Notice: Change in Taxability of Delivery and Installation Charges

The General Sales Tax Act, MCL 205.51 et seq., and the Use Tax Act, MCL 205.91 et seq., were recently amended by the passage of Public Acts 20 and 21 of 2023 (the “Acts”). The amendments made through the Acts are effective April 26, 2023 (the “Effective Date”).

Change in Taxability of Delivery and Installation Charges

In general, beginning on the Effective Date, delivery and installation charges are not included in the “sales price” for sales tax purposes or the “purchase price” for use tax purposes if both of the following conditions are met:

• The charges are separately stated on the invoice, bill of sale, or similar document provided to the purchaser; and
• The seller (taxpayer) maintains its books and records to show separately the transactions used to determine the sales tax or use tax, as applicable.

Delivery and installation charges that fail to satisfy the above conditions or that involve, or are related to, the sale of electricity, natural gas, or artificial gas by a utility remain subject to sales tax and use tax unless otherwise exempt.

The Acts define a “utility” as either of the following persons:

• A person regulated by the Michigan Public Service Commission as a utility.
• A person that operates equipment or facilities for producing, generating, transmitting, delivering, or furnishing electricity within Michigan for the public for compensation, regardless of the person’s owner, ownership structure, or regulation by the Michigan Public Service Commission.

For purposes of this Notice, “delivery charges” means charges by the seller for preparation and delivery to a location designated by the purchaser of tangible personal property or services and includes, but is not limited to, transportation, shipping, postage, handling, crating, and packing. MCL 205.51a(e); MCL 205.92b(e).

Review the new tax rules for delivery and installation charges under Michigan’s amended sales and use tax laws