   materials,   and 
supplies purchased.
  (2) If a bookbinder binds his own printed matter and  sells  the   finished 
products to users or consumers or makes and sells   loose-leaf   binders   or 
other articles at retail, he shall remit the tax on   the   entire   receipts 
from such sales.
  (3) A  person  engaged  in  the  business  of   paper   cutting,   folding, 
gathering, padding, or punching circulars, office forms,  or  other   printed 
matter belonging to others renders nontaxable services.  Sales  of   tangible 
personal  property  to  such  persons  for  use  or   consumption   in    the 
performance of these services are taxable.

  History:  1979 AC.


R  205.61   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.62   Airplanes and airlines.
  Rule 12. (1) The sales of new and used aircraft are subject to sales tax on 
the full selling price without any deductions for expenses incurred  as  part 
of the cost of doing business. Trade-ins are not deductible.
  (2) Gasoline, jet fuel, oil, repair parts, and  other   tangible   personal 
property sold and delivered in Michigan  for  operation   of   aircraft   are 
subject to sales tax regardless of where the plane will be flown or  used.
Tax applies whether such sales are to private or commercial airlines.
  (3) An airplane retailer is required to remit  sales  tax   on   sales   of 
planes solicited through his sales organization regardless  of  whether  such 
sales are on his own behalf or on behalf of  the   plane   owner.   So-called 
"brokerage" transactions are taxable on the full selling price.
  (4)  Aircraft  purchased  for  consumption  or  use   in   Michigan    from 
individuals or retailers outside the state of Michigan are subject to  the 4% 
use tax.
  (5) A purchaser of airplanes who is licensed as a  retailer  of  airplanes, 
who uses such property solely for demonstration or display and  for  which no 
charge is made while holding it for   sale   in   the   regular   course   of 
business, is not required to pay a tax on account of such use.
  (6) A retailer of aircraft who purchases new or used   aircraft   for   the 
primary  purpose  of  demonstration,  who  is  licensed   by   the   Michigan 
department of revenue as  an  aircraft  retailer  and,   further,   who   has 
secured registration certificates for  each  aircraft   from   the   Michigan 
department of aeronautics, shall pay a use tax on all  revenue  derived  from 
the utilization of such aircraft or on the amount   taken   as   depreciation 
charges plus operating costs, whichever is greater, during  the  period  such 
property is held in inventory and retained as a valid demonstrator.
  (7) Sales tax applies to the retail sale of the  airplane   following   its 
use for demonstration, display, or other  use.  This  is   a   distinct   and 
separate transaction from the prior  election  to  convert   the   plane   to 
personal use. Thus, sales tax must be paid  by  the  dealer   on   the   full 
selling price without deduction for use tax previously paid.
  (8) The transfer of an aircraft registration from one  individual  owner to 
another is subject to imposition of use  tax.  Such   tax   shall   be   paid 
directly to the Michigan department of revenue.  (See   R   205.135--Isolated 
vehicle, aircraft, watercraft, and snowmobile transfers.)

  History:  1979 AC.


R  205.63   Cemeteries and crematories.
  Rule 13. (1) Sales of tangible personal property  (boxes,  urns,   markers, 
vases, flowers, etc.) by cemeteries and crematories are taxable.
  (2) The sale of lots, crypts, and  niches  are  considered   to   be   real 
estate and are not taxable.
  (3) Sales not for resale to  cemeteries  and  crematories  are  taxable.
These include materials and supplies used   in   construction,   maintenance, 
improvement, or alteration  of  buildings  and  grounds,   such   as   seeds, 
plants, fertilizer, etc.
  (4) Sales of equipment to cemeteries and crematories  for  consumption  and 
use are taxable.

  History:  1979 AC.


R  205.64   Chemicals.
  Rule 14. (1) Sales of chemicals are taxable when  sold   to   persons   who 
consume or use them in experimental or development work not connected with an 
industrial process. Chemicals used in the rendering of services, repair work, 
and other nonindustrial activities are taxable.
  (2) Sales of  chemicals  are  not  taxable  when  consumed   or   used   in 
industrial processing. (See R 205.90--Industrial processing.)

  History:  1979 AC.


R  205.65   Churches and houses of religious worship.
  Rule 15. (1) Sales, not for resale, to regularly  organized  churches   and 
houses of religious worship are  not  subject  to  the  tax   if   the   item 
purchased is paid for by the church from church funds;  however,   sales   of 
property used in a commerical enterprise by a church or  house  of  religious 
worship, and sales of vehicles licensed for use on   the   public   highways, 
are taxable. Sales of tangible personal property, including sales of meals in 
a commercial activity, when conducted  as  a  retail   business   for   gain, 
benefit, or advantage, direct or indirect, are taxable, and   a   sales   tax 
license shall be obtained for the purpose of reporting and  paying  the   tax 
due.
  (2) Sales to religious organizations and societies   composed   of   church 
members are taxable.
  (3) Sales of merchandise to be given as prizes  in  games   of   skill   or 
chance are taxable.
  (4) Sales to all church employees for their own use are taxable.
  (5) If an exemption is to  be  claimed,  the  seller,  at   the   time   of 
transfer of the tangible personal property, shall retain, as  part   of   the 
seller's  records,  an  executed  exemption  certificate   which   reads   as 
follows:

                CERTIFICATE TO BE EXECUTED WHEN TAX EXEMPT SALE
                  IS MADE TO AN EXEMPT INSTITUTION OR AGENCY

  The undersigned hereby certifies that the item or items being purchased are 
to be used or consumer  in  connection  with  the  operation  of  the  exempt 
institution for agency named in  the  space  provided  below,  and  that  the 
consideration for this purchase  moves  from  the  funds  of  the  designated 
institution or agency.
In the event this claim is disallowed, the transferee promises  to  reimburse 
the seller for the amount of the tax involved.

                        ___________________________________________________
                        Name of exempt institution or agency

DATE _______________________________

                        ___________________________________________________
                        Signature and title of person making certification

  History:  1979 AC.


R  205.66   Clipping bureaus.
  Rule 16. (1) Sales of press clippings are taxable. If  a   press   clipping 
bureau merely furnishes special information derived from  press  clippings to 
which it retains title, its receipts  are   deemed   to   be   derived   from 
rendering service and not taxable.
  (2) Sales of lists of names, statistics, and other   information   in   the 
form of cards, sheets, or other tangible personal property are taxable.

  History:  1979 AC.


R  205.67   Coal and other fuel dealers.
  Rule 17. (1) The sale of coal, coke, wood, fuel   oil,   liquid   petroleum 
gas, and other fuel to consumers or users is taxable on the  basis   of   the 
delivery price, including all transportation charges.  However,  a   separate 
charge for  wheeling  or  carrying  coal  from  the   residence   street   of 
purchaser to his bin or cellar is deemed to be a service charge  and  is  not 
taxable since such services are beyond the trade practice  of  dumping   from 
vehicle into purchaser's bin.
  (2) The sale of equipment, tools, materials, supplies,  etc.  consumed   or 
used in handling and preparing fuel for market or delivery is taxable.
  (3) Sales of bottle  gas  equipment  to  dealers   and   distributors   are 
subject to sales or use tax except when purchased for rental   to   the   gas 
user with use tax then to be paid on the rental charge.   For   purposes   of 
determination, only those rentals which are  collected   under   a   specific 
written rental agreement carrying a reasonable rental  rate  consistent  with 
the actual cost of the equipment will be considered as a  rental  subject  to 
use tax. All other use of bottle gas equipment will be subject  to   tax   at 
the time of purchase. (See R 205.132--Rentals.)
  (4) The sale of fuel is taxable if for  consumption  or   use   by   ships, 
tugs, dredges, barges, fishing boats, and  other   watercraft,   either   for 
commercial, pleasure, or private use, irrespective of where  the  buyer   and 
seller are located or whether the purchaser, subsequent to  the  delivery  of 
such property within the state, transports it out of the state or uses  it in 
interstate commerce. Sales of bunker and  galley  fuel  sold   for   use   by 
certain vessels with a registered tonnage of 500 tons or more, and engaged in 
interstate commerce, are exempt. Sales  for  use  of  vessels  operating   in 
foreign commerce are taxable.
  (5) The sale of fuel to public utilities to be used or  consumed   in   the 
manufacturing of power, heat, light or gas to be sold  at   retail   is   not 
taxable.
  (For sales of fuel for industrial processing purposes, see R 205.90.)

  History:  1979 AC.


R  205.68   Containers, cartons, and wrapping materials.
  Rule 18. (1) "Containers"  means  the  articles  and   devices   in   which 
tangible personal property is placed for shipment and   delivery,   such   as 
wrapping materials, bags, cans, twines, gummed tapes,  barrels,  boxes,  tote 
boxes, pallets,  racks,  bottles,  drums,  carboys,   cartons,   sacks,   and 
materials from which such containers are manufactured.
  (2) Sales of containers to persons  regularly  engaged   in   rendering   a 
service are taxable.
  (3) Sales of containers to persons for resale are exempt.  If  a   separate 
charge is made for the sale of a container to a  person,   other   than   for 
resale, the receipts from the sales are taxable.
  (4) Sales of containers to a person, such as  a  manufacturer,  wholesaler, 
jobber, or retailer, who uses the containers to ship or  deliver  goods,  and 
who retains the ownership or legal right of possession  of  the   containers, 
are taxable.
  (5) Sales or purchases, for a single use only,   of   bracings,   blocking, 
skidding, shoring, and other materials, commonly known  as   "dunnage,"   are 
taxable when used in the shipment of a product to a customer.
  (6) Deposits on a returnable container for a beverage, or the deposit on  a 
carton or case which is used for  returnable  beverage  containers,  are  not 
taxable when sold in conjunction with a sale of a beverage.

  History:  1979 AC.


R  205.69  Rescinded.

  History:  1979 AC.


R  205.70   Consignments.
  Rule 20. (1) Sales of tangible personal property  consigned,  delivered, or 
entrusted to a retailer for the purpose of  sale  are  taxable  on  the total 
retail sale price without deduction for any expense such as storage,  rental, 
commission, repairs, etc. It is immaterial whether such goods  are  different 
from those sold in the regular business of the seller.
  (2) Where a retailer selling tangible  personal   property   belonging   to 
another has the right to withhold or claim a portion of the  sale  price   as 
his compensation, he shall include the total amount received from the sale of 
such goods in his tax return.

  History:  1979 AC.


R  205.71   Contractors.
  Rule  21.  (1)  "Contractor"   includes   only    prime,    general,    and 
subcontractors directly engaged in the business  of  constructing,  altering, 
repairing, or improving real estate for others.
  (2) Contractors are consumers of the materials used by them.  All  sales to 
or purchases by contractors  of  tangible  personal  property  are   taxable, 
except when affixed and made a  structural  part  of  real   estate   for   a 
qualified  exempt  nonprofit  hospital  or  a   nonprofit   housing    entity 
qualified as exempt under the  sales  and  use  tax   acts.   All   materials 
consumed in the performance of such contracts and not affixed  and   made   a 
structural part of real property  are  taxable.   Retailers   making   exempt 
sales shall obtain the following exemption certificate:

                            SALES OR USE TAX

   Certification is made that the merchandise specified in the instrument  to 
which this is made part will become part of the  completed  structure  for  a 
nonprofit hospital or a nonprofit housing entity qualified  as  exempt  under 
the sales and use tax acts.
   Should determination be made that any or all of this merchandise  is  used 
for a taxable purpose, it is agreed that tax, penalty, and interest  will  be 
paid to the seller.

                                __________________________________________
                                Name of exempt entity

                                __________________________________________
                                Name of contractor

Signed by _______________________________  Dated _________________________

  (3) Sales and rentals of tools, machinery, and  equipment  to   contractors 
are taxable.
  (4) Where  a  contractor  is  exclusively  engaged   in   the   contracting 
business and makes no direct sales to other contractors  or   consumers,   he 
does not need a  sales  tax  license.  Such   nonlicensed   contractors   are 
required to maintain a use tax registration and pay the  use   tax   to   the 
state on purchases made from out-of-state sellers.
  (5) Where a contractor is not engaged  exclusively   in   the   contracting 
business  but  makes  sales  of  tangible  property  at   retail   to   other 
contractors and consumers, he shall secure a sales tax   license   and   file 
returns to report sales on such transactions. Use tax  due  on   out-of-state 
purchases and on merchandise acquired for resale  and   later   consumed   in 
contract operations shall be reported on the combined sales   and   use   tax 
return.
  (6) Where a manufacturer affixes his product to real estate for  others, he 
qualifies as a contractor and shall remit  use  tax  on  the  inventory value 
of the property at  the  time  the  property  is  converted  to  the contract 
 which   value   shall    include     all     costs     of     manufacturing, 
fabricating, and processing.
  (7) A contractor purchasing tangible personal property  for  affixation  to 
realty where delivery is taken in Michigan is subject to sales or use  tax on 
the purchase price whether the improvement or  construction  of  realty takes 
place within or without Michigan, except as noted in subrule (2).

  History:  1979 AC.


R 205.72   Milk and dairy products.
  Rule 22. (1) The commercial  production  of  milk,  for  sale,  by  persons 
regularly engaged in business as farmers or agriculturists, is set forth in R 
205.51.
  (2) Transportation of milk from the place where it is produced for sale  by 
persons regularly engaged in business as farmers or agriculturists,  as  well 
as the receiving and storage of the milk at the processing plant, is taxable.
 Processing includes all necessary operations performed on the milk prior  to 
shipment from the plant.  Sales of tools and equipment used directly  in  the 
processing of milk or milk  products,  and  lubricants  and  other  materials 
consumed or used in the repair of maintenance  of  that  equipment,  are  not 
taxable.  Sales of  tangible  personal  property  consumed  or  used  in  the 
construction, alteration, repair, or improvement of buildings and grounds are 
taxable.
  (3) Sales of equipment used or consumed in the transportation  or  delivery 
of milk and milk products are taxable, including vehicles, cases, crates, and 
property used for the maintenance and operation of that equipment.
  (4) Sales of milk bottles and milk cans to dairies for  use  in  processing 
milk for sale at retail by others, including washing  machines  and  cleaning 
compounds used in  connection therewith by such processors, are  not  subject 
to tax.   Sales  of  milk  bottle  crates  or  cases  for   transportation,   
receiving, storage,  or  delivery  are subject to tax.  Sales  of  milk  cans 
to farmers or agriculturists for use in cooling  milk  prior  to shipment  to 
dairies are not taxable.

  History:  1979 AC; 2007 AACS.


R  205.73   Directories.
  Rule 23. (1) Sales of  business,  telephone,  city,   and   other   similar 
directories are taxable.
  (2) When such directories are given without charge  to   users,   the   tax 
applies to the cost when sold to the donor.

  History:  1979 AC.


R  205.74   Educational institutions.
  Rule 24. (1) Sales, not for resale, to  regularly   organized   educational 
institutions not operated for profit are not taxable.   "Not   operated   for 
profit," as used in this rule, means operated by an entity of  government,  a 
regularly organized church, religious or fraternal  organization,  where  the 
income from the operation does not inure,  in  whole  or  in  part,  to   the 
benefit of individuals or private shareholders,   directly   or   indirectly, 
and where the activities of the entity are carried on  exclusively  for   the 
benefit of the public at large and  are  not  limited   to   the   advantage, 
interests, or benefits of its members or a  restricted  group.   "Educational 
institution," as used in this rule,  means  an   institution   of   learning, 
organized solely for educational purposes, which maintains   a   faculty   of 
qualified instructors, and teaches regular, continuous  courses   of   study, 
and which confers upon students a recognized diploma after  completion  of  a 
specific curriculum.
  (2) Sales of athletic equipment to  a   regularly   organized   educational 
institution for consumption  or  use  are  not  taxable   if   the   athletic 
activities are  under  the  management  and  control   of   the   educational 
institution  and  the  entire  receipts  are  expended   for   athletic    or 
educational purposes.
  (3) Educational institutions which are  not  operated   for   profit,   and 
which operate lunchrooms, cafeterias, or dining rooms   for   the   exclusive 
use of bona fide enrolled students,  are  not  taxable.   Whenever   such   a 
lunchroom,  school  cafeteria,  or  dining  room   sells   to    nonstudents, 
including teachers, the institution operating it is subject to  the  tax   on 
those sales.
  (4) Sales of class pins, rings, and similar articles   are   taxable   when 
paid for, directly or indirectly, by the students.
  (5) Sales to educational  associations,   parent   teacher   organizations, 
teachers, and other personnel of an educational institution  are  taxable.
  (6) If an exemption is claimed, then at the time of the  transfer  of   the 
tangible personal property, the  seller  shall  retain,  as   part   of   the 
seller's  records,  an  executed  exemption  certificate   which   reads   as 
follows:

                CERTIFICATE TO BE EXECUTED WHEN TAX EXEMPT SALE
                  IS MADE TO AN EXEMPT INSTITUTION OR AGENCY

   The undersigned hereby certifies that the item or  items  being  purchased 
are to be used or consumed in connection with the  operation  of  the  exempt 
instutution or agency  named  in  the  space  provided  below  and  that  the 
consideration for this purchase  moves  from  the  funds  of  the  designated 
institution or agency.  In the event this claim is disallowed the  transferee 
promises to reimburse the seller for the amount of tax involved.

                        _________________________________________________
                        Name of exempt institution or agency

Date ___________________________

                        __________________________________________________
                        Signature and title of person making certification

  (7) Schools operating a kindergarten through twelfth  grade   program   are 
not required to pay tax on the sales of textbooks  to  enrolled  students.
Sales of textbooks to nonstudents are  taxable.  Sales   of   yearbooks   and 
annuals to both students and nonstudents are taxable.

  History:  1979  AC.


R  205.75   Employee associations and organizations.
  Rule  25.  Organizations  of  employees  which   sell   tangible   personal 
property of any kind to their members or others must procure  a   sales   tax 
license and pay the tax on such sales.

  History:  1979 AC.


R  205.76   Employer sales to employees.
  Rule 26. (1) When an employer sells tangible personal   property   to   his 
employees, permits them to purchase through his  organization   or   to   buy 
from others on discounts available to him or in any   other   manner   obtain 
goods through him, such sales are taxable. The employer  shall  include  such 
sales in his tax return  and  pay  the  tax  regardless   of   whether   such 
articles are charged to the employee.
  (2) If the employer is exempt from the tax on his  regular   business,   he 
must apply for a license and pay the tax on such sales.
  (3) When an employer purchases tangible property for  free  distribution to 
employees, the tax applies to the sale of  such  property  to  him.  (See   R 
205.112--Premiums and gifts.)

  History:  1979 AC.


R  205.77   Fairs, circuses, carnivals, and other public exhibitions.
  Rule 27. (1) Persons conducting games  of  chance  or   skill   at   fairs, 
carnivals, circuses,  expositions,  celebrations,   bazaars,   picnics,   and 
similar places and delivering merchandise as prizes are  deemed  consumers of 
such articles.  All  sales   to   them   of   tangible   personal   property, 
including  merchandise,  devices,  apparatus,    furnishings,    and    other 
equipment are taxable. Credit cards and extension of credit  in   any   form, 
given as prizes, will be deemed merchandise and taxable, unless  the  tax  is 
paid at the time the credit is exchanged for merchandise.
  (2) Concessionaires at fairs, circuses, carnivals, etc.,  shall  procure  a 
sales tax license and pay the tax  on  all  their  sales   at   retail.   The 
department reserves the right to require a concessionaire to  file  a  report 
and pay the tax at the close of any business day or period  during  which  he 
operates.
  (3) Persons operating or sponsoring  a  fair,   circus,   carnival,   etc., 
shall be held liable, as the principal, for the tax upon the sale  or  use of 
tangible personal property sold, given as prizes or otherwise  disposed of by 
a person engaged  in  business  without  a  sales   tax   license   at   such 
exhibition, unless the tax is paid by the dispenser of such property.

  History:  1979 AC.


R  205.78   Farmers, market masters, and other marketers.
  Rule 28. (1) Farmers, market masters, and  other  persons   who   sell   at 
retail tangible personal property, other than food for  home  consumption  or 
use, shall secure a license and pay the tax on those sales.
  (2) Sales of the property specified in subrule (1) for  resale  to  persons 
possessing a sales tax license are not taxable.
  (3) Where a person selling other than food at retail  rents   or   occupies 
space in a general market or other  place  operated  for   the   purpose   of 
transacting sales, that person shall secure a sales tax  license,  and  shall 
pay the tax on the sales made by that person. If the seller does not  have  a 
sales tax license, the market master, as the principal,  is  responsible  for 
paying the tax on the sales made by that person.

  History:  1979 AC.


R  205.79   Federal and state governments.
  Rule 29. (1) Sales to the United States government, the   state   and   its 
political subdivisions, departments and institutions are   not   taxable   if 
such sales are ordered on the prescribed  respective   government   form   or 
purchase order and are paid for directly  to  the  seller   by   warrant   on 
government funds.
  (2) When such sales are made without the required   purchase   order   form 
being supplied in advance, the sale is taxable but the  licensee  may   later 
take credit for the tax payment upon his subsequent   receipt   of   purchase 
order and warrant covering such sales.
  (3) Sales to governmental employees for their own consumption  or  use  are 
taxable.
  (4) The tax applies on sales by private entrepreneurs on federal  areas, if 
the sale is not made directly to an exempt federal instrumentality.
  (5) The tax does not apply on sales to the regular   departments   of   the 
United States government. Exempt  also  are  sales   to   federal   agencies, 
offices,  establishments  and  instrumentalities  which    the    state    is 
prohibited from taxing under  the  constitution  or  laws   of   the   United 
States.  Address  inquiries  to  the  department  of  revenue   as   to   the 
taxability of sales to specific federal agencies,  giving  full   information 
concerning the transaction.
  (6) A person subject to a tax under this act need  not   include   in   the 
amount of his gross proceeds used for  the  computation  of   the   tax   any 
proceeds of his business derived from sales  to  the   United   States,   its 
unincorporated agencies and instrumentalities, any  incorporated  agency   or 
instrumentality of the United States wholly owned by the United States  or by 
a corporation wholly owned by the United States, the American red  cross  and 
its chapters and branches,   and   the   state   or   its   departments   and 
institutions or any of its political subdivisions.
  (7) Sales to and purchases by national banks are taxable.

  History:  1979 AC.


R  205.80   Florists and nurserymen.
  Rule 30. (1) Florists and nurserymen regularly engaged in  the  business of 
selling tangible personal property  at  retail,  such  as   flowers,   trees, 
plants, shrubs, seeds, grass, etc., are liable for the tax  on  their   gross 
sales. The tax is applicable irrespective of where or how  such   items   are 
grown or produced and regardless of  whether  sold  from   a   store,   curb, 
market, greenhouse, farm, or other place. (Sales  for  commercial  production 
explained in R 205.51, Agricultural producing.)
  (2) The following apply  to  sales  made   through   telegraphic   delivery 
association or in similar manner:
  (a) On all orders taken by a  Michigan  florist  and   telegraphed   to   a 
second florist, either in Michigan or to a point outside   the   state,   the 
florist taking the order is liable for the tax.
  (b) Where Michigan florists receive telegraphic  instructions  from   other 
florists located either within or outside of Michigan for  the  delivery   of 
flowers, the florist receiving the telegraphic instructions   is   not   held 
liable for the tax with respect to any proceeds which he  may  realize   from 
the transaction.
  (3) Where a  florist  or  nurseryman  contracts  to   furnish   and   plant 
shrubbery, plants, trees, etc., for others he is deemed   to   be   improving 
real estate and use tax, based on the  fair  market  value   of   the   stock 
consumed, will apply.

  History:  1979 AC.


R  205.81   Foreign commerce.
  Rule 31. (1) The tax does not apply to export sales when,  as  a  necessary 
incident to the contract of sale, the exporter must and  does   deliver   the 
goods to the purchaser at a foreign destination, or is bound, under  terms of 
contract of sale, to place the goods in  the  hands  of  a   common   carrier 
consigned to the buyer at a foreign destination. It  is  immaterial   whether 
title to the goods passes upon delivery to the carrier or  upon  arrival   of 
the goods at their destination.
  (2) A sale to an exporter is not taxable if the   contract   requires   the 
seller to deliver the goods on board ship or in  the  hands   of   a   common 
carrier consigned on board ship.
  (3) The principal factors giving evidence to a shipment  for   export   are 
that the foreign destination be shown on the container of such  goods  and on 
a bill of lading  or  other  evidence   of   shipment   to   a   carrier   or 
forwarder acting for the shipper or carrier and that the  goods   remain   in 
the original, unbroken container until arrival at destination.
  (4) The tax will apply to sales made by an importer  of  tangible  personal 
property imported into the state from a foreign country in like manner and to 
the same extent as sales  made   by   a   retailer   of   domestic   tangible 
personal property.

  History:  1979 AC.


R  205.82   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.83   Gasoline stations and other motor fuel retailers.
  Rule 33. (1) The sale of motor fuel, oil, grease,  antifreeze,  and   other 
tangible personal property  for  use  or  consumption   in   motor   vehicles 
operated on public highways or for any other use not specifically exempted by 
law is taxable. Such sales are  taxable   on   the   basis   of   the   total 
receipts, without deduction for labor or other expenses or losses.
  (2) The sale of aviation gasoline, turbojet fuel, jet   fuel,   and   other 
fuels, oils, and lubricants to commercial airlines and to other  operators of 
aircraft is taxable on the total receipts, without deduction  for   labor  or 
other expenses or losses.
  (3) The sale of fuel and lubricants for use in  commercial  fishing  craft, 
pleasure craft, and boats under 500 tons is taxable.
  (4) The sale of equipment, material, and supplies consumed or  used  by   a 
person in the business of marketing gasoline and other petroleum  products is 
taxable.
  (5) The sale of chassis lubricants, wheel greases,   and   other   products 
sold to a gasoline station operator or to others for use  in   performing   a 
service is taxable.
  (6) Motor fuel retailers may take a deduction  from   gross   proceeds   on 
their sales tax returns for  the  state  motor  fuel  taxes   paid   by   the 
retailer to the state or to the distributor.
  (7) The manufacturers' federal excise tax on  gasoline,  lubricating  oils, 
tires, and tubes shall  be  included  as  part  of   the   retailers'   gross 
proceeds subject to tax.
  (8) Dealers paying retailers' federal  excise  taxes   on   special   motor 
fuels, such as diesel fuel or liquid petroleum gas, are   not   required   to 
include the excise taxes as part of the gross proceeds   subject   to   sales 
tax.
  (9) Sales or use tax does not apply on sales or purchases  of  diesel  fuel 
for use in passenger vehicles of 10 or more  capacity   operated   for   hire 
under a certificate issued by the  public  service   commission   when   such 
vehicles operate over regularly scheduled routes in  this  state.   Exemption 
does not prevail for charter trips.

  History:  1979 AC.


R  205.84   Golf and country clubs.
  Rule 34. (1) Sales of tangible personal property  by   golf   and   country 
clubs are taxable and such clubs must obtain  and  maintain   a   sales   tax 
license.
  (2) Sales, not for resale, to these clubs are  taxable,  including   seeds, 
plants, fertilizer, etc., used to  improve  the   grounds,   and   equipment, 
supplies   and   other   tangible   personal   property.    (See    also    R 
205.116--Restaurants, hotels,  lunchrooms,  and   other   establishments;   R 
205.95--Leased departments; and R 205.98--Meals.)

  History:  1979 AC.


R  205.85   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.86   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.87   Hospitals.
  Rule 37. (1) Sales, not for resale, of  tangible   personal   property   to 
hospitals not operated for profit, are not taxable. A  "hospital,"  for   the 
purpose of this rule, means only a  separately   organized   institution   or 
establishment, the  primary  purpose  of  which  is   to   provide   medical, 
obstetrical, psychiatric, or surgical attention  and   nursing   to   persons 
requiring the same. The sales tax exemption for sales to a hospital  which is 
 not  operated  for  profit   does   not    apply    to    an    institution, 
establishment, or organization that is not a hospital   as   defined   above, 
notwithstanding the fact that it may not  be  operated   for   profit.   "Not 
operated for profit" means that the income or benefit from  the  operation of 
the hospital does not inure, in whole  or  in   part,   to   individuals   or 
private shareholders, directly or indirectly, and that  the   activities   of 
the entity or agency are carried on exclusively for  the   benefit   of   the 
public at large, and are not limited  to  the   advantage,   interests,   and 
benefits of its members or a restricted group.
  (2) If an exemption is claimed, then, at the time  of   transfer   of   the 
tangible personal property, the  seller  shall  retain,  as   part   of   the 
seller's  records,  an  executed  exemption  certificate   which   reads   as 
follows:

                CERTIFICATE TO BE EXECUTED WHEN TAX EXEMPT SALE IS
                   MADE TO AN EXEMPT INSTITUTION OR AGENCY

  The undersigned hereby certifies that the item or items being purchased are 
to be used or consumed  in  connection  with  the  operation  of  the  exempt 
institution or agency  named  in  the  space  provided  below  and  that  the 
consideration  for  the  purchase  moves  from  the  funds  of  the  designed 
institution or agency.  In the event this claim is disallowed, the transferee 
promises to reimburse the seller for the amount of tax involved.

Date __________________ _________________________________________________
                        Name of exempt institution or agency

                        _________________________________________________
                        Signature and title of person making certification

  (3) A hospital claiming an exemption shall  prove  by   its   articles   of 
association and bylaws that it is not directly or  indirectly  operated   for 
profit, and that its income and assets may not inure, in whole  or  in  part, 
directly or indirectly, to the benefit of  any   individuals,   members,   or 
private shareholders whatsoever. A copy of the articles  of  association  and 
bylaws shall be submitted to the revenue division  of   the   department   of 
treasury for determination as to whether the hospital is  entitled   to   the 
exemption.
  (4) Sales by hospitals which are taxable retail sales  include,   but   are 
not limited to, the following:
  (a) Meals sold to visitors and employees.
  (b) Nonprescription drugs, nonprescription medicines, and supplies  sold to 
patients, doctors, employees, and the general  public  for   consumption  off 
the premises.
  (c) Sales of cosmetics, souvenirs, and other similar merchandise.
  (5) Sales by hospitals which are not taxable retail  sales   include,   but 
are not limited to, the following:
  (a) Drugs, medicines, insulin, and meals furnished patients and consumed on 
the premises.
  (b)  Charges  for  oxygen,  blood  plasma,  and   blood   administered   to 
patients.
  (c) Dressings and bandages applied in the hospital.
  (d) Charges for X-ray  radiation  treatments,   braces,   splints,   cases, 
therapeutic diets, and intravenous solutions furnished patients.
  (e) Charges for anesthesia supplies and laboratory tests.
  (f) Sales of eyeglasses prescribed or dispensed to   correct   a   person's 
vision by an ophthamologist, optometrist,  or  optician,   and   repair   and 
replacement parts for such eyeglasses. (See R 205.104.)
  (6) Hospitals making sales at retail shall be licensed and  shall  pay  the 
sales tax, where applicable, whether organized for profit or not.

  History:  1979 AC.


R  205.88   Hotels, motels, cabins, and camps; accommodations.
  Rule 38. (1) Effective September 1, 1959, a 4% use  tax   is   imposed   on 
rental receipts from rooms or lodgings furnished by  hotel   keepers,   motel 
operators and other persons furnishing accommodations that  are  available to 
the public on the  basis   of   a   commercial   and   business   enterprise, 
irrespective  of  whether  membership  is  required   for    use    of    the 
accommodations.
  (2) The following rentals are exempt from the tax:
  (a) Rooms or accommodations rented for a continuous period of more  than  1 
month to the same tenant.
  (b) Rooms or  accommodations  furnished  by   hospitals,   nursing   homes, 
convalescent  homes  and  mental  institutions   or   similar    institutions 
dedicated to the care and treatment of the sick under medical supervision.
  (c) Rooms or accommodations furnished by  summer  camps   operated   by   a 
legally qualified nonprofit corporation or association  and  camps   licensed 
under Act No. 47, Public Acts of 1944, as  amended,   administered   by   the 
social welfare department.
  (d) Rooms or accommodations furnished directly to  the  federal  government 
provided exemption certificates are executed as issued  by  the   comptroller 
general.
  (e) Rooms or  accommodations  furnished  directly  to   state   and   local 
governmental entities provided payment for such accommodations  are  made  to 
the seller by a prescribed warrant on government funds.
  (f) Rooms or accommodations  furnished  directly   to   legally   qualified 
nonprofit corporations  or  associations,  as  prescribed   in   section   4, 
subsection (j), of the use tax act, and regularly  organized   churches   and 
houses of religious worship. Organizations and societies  of  church  members 
are taxable.
  (3) As used in the act "hotel" or "motel" means a building  or   group   of 
buildings  in  which  the  public  may   obtain    accommodations    for    a 
consideration, including, without limitation, such  establishments  as  inns, 
motels, tourist homes, tourist houses or units,  lodging  houses,   apartment 
hotels, rooming houses, camps, resort lodges  and  cabins   and   any   other 
building or group of buildings in which accommodations   are   available   to 
the public.
  (4) All tangible  personal  property  purchased  by  a   hotel   or   motel 
operator is subject to sales or use tax.
  (5) A  motel  or  hotel  operator  making  sales   of   tangible   personal 
property, in addition to the renting of rooms, will be required  to  have   a 
sales tax license for the purpose of reporting both sales and use tax.  If no 
retail sales  of  tangible  personal   property   are   made,   a   use   tax 
registration is needed.

  History:  1979 AC.


R  205.89   Ice producing.
  Rule 39. (1) Sales tax applies on the full retail selling  price   of   ice 
sold to the final consumer by a retailer maintaining a sales tax  license.
The entire gross proceeds from sales of ice through  vending   machines   and 
other automatic sales devices  are  taxable  without   any   deductions   for 
commissions, rentals and other expenses paid. It is  immaterial  whether  the 
business operator owns such machine or the merchandise sold thereby.
  (2) Ice producers and manufacturers selling directly  to  final  consumers, 
except sales through vending machines as provided in   subrule   (1),   shall 
maintain a sales tax license and remit tax on the sales.
  (3) The sale of tools, equipment, materials  and   supplies   consumed   or 
used by an ice producer in the  manufacturing  of  ice  for   sale   is   not 
taxable. Tangible personal property acquired for storing  and   delivery   of 
ice is taxable.

  History:  1979 AC.


R  205.90   Industrial processing.
  Rule 40. (1) This rule  applies  to  sales,  purchases   and   rentals   of 
tangible personal property to persons for use or  consumption  in  industrial 
processing, and the word "sales" hereafter used shall be  construed   to   be 
either sale, purchase or rental. The word "manufacturing" as  used  in   this 
rule is included within those activities which  are  considered   "industrial 
processing."
  (2)  "Industrial  processing"  means  the  activity   of   converting    or 
conditioning tangible personal property by changing  the  form,  composition, 
quality, combination or character of the property  for   ultimate   sale   at 
retail or use in manufacturing of a  product  to  be   ultimately   sold   at 
retail.
  (3) The sale of  tangible  personal  property   to   manufacturers,   which 
property becomes an ingredient or component part of the  finished  product or 
 that  which  is  consumed,  destroyed   or   loses   its   identity   in   a 
manufacturing  process,  together  with  the   processing    machinery    and 
equipment  (including  maintenance  and  repairs  thereof)   used   in    the 
manufacturing of a product which is either to be sold ultimately at retail or 
to be used as tangible  personal   property   in   the   manufacture   of   a 
product to be sold ultimately at retail, is not taxable.  The  consumption or 
use of the tangible personal property rather than the kind  or  character  of 
the property sold is the determining factor as to whether or not such a  sale 
is taxable. The industrial processing exemption does not include:
  (a) Tangible  personal  property  permanently  affixed   and   becoming   a 
structural part of real estate. This  includes   building   utility   systems 
such as heating, air conditioning,  ventilating,   plumbing,   lighting   and 
electrical  distribution.  Example:  all    electrical    transmission    and 
distribution  materials  and  equipment  which  are    installed    in    the 
construction of plant facilities for, or by, an  industrial   processor   for 
use  in  transmitting  electrical  energy  is  taxable  up   to   the    last 
transformer, switch or  other  device  at  which  point   usable   power   is 
diverted from distribution circuits for use in industrial processing.
  (b) Tangible personal property used or consumed  in   performing   services 
upon property owned by others where the services do not  transform,  alter or 
modify the property so as to place it in a different  form,   composition  or 
character.
  (c) Office equipment,  including  data  processing   equipment   used   for 
nonindustrial  processing  purposes,  and  office   furniture   and    office 
supplies wherever and however used.
  (d) Tangible  personal  property  used  for  receiving   and   storage   of 
materials, supplies,  parts  and  components  purchased  by   the   user   or 
consumer.
  (e) Tangible personal property used for receiving and  storage  of  natural 
resources extracted by the user or consumer.
  (f) Vehicles, including special  bodies  or   attachments,   licensed   and 
titled for use on public highways.
  (g)  Tangible  personal  property  used  for  preparation   of   food   and 
beverages by a retailer for retail sale.
  (h) Tangible personal property used or consumed for   the   preserving   or 
maintaining of a product in the form and condition in which it   is   to   be 
sold.
  (4)  The  following  examples  of  nontaxable    sales    illustrate    the 
application of the industrial processing exemption:
  (a) Property which becomes  an  ingredient  or  component   part   of   the 
finished product to be sold ultimately at retail.
  (b)  Machinery,  tools,  dies,   patterns,    machinery    and    equipment 
foundations  and  other  processing  equipment,    including    repair    and 
maintenance of all of these, used in an industrial  processing  operation.
  (c) Property which is consumed, destroyed or loses  its   identity   in   a 
manufacturing or other production process.
  (d) Tangible personal property, not permanently affixed and not becoming  a 
structural part of real estate, which becomes a part  of,  or  is  used   and 
consumed in installation and maintenance of, systems  used   for   processing 
purposes.
  (e) Fuel or energy used or consumed for industrial processing.
  (f) Machinery, equipment and materials used  within  a   plant   site   for 
movement of tangible personal property in process of production.
  (g) Office equipment, including  data  processing   equipment,   used   for 
industrial processing purposes.
  (5) Industrial processing includes the following activities:
  (a) Production.
  (b)  Patent,  experimental,  development,   engineering   inspection    and 
quality control.
  (c) Planning, scheduling and production control.
  (d) Design, construction and maintenance of  factory  machinery,  equipment 
and tooling.
  (e) Disposal of production scrap and waste.
  (f) Production supervision.
  (g) Production material handling.
  (6) Industrial processing does not include the following activities:
  (a) Purchasing, receiving and storage of raw materials.
  (b)  Sales,  distribution,   warehousing,    shipping    and    advertising 
departments. (See R 205.68.)
  (c) Administrative, accounting and personnel.
  (d)  Design,  construction  and  maintenance  of    real    property    and 
nonprocessing equipment.
  (e) Plant security, fire prevention and hospitals.
  (7) The foregoing examples of taxable and exempt activities  shall  not  be 
considered as exclusive in either category but are  included   as   generally 
descriptive of  industrial  processing  operations   which   are   considered 
exempt as distinguished from nonexempt activities.
  (8) Where the industrial processing areas or spaces are  not  separate  and 
distinct from other departments or activities, or where  the  same   tangible 
personal property can be used or consumed  in   the   industrial   processing 
area and 1 or more other areas, the tax will apply to such property unless it 
can be determined and substantiated  to  the  satisfaction  of  the   revenue 
division, department of treasury that a percentage  or  other   apportionment 
thereof is equitable and practical.

  History:  1979 AC.


R  205.91   Interstate commerce.
  Rule 41. (1) The tax does not apply on any  sale   of   tangible   personal 
property when such tax is prohibited by the constitution or   laws   of   the 
United States. Whether or not the tax on a sale at retail  is  prohibited  by 
the constitution or laws of the United States  depends   primarily   on   the 
facts in each individual case.  The  department   requests   your   inquiries 
concerning specific transactions involving interstate commerce.
  (2) Where tangible personal property is located within the  state  at   the 
time of sale and is delivered within  the  state  it  is   taxable.   It   is 
immaterial that the purchaser may, subsequent to the  sale,   transport   the 
property out of the state or use it in interstate commerce.
  (3) A sale taking place within the state is  taxable   as   an   intrastate 
transaction. For example: tax would apply  when  a   customer   in   Michigan 
purchases tangible personal property from a Michigan   retailer,   pays   the 
seller the required sales price together  with  insurance   or   postage   or 
freight regardless of the destination of the property  purchased;  tax  would 
not apply on sales where the seller is obligated to make  delivery   to   the 
purchaser at an out-of-state delivery point when the property  will  not   be 
returned to Michigan for storage, use or consumption.
  (4) When making a valid sale in interstate commerce, it  is  necessary  for 
the seller to retain documentary evidence of shipment   outside   the   state 
for the purpose of substantiating a deduction on the tax   return.   If   the 
shipment of the property is diverted in transit or if for   any   reason   it 
does not arrive at the indicated destination  outside  the   state,   or   is 
reshipped into the state, the sale is taxable. The  documents  acceptable  to 
the department are any of the following:
  (a) A waybill or bill of lading made  out  to  the   seller's   order   and 
calling for delivery outside the state.
  (b) An insurance or registry receipt issued by the  United  States   postal 
service.
  (c) A trip sheet signed by the seller's delivery agent  and   showing   the 
signature and address of the person, outside the state,  who   received   the 
goods delivered.
  (d) Sales slips or other sales and shipping forms regularly  used  by   the 
seller  for  interstate  transactions  must  be   filed    separately    from 
intrastate, in an accessible manner to facilitate an audit by  the  state.

  History:  1979 AC.


R  205.92   Jewelers and jewelry repairers.
  Rule 42. (1) Sales, not for resale,  of  watches,   clocks,   jewelry   and 
other items by jewelers and jewelry repairers, are taxable.
  (2) Sales of jewelry, such as class rings and pins, to  high   school   and 
college students, members of fraternities, sororities, etc.,  are  subject to 
the tax. This is true  even  when   sales   are   made   through   a   school 
official  acting  as  agent  either  for  the  seller  or  the  purchaser.
Manufacturing jewelers making  such  sales  by   contract,   either   through 
school officials or through retail jewelers acting  as   commission   agents, 
are  to  report  and  pay  the  tax  on  the  full  sales   price   of   such 
transactions. They are not deemed to be either sales for resale  or  sales to 
educational institutions.
  (3)  Sales  of  trophies,  medals,  etc.,    to    nonprofit    educational 
institutions, intended for awards to students, are not taxable.

  History:  1979 AC.


R  205.93   Kennels, stables, and pet shops.
  Rule 43. (1) Sales, not for resale, of tangible   personal   property   for 
use and consumption in operating boarding  kennels  and   stables,   or   pet 
shops, are subject to tax.
  (2) Persons operating boarding kennels and stables only,  and   making   no 
retail sales of animals, are considered as consumers  subject   to   tax   on 
acquisition cost of property purchased.
  (3) Sales of horses, dogs, other animals, birds, goldfish  and  other  pets 
are subject to tax, except when sold to a person regularly  engaged  in   the 
business of breeding such livestock for resale and  conditioned   that   such 
breeder or propagator is the holder of a sales tax license.

  History:  1979 AC.


R  205.94   Labels, tags, and nameplates.
  Rule 44. (1) Sales of labels, tags, or nameplates to persons using  them in 
rendering services or for personal or  business   use   or   which   do   not 
accompany products sold, are sales for consumption and are taxable.
  (2) Sales of labels or nameplates to be  affixed   to   tangible   personal 
property which is taxable when sold at retail, or to  the   containers   sold 
with such property, are not subject to tax if the labels or nameplates are an 
inseparable part of the property sold and purchased by the buyer  as  a  part 
of such property.
  (3) Sales of labels to persons retaining title to   containers   to   which 
the labels are affixed  are  not  sales  for  resale  but   are   sales   for 
consumption and subject to tax.

  History:  1979 AC.


R  205.95   Leased departments.
  Rule 45. (1) Where an established  business  leases  a   portion   of   its 
shelves, counters, or  floor  space  to  other   persons   selling   tangible 
personal property to consumers, the sales of tangible  personal  property  by 
the leased departments shall be included in the tax return  of  the   lessor, 
who shall pay the tax thereon to the state. A lessor not otherwise subject to 
the tax shall obtain a license in behalf of the lessee.
  (2) When the lessee conducts the leased department in the same manner as an 
established like business, and gives evidence  to  the  public  that  he   is 
conducting his department separately from the  lessor's   business,   or   if 
separate business records are kept, the lessee may apply for  a   sales   tax 
license, if the lessee keeps separate records of his   business   and   files 
separate returns. The lessor shall be responsible for the  tax   unless   the 
lessee obtains such a license.
  (3)  The  word  "lease,"  as  used  in  this   rule,   includes   permitted 
occupancy, regardless of consideration. The   liquor   commission   restrains 
persons licensed by the commission from  subleasing   or   surrendering   any 
part of the business conducted at or on the licensed premises.

  History:  1979 AC.


R  205.96   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.97   Linen and laundry suppliers and laundries.
  Rule 47. (1) Persons engaged in the business of  laundering   clothes   and 
other textiles for  others  and  persons  operating  a   linen   service   or 
providing the use of clean jackets and other garments,  towels  and   similar 
articles to hotels, barber shops and other establishments are  deemed  to  be 
rendering a service. All sales to them of tangible   personal   property   of 
any kind are taxable.
  (2) Sales of tangible personal property at retail by   such   persons   are 
taxable, but they may deduct on their tax  returns  the   amount   of   gross 
sales upon which they paid the tax at time of purchase.
  (3) Rentals of linens and other similar articles are subject  to  use   tax 
unless the lessor has paid Michigan sales or use tax on the purchase price of 
the articles to be rented. A person remitting tax on the purchase price as  a 
purchaser-consumer or remitting tax on rental receipts as  a   lessor,  shall 
follow 1 or  the  other  methods  of  remitting  for  his   entire   business 
operation.

  History:  1979 AC.


R  205.98   Meals.
  Rule 48. (1) The sale of meals or other tangible   personal   property   by 
railroad,  pullman  car,  steamship,  airplane,   or   other   transportation 
companies, while operating in the state  of  Michigan,   or   upon   Michigan 
waters, is taxable.
  (2) Fraternities, sororities, and other student  societies,  with   members 
residing at a common location  and  jointly   sharing   household   expenses, 
including meals, are not considered to be selling  at   retail,   and   meals 
furnished to members are not taxable. Caterers or   other   persons   selling 
meals to fraternities and sororities are taxable on  their   gross   proceeds 
from meals so furnished.

  History:  1979 AC.


R  205.99   Mining, oil wells, and extractive operations.
  Rule 49. (1) An extractive operator includes a person who,  from  his   own 
land or from the land of another, either directly or by  contract,  takes  or 
extracts for resale ore, oil, gas,  coal,  timber,   stone,   gravel,   clay, 
minerals or other natural resource material.
  (2) An extractive operation begins when contact is made  with  the   actual 
type of natural raw product being  recovered  and  no   exemptions   in   the 
nature of industrial processing are to be considered pending such contact.
Processing includes all necessary processing   operations   before   shipment 
from the place of  extraction,  except  that   tangible   personal   property 
consumed or used in the construction, alteration, improvement  or  repair  of 
buildings, storage tanks, storage and housing facilities  is   taxable.   The 
sale of tangible personal property for consumption or  use  in   transporting 
the product from the place of extraction is taxable.
  (3) If an extractive operator sells any part of his product  at  retail, or 
if he consumes or uses it himself  in  other  than   the   manufacturing   or 
producing of a product for ultimate sale, extractions thus   sold   or   used 
are taxable and the extractor shall account for and remit the  tax   to   the 
state. When he consumes or uses his own product, the tax   shall   be   based 
upon its fair market value. Where an  extractor  sells   to   a   wholesaler, 
refiner, manufacturer or other person for resale, the tax does not  apply.
However, where an extractor sells to a final buyer  or   ultimate   consumer, 
the tax applies to the gross proceeds of such sales.
  (4) The drilling or prospecting for oil, gas,  brine   or   other   natural 
resources does not constitute industrial processing.  Sales   of   equipment, 
materials and supplies used in exploring for natural resources  and  sales of 
equipment and materials used in the drilling  of  oil,  gas  and  brine wells 
are taxable.
  (5) The actual production of oil, gas, brine or  other  natural   resources 
constitutes industrial processing and exempts from application  of  the   tax 
casing pipe and drive pipe commonly known as 8-inch or  under   (8   5/8-inch 
O.D.); tubing; well-pumping equipment;  chemicals,   explosives   and   acids 
used in fracturing, acidizing or shooting wells; Christmas  trees  and  other 
wellhead equipment; treatment tanks; piping, valves and  pumps  used   before 
movement or transportation of the natural  resource   from   the   production 
area; and chemicals and acids used in treating such crude oil, gas,  brine or 
other natural resources.
  (6) The storage of oil, gas, brine or other  natural  resources  (including 
underground storage) does not constitute industrial  processing.   Sales   of 
equipment, material and supplies  used  in  the   storing,   withdrawing   or 
distribution of oil, gas or brine from a storage facility are taxable.

  History:  1979 AC.


R  205.100   Tombstones, markers, and other memorials.
  Rule 50. (1) Memorial dealers are retailers of  tombstones,   markers   and 
other memorials sold by them and also of the materials used  in   setting   a 
memorial in the cemetery. Such sales are subject to tax.
  (2) If the memorial dealer furnishes a  memorial  and  sets   it   in   the 
cemetery for a lump sum, the tax applies to the entire amount charged.  If  a 
separate and additional charge is made for   the   labor   of   setting   the 
memorial, the tax does not apply to this labor charge. No  deduction  may  be 
made of charges for cutting, shaping, polishing or lettering  a  memorial  or 
for transporting it to the cemetery.
  (3) When a cemetery constructs the foundation upon which  a   memorial   is 
placed and collects the charges therefor from the memorial  dealer  who  then 
either collects that amount from his customer or includes it  in  the  charge 
for the memorial, the memorial dealer is the retailer of  the  foundation  or 
the material used therein and must pay the tax on it. The  cemetery  in  this 
case is deemed to be acting  as  the  agent  of  the   memorial   dealer   in 
constructing the foundation.
  (4) If the cemetery collects the charges for  foundations   directly   from 
customers of the memorial dealer, the cemetery is the   retailer   and   must 
pay the tax to the state on the charges for the  foundations   or   for   the 
materials alone when the latter are charged separately.

  History:  1979 AC.


R  205.101   Morticians, undertakers, and funeral directors.
  Rule  51.  (1)  Morticians,  undertakers,  and   funeral   directors    are 
construed to be  rendering  a  service  beyond  the   selling   of   tangible 
personal property, therefore, their sales are taxable as follows.
  (2) Where a lump sum charge is made for the ordinary funeral, consisting of 
the casket complete with rough box, embalming and care of the deceased, use   
of   hearse,   limousine,   funeral    chapel    and    establishment     and 
professional services, it is assumed that 50% of such lump  sum   charge   is 
tangible personal property and subject to the tax.
  (3) The tax will apply to the entire charges made on  purchases  that   are 
not included in lump sum billing which may be in the nature  of  extras.  The 
tax will not apply to  accommodation  cash  advances  for   such   items   as 
cemetery charges, newspaper notices, railroad   tickets,   ministerial   fee, 
choir, etc.
  (4) If the casket and other tangible personal property  furnished   for   a 
funeral are segregated on the invoice and  also  in  the   records   of   the 
undertaker, the tax applies to the price charged for each  item  of  tangible 
personal property, provided such price is the fair retail   value   of   such 
personal property.
  (5) Direct sales to a governmental entity  are   exempt.   This   exemption 
does  not  include  payments  from  social   security   benefits,   veterans' 
administration benefits, and similar participation   benefits   accruing   to 
the deceased under various federal and state laws.
  (6)  All  equipment,  ambulances,  hearses,   embalming    equipment    and 
materials, chapel furnishings, etc., are presumed to be used  or  consumed by 
the mortician, undertaker or funeral director in  rendering  a   service  and 
such sales to them are  subject  to  the  tax.  Generally   speaking,   these 
commodities are classified as trade tools or equipment that have more than  a 
onetime use.

  History:  1979 AC.


R  205.102   Multigraphers and mimeographers.
  Rule 52. (1) Sales  of  tangible  personal   property   by   multigraphers, 
mimeographers, and similar establishments are taxable, when for resale  or to 
be used in "industrial processing" (R 205.90).
  (2) A multigrapher or mimeogapher may not deduct, from the selling price of 
an item, the labor or other service  charge  in  performing  the   job   even 
though it is shown separately and regardless  of  when   the   services   are 
performed. The labor cost is considered part of the cost   of   the   article 
sold. Amount paid for postal privileges never becomes part   of   the   price 
upon which tax is figured.
  (3) When a  customer  furnishes  his  own  printed  paper   stock   and   a 
multigrapher or mimeographer imprints thereon the  name,  address,  telephone 
number, etc., this is merely service and not taxable.
  (4) If government postcards or stamped envelopes are   furnished   by   the 
customer to the multigrapher or mimeographer, receipts  for  imprinting   the 
cards or envelopes are not taxable.
  (5) Sales to multigraphers and mimeographers of  equipment  and   materials 
consumed or used directly in the  processing  of  their   product   are   not 
taxable.  However,  when  sold  to  persons  not   regularly    engaged    in 
mimeographing or multigraphing for sale, they are taxable.
  (6) This rule also  applies  to  persons  engaged  in   the   business   of 
conducting a letter service for others, regardless of the  method   used   to 
produce such letters.

  History:  1979 AC.


R  205.103   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.104   Optometrists, ophthalmologists, opticians, and optical supply
  houses.
  Rule 54. (1) Licensed optometrists  and   ophthalmologists   who   examine, 
prescribe, and dispense eyeglasses and contact lenses  are   considered   for 
sales tax purposes to be making retail  sales.  A  sales   tax   license   is 
required for this activity.
  (2) Sales of eyeglasses prescribed or dispensed to   correct   a   person's 
vision by an ophthalmologist, optometrist, or  optician,   and   repair   and 
replacement parts for such eyeglasses,  are  exempt.   Contact   lenses   are 
taxable, except when prescribed by an optometrist or  ophthalmologist  for  a 
specific disease  which  precludes  the  use   of   eyeglasses.   Examination 
charges when billed separately are exempt.
  (3) Sales by opticians and optical supply  houses   to   optometrists   and 
ophthalmologists are exempt in both of the following situations:
  (a) When sold for resale, provided the optometrist  or  ophthalmologist  is 
properly registered as a retailer as noted in subrule (1).
  (b) When sold pursuant to a specific prescription, except   as   noted   in 
subrule (2).
  (4) Sales of machinery and apparatus used directly in  the  manufacture  of 
eyeglasses for resale are not taxable. Sales of all   other   equipment   and 
materials to opticians are taxable.
  (5) Sales at retail  by  a  person  regularly  engaged  in   any   of   the 
businesses mentioned above  of  stock  accessories,   such   as   sunglasses, 
barometers,  thermometers,  telescopes,  opera   glasses,    solutions    for 
cleaning glasses, lorgnettes, chains,  ribbons,  and   similar   items,   are 
taxable.
  (6) If an optician employs an optometrist or  ophthalmologist,  and   sells 
eyeglasses directly to the ultimate consumer, the sale will be  exempt  if in 
 fulfillment  of  a   prescription   issued    by    the    optometrist    or 
ophthalmologist.
  (7)   Physicians   acting   in   the   capacity    of    optometrists    or 
ophthalmologists are subject to this rule. (See R 205.111.)

  History:  1979 AC.


R  205.105   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.106   Pawnbrokers.
  Rule 56. Pawnbrokers are engaged primarily in the   business   of   lending 
money for the repayment of which they accept as  security  tangible  personal 
property from the pawner or pledger. In case the pawner   or   pledger   does 
not redeem the property pledged or pawned within the   specified   time   and 
the property is forfeited and title rests in  the   pawnbroker,   the   gross 
proceeds realized by the pawnbroker from a subsequent sale  of  the  articles 
are taxable.

  History:  1979 AC.


R  205.107   Pharmacists.
  Rule 57. (1) The sale of prescription drugs for human use  by  a   licensed 
pharmacist is  exempt  from  tax.  To  qualify  for   this   exemption,   the 
pharmacist shall have a specific prescription as prescribed by a physician or 
other licensed practitioner of the healing arts.
  (2) Retail sales of any apparatus, device, appliance, or equipment  used to 
replace or substitute for any part of the human body, or used to  assist  the 
disabled person to lead a  reasonably  normal  life,  are  exempt  when   the 
tangible personal property is purchased on a written  prescription  or  order 
issued by a licensed health professional. (See R 205.139  for  definition  of 
"licensed health professional.")
  (3) To support the exemption claimed when filing the  required  return,   a 
pharmacist shall keep a  record  showing  the  date   the   prescription   is 
issued, the name of the person issuing it, the name of  the  individual   for 
whose consumption it is issued, the contents of   the   formula   prescribed, 
and the amount charged to the consumer. This information may appear either in 
the form of the original prescription attached to a  substantial   record  in 
chronological order or in a transcribed  record  in  the  same  order.  These 
records shall be kept for a period of 4 years.
  (4) Insulin  dispensed  by  a  pharmacist,  either  with   or   without   a 
prescription, is exempt from the tax.
  (5) The sale to consumers of drugs without a prescription is taxable.
  (6) Sales of nonprescription  apparatuses,  devices,   or   equipment   are 
taxable. Repair and replacement parts are also taxable.

  History:  1979 AC.


R  205.108   Philatelists; antiques, curios, and old coins.
  Rule 58. (1) Sales of curios, antiques, art work,  coins,  postage   stamps 
and like articles to art collectors, philatelists,  numismatists   or   other 
persons who purchase such items for use or storage and  not   for   immediate 
resale are sales subject to tax.
  (2) Sales of uncancelled United States postage or  revenue   stamps   valid 
for transportation of mail or for revenue tax purposes  are  not  taxable.
Sales of cancelled domestic or foreign stamps or   of   uncancelled   foreign 
postage stamps not valid for transportation of mail in  the   United   States 
are taxable.

  History:  1979 AC.


R  205.109   Photographers and photo finishers.
  Rule 59. (1) The  making  of  photographs  for  sale   is   an   industrial 
process, and tangible personal property used and consumed  directly  in   the 
process is not taxable.
  (2) The total amount  charged  for  making   photographs,   including   the 
camera charge, is taxable. When an order is not received  from  proofs,   the 
amount of the deposit retained is not taxable.
  (3) The development and processing of exposed film or  negatives  in  black 
and white or in color, and the  production  of  film   strips,   slides,   or 
prints therefrom, are subject to sales tax on the total  price   charged   to 
the  customer.  The  purchase  of  machinery,   equipment,   materials,   and 
supplies used by the processor in processing the exposed film,  and  in   the 
production of the film strips, slides, and prints, are exempt  from  tax   as 
being a part of an industrial process.
  (4) The coloring or tinting of photographs returned  to  the   photographer 
for such a purpose is a nontaxable service. However, if   the   coloring   or 
tinting of the photograph is included in a quoted price, the total  amount is 
taxable.
  (5) Sales of cameras, films, frames, and other articles  to  the   consumer 
are taxable.
  (6) Sales of x-ray films  to  laboratories,   physicians,   surgeons,   and 
dentists, and to  other  persons  primarily  engaged   in   rendering   x-ray 
services, are taxable.

  History:  1979 AC.


R  205.110   Telephone and telegraph.
  Rule  60.  (1)  Use  tax  applies  on  income   derived   from   intrastate 
telephone,  telegraph,  leased  wire,  private   line,   teletypewriter   and 
similar communications services. The tax applies  only   on   such   services 
which both originate and terminate in Michigan.
  (2) The tax does not apply on income  from   coin-operated   installations, 
directory advertising proceeds,  or  on  charges   to   telephone   answering 
services for switchboards,  concentrator-identifiers,  interoffice  circuitry 
and their accessories. Charges for lines, stations, toll  calls   and   other 
services and equipment to  such  answering  services   which   are   normally 
furnished to a subscriber are taxable.
  (3) The tax does not apply on sales of services  to   the   United   States 
government, the state of Michigan, political subdivisions of  the  state   of 
Michigan or to the American red cross.
  (4) The tax does not apply on services sold to  schools,  hospitals,  homes 
for the aged  or  children,  or  other  health,   welfare,   educational   or 
charitable institutions or agencies not operated for profit  or  benefit   to 
the shareholders.
  (5) Sales or use tax applies on purchases of tangible personal  property by 
sellers of taxable communication services except exemption  will  prevail  on 
the necessary exchange equipment  and  on  the  tangible  personal   property 
acquired for installation on the premises of the subscriber.
  (6) Sales or use tax will apply on tangible  personal  property   purchased 
and used in providing the exempt services noted in  preceding  paragraphs.

  History:  1979  AC.


R  205.111   Physicians, surgeons,  dentists,  veterinarians,  osteopaths,
  and other practitioners.
  Rule 61. (1) Physicians, surgeons, dentists,  veterinarians,  osteopaths or 
other practitioners of  the   healing   arts   not   otherwise   specifically 
provided for in these rules render nontaxable services.
  (2) Sales  of  drugs,  medications,  instruments,   equipment   and   other 
tangible  personal  property  to  such  persons  for   use    in    rendering 
professional services or in connection with their   office,   laboratory   or 
other similar quarters are taxable.
  (3) Sales by dental supply houses  and  others  to   dentists   or   dental 
laboratories of materials, supplies and equipment used in  the  rendition  of 
their services are taxable.
  (4) If a dental laboratory sells to dentists tangible personal  property in 
its original form upon which no  professional  services  are  performed  such 
as cement, gold, cleaning preparations, etc.,  then  such   sales   shall  be 
considered as sales at retail and  the  dental  laboratory  so  engaged  must 
obtain a sales tax license and pay the tax on these sales.

  History:  1979 AC.


R  205.112   Premiums and gifts.
  Rule 62. (1) Donors  of  tangible  personal  property   are   regarded   as 
consumers thereof and the sale of such property to them   is   taxable.   The 
sale of goods to be given away for advertising purposes is taxable.
  (2) If goods purchased for resale are subsequently given away  or  used  by 
the retailer, he must include in his use tax return the cost  of  such  goods 
and pay the tax thereon.
  (3) The redemption of trading stamps for premiums is a  taxable   sale   at 
retail and sales tax is to be paid on the redemption value of the  stamps.
Sales tax will not apply on stamps  redeemed  for  cash   rather   than   for 
merchandise. Premiums acquired for "resale" purposes are   not   subject   to 
sales or use tax.
  (4) Purchasers of property to be awarded as prizes, the  winning  of  which 
depends upon chance or skill, are regarded as consumers   thereof   and   the 
tax applies to sales of such property to them. Sales  of  tangible   personal 
property to the operator of a game of skill or chance   or   similar   device 
are taxable  as  he  is  considered  the  consumer  of   property   used   in 
connection therewith.

  History:  1979 AC.


R  205.113   Printers,  lithographers,  photostaters,  typographers,   and
  blueprinters.
  Rule  63.  (1)  Sales  of  tangible  personal   property    by    printers, 
lithographers, photostaters, typographers  and   blueprinters   are   taxable 
except when such sales are for resale  purposes  or   used   in   "industrial 
processing." (See R 205.90.)
  (2) Labor charges involved in producing the property for  sale  cannot   be 
deducted from the selling price regardless of whether or not  the  charge  is 
billed separately on the sales invoice. The labor cost   is   considered   as 
part of the "gross proceeds" derived from the sale.
  (3) If a customer furnishes his own printing stock   which   was   acquired 
from another source and the printer imprints thereon the  name,  address  and 
telephone number, this constitutes the rendition of a service  and   is   not 
taxable.
  (4) Purchases of tangible personal property by  a  printer,   lithographer, 
photostater,  typographer  or  blueprinter  are  not   taxable   when    such 
materials are to be consumed in the producing of  a  product  for  resale.
(See R 205.90.)

  History:  1979 AC.


R  205.114   Professional shoppers.
  Rule 64. (1) When a professional  shopper   purchases   tangible   personal 
property either in his own name or in the name of his  client,   such   sales 
are taxable without deduction for any commission or  other  compensation   of 
the shopper.
  (2) The commission or other compensation paid  to   professional   shoppers 
employed by retailers to assist  customers  in   selecting   and   purchasing 
tangible personal property is not deductible from  the   selling   price   of 
such property on which the tax applies.

  History:  1979 AC.


R  205.115   Public utilities; gas, electricity, and steam.
  Rule 65. (1) Sales of tangible personal  property,   including   sales   of 
gas, electricity, and steam by public and private utilities,  are  subject to 
sales tax, except in those cases  wherein  the  purchaser  is   entitled   to 
exemption as specifically provided in the sales and use tax statutes. (See  R 
205.51 and R 205.90.)
  (2) When gas, electricity, or steam is sold to a customer for  2  or   more 
purposes through 1 meter, and 1 of the purposes is taxable  while  another is 
exempt, the total consumption as shown by the meter is taxable,  except where 
it is impractical to install separate meters and the consumption for each use 
can be substantiated in a manner acceptable to the department. On sales  of   
electricity  to  farmers,  if  the  farmer's  total   electrical  consumption 
exceeds 1,500 kwh per month, or 2,500 kwh per month for a home with  electric 
 heat,  during  the  period  of  November  to  March,    the  consumption  in 
excess will be considered exempt if the farmer provides the seller  with  the 
prescribed agricultural producing  exemption  certificate.
  (3) The sale of tangible personal property is not taxable when  consumed or 
used in the process of manufacturing or generating electricity, gas, or steam 
 which   is   taxable   when   sold   at   retail.   Transformers   used   in 
industrial processing are not taxable.
  (4) The sale of tangible personal  property  consumed  or   used   in   the 
transmission or distribution of electricity, gas,  or  steam  is  taxable.
Such transmission or distribution starts at the place   where   the   product 
leaves the immediate premises from which it is manufactured.
  (5) When a public utility uses or consumes its own  product  for   purposes 
not included in "industrial processing" (see R 205.90),   the   tax   applies 
upon the basis of the cost of the part of its product thus used.

  History:  1979 AC.


R  205.116   Restaurants, hotels, lunchrooms, and other establishments.
  Rule 66. (1) The tax applies to sales of meals, foods,  or   beverages   of 
any  kind,  and  to  sales  of  other  tangible   personal    property,    by 
restaurants, hotels, cafes, bars, caterers, lunch  counters,  lunch   wagons, 
and other establishments engaged in the business of  preparing  and   selling 
food or beverages for direct consumption, on or off the premises.
  (2) The tax applies to  the  cover  or  minimum  charge   and   all   other 
charges, except to those charges for entertainment  and  dancing,  separately 
listed on the bill or collected as an admission fee or fixed charge.
  (3) When food is delivered or served at a location other than the  place of 
business of the retailer or in a room other than a regular dining  room,  and 
an extra charge is  made   for   that   service,   the   entire   amount   is 
taxable.
  (4) Banquets, dinners, and similar functions served by  hotels   or   other 
establishments covered by this rule are subject to tax  at   the   contracted 
price per plate or seat, or at the minimum price,  whichever  is  greater.
Charges for flowers are taxable.
  (5) Amounts paid as a gratuity and distributed to  the   employees   as   a 
gratuity, and not as a wage, are not considered as part of   the   tax   base 
when that gratuity is separately identified  and  itemized   on   the   guest 
check or billed to the customer. All service charges   in   connection   with 
the transfer of tangible personal property shall be included   as   part   of 
the tax base.
  (6) All  tools,  equipment,  and  materials  used  or   consumed   in   the 
preparation of food or beverages for retail sale   are   taxable.   Materials 
which become an ingredient or component  part  of  the   prepared   food   or 
beverage may be purchased for resale by the preparer, tax exempt.
  (7) Meals provided to  employees  are  taxable.   When   provided   without 
charge, the actual cost of the meals shall be taxed at the  cost   shown   by 
the  employer's  records.  When  records  are  not   available,   each   meal 
furnished shall be taxed at the cost of 45 cents a meal. The actual number of 
meals served shall be taxed  if  satisfactory  records  are   maintained   to 
establish the number. If the employer furnishes  board  and   room,   it   is 
presumed that 3 meals a day per employee are served  7  days   a   week.   If 
meals only are provided, it is presumed that 2 meals a   day   per   employee 
are served each working day.
  (8) Fraternities, sororities, and other student  societies,  with   members 
residing at a common location  and  jointly   sharing   household   expenses, 
including meals, are not considered to be  selling  at   retail.   Sales   to 
these organizations of tangible personal property,  other   than   food   and 
nonalcoholic beverages for preparation and consumption  at   the   consumer's 
location, are subject to tax.

  History:  1979 AC.


R  205.117   Repairers and servicers.
  Rule 67. (1) Persons regularly and exclusively engaged in  the  business of 
repairing, improving, or  altering  tangible  personal  property   owned   by 
others, in which work the value of the  material  used   is   incidental   or 
negligible, render a nontaxable service. Sales   of   equipment,   materials, 
and supplies to such persons  are  taxable.  For  example,   sales   to   the 
following are taxable: Bootblacks, cleaners and  dyers,  garment   repairers, 
jewelry  and  watch  repairers,  linen  suppliers   and   laundries,    radio 
repairers (radio tubes not being considered  repair  material),  refrigerator 
repairers, small tool sharpeners, and welders.
  (2) Sales for resale to a person who has a  sales  tax   license   and   an 
established business of one of the following types are   not   taxable,   but 
sales to such a  person  of  all  other  tangible   personal   property   are 
taxable: Automobile repairers or garages,  electrical  repairers,   machinery 
repairers, upholsterers and furniture repairers, and shoe repairers.
  (3) Persons selling tangible personal property in  addition  to   providing 
labor or service shall obtain a sales tax license and pay the  tax  on  their 
sales of tangible personal  property,  including  such   property   sold   in 
connection with repair work. When  both  labor  and   service   charges   are 
involved in repair work for others, the retailer  shall  separately   itemize 
the amount charged for the tangible personal property  sold;  otherwise,  the 
tax shall apply to the total gross proceeds.
  (4) A person engaged in a repair or service   business   not   specifically 
covered may write the department for information.

  History:  1979 AC.


R  205.118   Shoe repairers.
  Rule 68. (1) When persons in  the  business  of   repairing   shoes   affix 
soles, heels, laces, sewing thread, nails, etc., to the  property  of   their 
customers they sell tangible personal property at retail  and   also   render 
services. It shall be considered that of the amount received  by   them   for 
repairing shoes, etc., the taxable sale of tangible  personal   property   is 
35% and the sale of the nontaxable services 65% of such amount.
  (2) The sale of leather, heels, laces and other shoe   findings   by   shoe 
repairers (not used in connection with repair work but   sold   directly   to 
purchasers for use) is taxable on the full amount of such sale.
  (3) Vendors who sell  machinery,  tools  and  other   equipment   to   shoe 
repairmen are subject to either the sales or use taxes, as   the   case   may 
be, on the full amount of such sales.

  History:  1979 AC.


R  205.119   Sign painting.
  Rule 69. (1) The painting and selling of detached metal, wood, cardboard or 
paper signs constitute a retail  sale   and   tax   applies   on   the   full 
selling price without deduction for any costs incurred   in   producing   the 
sign.
  (2) A sign painter, working on the property of others, is a servicer and  a 
sales tax license is not required unless, in addition to this  work,  he also 
makes retail  sales  of  manufactured  signs.  Sales  of  tangible   personal 
property to sign painters for use or consumption   in   performing   services 
for others are taxable.

  History:  1979 AC.


R  205.120   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.121   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.122   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.123   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.124   Transportation charges.
  Rule 74. For the purpose of computing the tax, no deduction is allowable on 
account of freight, express,  mail,  cartage  or  other   transportation   or 
delivery charges incurred or to be incurred on  tangible  personal   property 
prior to completion of transfer of ownership of  such   property   from   the 
seller to the purchaser for use or consumption. It  is   immaterial   whether 
such transportation charges are billed separately or whether they are paid by 
the seller or the purchaser.

  History:  1979 AC.


R  205.125   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R 205.126   Vending machines and other automatic sales devices.
  Rule 76. (1) The gross receipts from sales of  tangible  personal  property 
through vending machines and other automatic sale devices, including food  or 
drink as specified in MCL 205.54g(2), are taxable. Vending machine  sales  of 
certain items described in MCL 205.54g(2),  including  candy,  nuts,  chewing 
gum, cookies, crackers and chips, are exempt  from  tax.   It  is  immaterial 
whether the sales are made for money, coins, tokens, or coupons redeemable in 
money or merchandise.  If both taxable and exempt merchandise is sold through 
the same vending machine, sales tax shall be calculated  in  accordance  with 
MCL 205.54g(2).
  (2) The operator of a nonelectric vending machine business, having sales of 
merchandise where the consideration is 10 cents or less, may deduct from  the 
operator's gross proceeds  the  commissions  paid  to  an   exempt  nonprofit 
entity, if the sales are of unsorted nuts, confections, or other merchandise, 
dispensed at random  in  substantially  equal  portions  upon insertion of  a 
coin.
  (3) The business operator of a vending machine  or  other  automatic  sales 
device is defined, for the purpose  of  this  rule,  as   the   person   who, 
personally or through an agent,  removes  the  coins  or   other   means   of 
payment from the machines and is responsible for their disposition.
  (4) The business operator of a vending machine  or  other  automatic  sales 
device shall maintain a sales tax license and shall pay the tax to the  state 
on all taxable sales made through each machine or  device  operated  by  that 
person.
  (5) It is immaterial whether the business operator owns the machine or  the 
merchandise  sold.  If  merchandise  belonging  to  another  is   sold,   the 
merchandise shall be considered consigned or entrusted to the control of  the 
business operator for sale, in accordance with R 205.70.
  (6) The name, address, and sales tax  license   number   of   its   current 
business operator shall appear at all times on every   vending   machine   or 
other automatic sales device from  which  tangible   personal   property   is 
sold.
  (7) Sales or purchases of vending machines and parts, as well as the  tools 
and equipment for the maintenance thereof, are subject to sales or  use  tax.
Machines used in retail vending of tangible personal property cannot  qualify 
as exempt equipment acquired for "industrial processing" purposes.

  History:  1979 AC; 2007 AACS.


R 205.127   Water
  Rule 77. (1) Sales of water when delivered in any manner other than through 
mains, in bulk tanks in  quantities  of  not  less  than  500  gallons  to  a 
consumer, or as bottled water, are taxable, regardless of the use or  purpose 
of the water, unless exempt under R 205.90 or R 205.51.
  (2) The sale of equipment, tools, machinery, pipes, fittings  and  supplies 
to a person for consumption or use in  distributing  and  carrying  water  is 
taxable.

  History:  1979 AC; 2007 AACS.


R  205.128   Federal and state taxes.
  Rule  78.  (1)  Federal  manufacturers'  excise  taxes   imposed   on   the 
following products are not deductible from a retailer's  gross  proceeds   in 
computing sales or use taxes: Trucks,  buses,   tractors,   accessories   and 
similar products, tires and tubes, gasoline and  lubricating   oil,   fishing 
equipment, and firearms.
  (2) The  federal  retailers'  excise  taxes  imposed   on   the   following 
products are deductible from a  retailer's  gross   proceeds   in   computing 
sales or use taxes: Diesel fuel, liquid petroleum gas,  and   other   special 
motor fuels.
  (3)  The  federal  communications   tax   imposed    on    persons    using 
communication services is not part of the tax base for  computing   the   use 
tax on such services.
  (4) Michigan taxes which are deductible when included in   gross   are   as 
follows:
  (a) Motor fuel retailers may deduct from gross proceeds  on   their   sales 
tax return the amount of Michigan motor fuel tax paid to the  state   or   to 
the distributor.
  (b) The Michigan cigarette tax may be deducted only by taxpayers engaged in 
the business of selling cigarettes at   retail   if   the   seller   is   not 
enriched by collecting the sales tax on the full selling price.

  History:  1979 AC.


R  205.129   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.130   Tire retreading and vulcanizing.
  Rule 80. (1) Gross receipts from retail sales  of   retreaded   tires   are 
taxable. When a person in the business of retreading  tires   purchases   old 
tires and retreads and sells them to consumers or  users,   the   sales   tax 
applies to the full retail selling price of the tires.  Sales  of   equipment 
and supplies used for retreading and vulcanizing tires for  retail  sale  are 
exempt.
  (2) When tires are supplied by a customer for  retreading  or  vulcanizing, 
the sales tax shall apply on the selling  price  of  the  materials  sold.
Labor charges, billed separately to the customer,  are   not   taxable.   The 
materials consumed directly in the retreading or vulcanizing of tires  may be 
purchased for resale without tax. However, sales of all equipment   used  for 
retreading and vulcanizing tires for others are taxable.
  (3) If tires that require retreading or vulcanizing  are   traded   in   or 
credited for tires that have been retreaded  or  vulcanized,   or   for   the 
purchase of other tires, the sales tax applies to the full  selling  price of 
the tires accepted by the purchaser.

  History:  1979 AC.


R  205.131   Vessels and watercraft.
  Rule 81. (1) Sales of vessels designed for commercial  use  of   registered 
tonnage of 500 tons or more, when  produced  upon  special   order   of   the 
purchaser, are exempt from tax. Also nontaxable are sales   of   bunker   and 
galley fuel,  provisions,  supplies,  maintenance,  and   repairs   for   the 
exclusive use of those vessels of 500  tons  or  more,   if   those   vessels 
travel from a point in Michigan to a destination in another  state.  Sales of 
such items for the use of  vessels  operating   in   foreign   commerce   are 
taxable.
  (2) All sales and purchases of  vessels  and   watercraft,   except   those 
noted in subrule (1), are subject to sales or use  tax.   Persons   acquiring 
watercraft from other than a registered retailer shall be  required  to   pay 
the use tax to the secretary of state at the time of  registration.  (See   R 
205.135--Isolated   vehicle,   aircraft,    watercraft,    and     snowmobile 
transfers.)
  (3) Sales of fuel and supplies for use on commercial  fishing  or  pleasure 
craft are subject to tax.
  (4) Sales of food for resale on  vessels  plying  the   Great   Lakes   are 
exempt if the vessel operator has a sales tax license and   remits   tax   on 
all sales within the territorial waters of Michigan.

  History:  1979 AC.


R  205.132   Rentals.
  Rule 82. (1) A person engaged in the  business  of   renting   or   leasing 
tangible personal property to others shall pay the Michigan  sales   or   use 
tax at the time he purchases tangible personal property, or  he  may   report 
and pay use tax on the rental receipts from the rental  thereof.   A   person 
remitting tax on the purchase price as a  purchaser-consumer   or   remitting 
tax on rental receipts as a lessor, shall follow 1 or the  other  methods  of 
remitting for his entire business operation. A  person   remitting   tax   on 
rental receipts shall  be  the  holder  of  a  sales  tax   license,   or   a 
registration as is provided in the use tax act.  Each   month   such   lessor 
shall compute and pay use taxes on the total rentals charged.
  (2) A lessor remitting tax on rental receipts may deduct direct  rentals to 
the United States, the state  of   Michigan   or   its   local   governmental 
entities, churches  (excluding  vehicles),  schools   and   other   qualified 
nonprofit institutions or agencies, or to persons or concerns  for   use   in 
agricultural producing  or  industrial  processing.   However,   rentals   to 
construction contractors engaged in contract work for   such   entities   are 
taxable.

  History:  1979 AC.


R  205.133   Advertising agencies.
  Rule 83. (1) The primary function of an advertising agency  is   to   plan, 
create and arrange for production of advertising on the  special   order   of 
clients. Their activities are in the nature of special creative  services.
Part of their services  consist  in  ordering   the   services,   publication 
space, and the materials necessary to produce advertising  as   directed   by 
the client. For the convenience of the client it is the  practice   for   the 
agency to pay for these services and materials and to re-bill the  client.
The compensation of the agency is  derived  from   discounts   available   to 
agencies, but not to advertisers from publications,   and   from   percentage 
charges added to the cost of  services  and  materials   acquired   for   the 
client. The practice is to attach  invoices  from  the   suppliers   to   the 
agency invoice to the client. These activities constitute   a   service   and 
not a purchase and resale of tangible personal property.
  (2) Materials and supplies purchased by the agency and  consumed   in   the 
operation of the agency are taxable except when such  materials  or  supplies 
are purchased and are exempt by reason of R 205.69  or   205.103.   When   an 
advertising agency goes beyond the rendition of services   and   enters   the 
business of selling matrices, sales  manuals,   record   books,   advertising 
novelties, data  books,  and  other  tangible  personal   property,   it   is 
required to be licensed and to remit the proper tax.

  History:  1979 AC.


R  205.134   Radio and television stations.
  Rule 84. (1)  Sales  of  tangible  personal  property   to   operators   of 
licensed commercial radio or television stations are  taxable   except   when 
such property is used as a component in the direct production  of   a   film, 
tape or recording produced for resale or  transmission  purposes.  Production 
begins at the time of the electronic  processing  of  the   signal   in   the 
studio and ends at the  point  at  which  the  signal   leaves   the   studio 
production equipment and begins transmission to the transmitter.
  (2) When a station makes retail sales of cookbooks or  other  books,  toys, 
gadgets,  nursery  stock,  building  plans,  pictures   or   other   tangible 
personal property, the persons owning such station shall also  hold  a  sales 
tax license and remit the tax.

  History:  1979 AC.


R  205.135   Isolated  vehicle,  aircraft,  watercraft,   and   snowmobile
  transfers.
  Rule 85. (1) The use tax applies on the transfer  of  vehicles,   aircraft, 
watercraft, and snowmobiles between  persons  other  than   for   resale   by 
registered dealers. The tax shall be collected by the  Michigan  secretary of 
state before the  transfer  of   any   vehicle   title   or   watercraft   or 
snowmobile registration. The tax due on aircraft shall be  paid  directly  to 
the revenue division, department of treasury, by the purchaser.
  (2) All vehicles, aircraft, watercraft, and snowmobiles  brought  into  the 
state of Michigan for registration purposes within 90 days after the  date of 
purchase are taxable, unless the  unit  was  properly   registered   by   the 
purchaser in the state or country of purchase, thus signifying the  intent of 
having purchased the  unit  for   first   use   and   consumption   in   that 
jurisdiction.
  (3)  Exemption  from  use  tax  is  allowed  only   under   the   following 
conditions:
  (a) When the transferee or purchaser  is  the   spouse,   mother,   father, 
brother, sister, or child of the transferor.
  (b) When the transfer is a gift to a beneficiary in  the  administration of 
an estate. Sales by an administrator of an estate are taxable.
  (c) When a vehicle, aircraft, watercraft, or snowmobile  which   has   once 
been subjected to sales or use tax is transferred in  connection   with   the 
organization, reorganization, dissolution, or partial   liquidation   of   an 
incorporated or unincorporated business in which the beneficial  ownership is 
not changed.
  (4) Vehicles, aircraft, watercraft, or snowmobiles purchased  as  part   of 
the total assets of a business are taxable. The tax due shall be  computed on 
the actual book value of the property at the time of transfer.
  (5) The base price to be used in computing the tax liability  shall  not be 
less than its retail dollar value as listed in any recognized guide  for  use 
or appraisal purposes.
  (6) Questions regarding taxability of  specific   transactions   shall   be 
referred to the revenue division, department of treasury.

  History:  1979 AC.


R 205.136   Food for human consumption.
  Rule 86. (1) Retail sales of food for human consumption normally considered 
as grocery items for home consumption are tax exempt.
  (2) Alcoholic products, such as beer, wine, and liquor, are taxable.
  (3) Tobacco and tobacco products are taxable.
  (4) Both of the following apply:
  (a) Sales of "prepared food," as defined in MCL 205.54g(4), are taxable.
  (b) Notwithstanding subdivision (s) of this subrule, "prepared  food"  does 
not include items as specified in MCL 205.54g(5).
  (5) Eating utensils are "provided by the seller" under all of the following 
conditions:
  (a) For a seller with a prepared food sales percentage  greater  than  75%, 
eating utensils are "provided by the  seller"  when  the  utensils  are  made 
available to purchasers.
  (b) For a seller with a prepared food sales  percentage  of  75%  or  less, 
eating utensils are "provided by the seller" if  the  seller's  practice,  as 
represented by the seller, is to physically give  or  hand  the  utensils  to 
purchasers, except that plates, bowls, glasses, or  cups  necessary  for  the 
purchaser to receive the food, for example, dispensed soft drink or milk,  or 
salad bar, need only be made available.
  (c) A seller's "prepared food sales percentage" at an  establishment  is  a 
fraction determined by dividing the  following  described  numerator  by  the 
following described denominator:
  (i) The numerator shall consist of the seller's annual sales of all of  the 
following:
  (A) Food sold in a heated state or heated by the seller.
  (B) Two or more food ingredients mixed or combined by the seller  for  sale 
as a single item, not including food items specifically excluded  in  subrule 
(4)(b) of this rule.
  (C) Food where plates, bowls, glasses or cups are necessary to receive  the 
food, for example, dispensed soft drink or milk, or salad bar.
  (ii) The denominator shall consist of the seller's total  annual  sales  of 
all food and food ingredients at the establishment including  prepared  food, 
candy, dietary supplements and soft drinks
  (iii) Sales of alcoholic beverages are not included  in  the  numerator  or 
denominator.
  (d) For a seller with a prepared food sales percentage greater than 75% who 
sells an item that contains 4 or more servings packaged as 1 item sold for  a 
single price, that item does not become  prepared  food  due  to  the  seller 
having utensils available.  Both of the following shall apply:
  (i) If the seller provides utensils for that item as in subdivision (b)  of 
this subrule, then the item is considered prepared food.
  (ii) Whenever available, serving sizes shall be determined based on a label 
on an item sold.  If no label is available, then a  seller  shall  reasonably 
determine the number of servings in an item.
  (e) When a seller sells a food item  that  has  a  utensil  placed  in  the 
package by a person other than the seller, both of the following shall apply:
  (i) If that person's North American Industry Classification System  (NAICS) 
classification code is that of manufacturer (sector 311),  the  seller  shall 
not be considered  to  have  provided  the  utensil  except  as  provided  in 
subdivisions (a), (b) and (d) of this subrule.
  (ii) For any other packager with any other NAICS classification  code,  for 
example, sector 722 for caterers, the seller  shall  be  considered  to  have 
provided the utensil.
  (f) The prepared food sales percentage shall be calculated by a seller  for 
each tax year or business fiscal year, based on the seller's  data  from  the 
prior tax year or business fiscal year, as soon as possible after  accounting 
records are available, but not later than 90 days after the beginning of  the 
seller's tax year or business fiscal year.
  (g) A single prepared food sales percentage shall be  determined  annually, 
for all of the seller's establishments in this state.
  (h) A new business shall make a good faith estimate of  its  prepared  food 
sales percentage for its first year.  A new business should adjust  its  good 
faith estimate prospectively after the first 3 months of operation if  actual 
prepared food sales percentages materially affect the 75% threshold test.
  (6)  Prepared food sold by  various  organizations,  such  as  churches  or 
charitable, benevolent, social, or fraternal groups,  including  fund-raising 
projects, is taxable.  Such organizations shall have a sales tax license  for 
the purpose of reporting the tax due.
  (7) Sales of prepared food and drink by a caterer are subject to tax.
  (8) Sales of prepared food cooked to the  order   of   the   purchaser,  or 
maintained at a temperature  higher  than  normal   room   temperature,   are 
taxable.
  (9) Examples of nontaxable food items sold without  eating  utensils  by  a 
grocer or other food retailer for human consumption are as follows  to  serve 
as a guide for both the retailer and the consumer:
  (a) Baby food.                             
             
  (b) Bakery products.                          
   
  (c) Baking soda.                               
  (d) Bouillon cubes.                             
  (e) Candy and confectionery.                 
  (f) Carbonated beverages (bottle deposits are exempt).
  (g) Candied apples.                          
  (h) Caramel-coated popcorn.                   
  (i) Cereal and cereal products.   
  (j) Chewing gum (nonmedicated).               
  (k) Chocolate.
  (l) Cocoa.     
  (m) Coconut.     
  (n) Coffee and coffee substitutes.              
  (o) Condiments.    
  (p) Cookies.                 
  (q) Crackers.                                  
  (r) Dehydrated fruits and vegetables.                        
  (s) Diet food.                                 
  (t) Dietary supplements.
  (u) Eggs and egg products.                           
  (v) Extracts, flavoring as an ingredient of food products.          

  (w) Fish and fish products.                   
  (x) Flour.                                     
  (y) Food coloring.                            
  (z) Fruit and fruit products.                  
  (aa) Gelatin.     
  (bb) Health foods.
  (cc) Honey.     
  (dd) Ice cream, topping, and novelties.
  (ee) Jams. 
  (ff) Jellies.
  (gg) Lard. 
  (hh) Marshmallows.
  (ii) Mayonnaise.
  (jj) Meat and meat products.
  (kk) Milk and milk products.
  (ll) Mustard.
  (mm) Nuts.
  (nn) Oleomargarine.
  (oo) Olives.
  (pp) Olive oil.
  (qq) Peanut butter.
  (rr) Pepper.
  (ss) Pickles.
  (tt) Popcorn.
  (uu) Potato chips.
  (vv) Powdered drink mixes (pre-sweetened or natural).
  (ww) Relishes.
  (xx) Salad dressings and dressing mixes.
  (yy) Salt.
  (zz) Sauces.
  (aaa) Sherbets.
  (bbb) Shortenings.
  (ccc) Soups.
  (ddd) Spices.
  (eee) Sandwich spreads.
  (fff) Sugar, sugar products, and sugar substitutes.
  (ggg) Syrups.
  (hhh) Tea.
  (iii) Vegetables and vegetable products.
  (jjj) Water, bottled.     
  (kkk) Yeast.
  (10) All of the following are examples of items subject to tax:
  (a) Alcoholic beverages (containing 0.5% or more of alcohol by volume).   
  (b) Cocktail mixes (dry or liquid).            
  (c) Drugs (nonprescription).                   
  (d) Household supplies.                               
  (e) Hot prepared foods.
  (f) Nonprescription medicines.                    
  (g) Paper products.
  (h) Pet foods and supplies.
  (i) Prepared foods for immediate consumption.
  (j) Soap and soap products.
  (k) Toothpaste.

  History:  1979 AC; 2007 AACS.


R  205.137   Air and water pollution.
  Rule 87. (1) Tangible personal property purchased for  installation  as   a 
component part of a water pollution control facility or  an   air   pollution 
control facility for which a tax exemption certificate is   issued   by   the 
state tax commission is exempt from tax.
  (2) When sales or use tax has been paid on   tangible   personal   property 
which later qualifies for exemption as a result of obtaining a certificate of 
exemption from the state tax commission, a refund may be  requested   by  the 
purchaser upon submission of  both  of  the  following   documents   to   the 
revenue division:
  (a) A copy of the exemption certificate issued  by   the   tax   commission 
indicating the approved cost of the tangible  personal   property   installed 
and entitled to exemption.
  (b) A copy of the seller's invoice  showing  the  name   and   address   of 
seller,  identification  of  purchaser,  identification    of    the    items 
purchased, date of purchase, and amount of tax paid to seller.

  History:  1979 AC.


R  205.138   Rescinded.

  History:  1979 AC; 1996 AACS; 1997 AACS.


R  205.139   Medical equipment and appliances.
  Rule 89. (1) Retail sales of hearing  aids  and   replacement   parts   are 
exempt from tax.
  (2) Retail sales of any apparatus, device, appliance, or equipment  used to 
replace or substitute for any part of the human body, or used to  assist  the 
disabled person to lead   a   reasonably   normal   life,   are   exempt   if 
purchased on a written prescription or order issued by  a   licensed   health 
professional. Repair and replacement parts for such items are also exempt.
  (3) A "licensed health professional" means a  physician,  dentist,   nurse, 
podiatrist, optometrist,  or  other  individual   licensed,   certified,   or 
authorized by the director of the department of public  health  to   practice 
that specific profession in his or her respective state.
  (4) To support the exemption claimed for prescription  sales  when   filing 
the required tax return, the seller shall keep a record  showing   the   date 
the prescription was issued, the name of the person issuing it,  the  name of 
the individual for whose consumption it was issued, a  brief  description  of 
the property  sold,  and  the   amount   charged   to   the   customer.   The 
prescription should be attached to the seller's copy of the sales  invoice or 
retained in such a manner as will  permit  the  department  to   verify   the 
authenticity of the exemption.
  (5) Examples of the kind of medical  appliances  that   may   qualify   for 
exemption if sold pursuant to a  written  prescription  or   order   are   as 
follows:
Artificial eyes                         Oxygen equipment Artificial limbs     
                   Pacemakers     Braces                                      
Post-surgical  bust  forms  Canes                                    Pressure 
pads Corrective shoes                        Specially  built  hospital  beds 
Crutches                                   Stoma    appliances    (colostomy, 
ileostomy,    Dialysis    machine                               ureterostomy, 
catheters)  Hydraulic  (patient)   lifts                 Trusses   Hypodermic 
syringes & needles           Walkers Orthotic supports (bandages, belts       
Wheelchairs
   and similar supplies)

  (6) Sales of  nonprescription  apparatus,  devices,   or   equipment,   are 
taxable. Repair and replacement parts are also taxable.

  History:  1979 AC.


R  205.140   Nonprofit entities.
  Rule 90. (1)  Sales  of  tangible  personal  property   and   services   to 
properly qualified nonprofit entities for their own  use   and   consumption, 
but not for resale, are exempt.
  (2) The claimant shall meet the following requirements for exemption:
  (a) Qualify as a school, hospital, home for the care  and  maintenance   of 
children  or  aged  persons,  and  other   health,   welfare,    educational, 
charitable, or benevolent institutions and agencies.
  (b) Be operated by  an  entity  of  government,   a   regularly   organized 
church, religious or fraternal organization, a veterans  organization,  or  a 
corporation incorporated under laws of the state.
  (c) The income or benefit from the operation shall not inure,  in  whole or 
in part, to  any   individuals   or   private   shareholders,   directly   or 
indirectly.
  (d) The  activities  of  the  entity  or  agency  shall   be   carried   on 
exclusively for the benefit of the public at large and not  limited  to   the 
advantage, interests, and benefits of its members or any restricted group.
  (3) When an exemption is  claimed,  the  seller,  at  the   time   of   the 
transfer of the tangible property or services, shall retain,   as   part   of 
the seller's records, an executed exemption  certificate   which   reads   as 
follows:

                CERTIFICATE IS TO BE EXECUTED WHEN TAX EXEMPT SALE
                   IS MADE TO AN EXEMPT INSTITUTION OR AGENCY

  The undersigned hereby certifies that the item or items being purchased are 
to be used or consumed  in  connection  with  the  operation  of  the  exempt 
institution or agency named  in  the  space  provided  below,  and  that  the 
consideration for  this  purchase  moves  from  the  funds  of  the  designed 
institution or agency.  In the event this claim is disallowed, the transferee 
promises to reimburse the seller for the amount of tax involved.

Date __________________ _________________________________________________
                        Name of exempt institution or agency

                        _________________________________________________
                        Signature and title of person making certification

  (4) The department does not  issue  so-called   "exemption   numbers."   If 
there is some  question  regarding  exemption  status,   the   claimant   may 
contact the department for a ruling.
  (5) Nonprofit entities engaged in a retail sales activity   of   any   kind 
are required to have a sales tax license. The fact that   the   receipts   or 
profits from such sales may be used for otherwise exempt  purposes   is   not 
material.

  History:  1979 AC.