Michigan's Revised Sales Tax Policy on Delivery and Installation Fees

Boldly stepping into a new fiscal era, Michigan has changed its General Sales Tax Act and the Use Tax Act. As of April 26, 2023, delivery and installation charges are exempt from the state's sales and use tax.

This change comes along with two key conditions:

• Document Transparency: The charges must be separately stated on the invoice, bill of sale, or any equivalent document given to the purchaser.
• Record-keeping Excellence: The seller (or taxpayer) should maintain its records to separately show the transactions utilized to determine the sales or use tax, whichever applies.

Exceptions

While this policy alteration signifies a step towards economic flexibility, it isn't without its exceptions. Delivery and installation charges tied to the sale of electricity, natural gas, or artificial gas by a utility are still subject to Michigan sales tax and use tax.

Unpaid Assessment Balances

Another noteworthy element of this policy shift is its impact on outstanding assessment balances. The Treasury has committed to canceling within 90 days any balances on notices of assessments issued before the effective date, provided they're related to now-exempt delivery or installation charges.

While the Treasury will be actively working to locate and cancel these assessments, taxpayers holding outstanding balances for delivery or installation charges are being urged to reach out to Treasury.

Refunds

Taxpayers cannot receive a refund for sales tax or use tax on delivery or installation charges that were paid to the Treasury before the effective date of April 26, 2023. Similarly, purchasers will not be granted refunds for sales or use tax paid on delivery or installation charges.

‍Any business shipping to Michigan — including retailers — should update their sales tax and use tax procedures to ensure tax is not applied to exempt delivery or installation charges.

Talk to our experts for assistance with your sales and use tax needs.