Michigan Sales Tax Exemption for Manufacturing

AGILE CONSULTING GROUP

November 16, 2020

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Michigan provides an extensive sales tax exemption for manufacturers involved in industrial processing. Michigan defines industrial processing as “the activity of converting or conditioning tangible personal property by changing the form, composition, quality, combination or character of property for ultimate sale at retail or for use in the manufacturing of a product to be ultimately sold at retail or affixed to and made a structural part of real estate located in another state. Industrial processing starts when tangible personal property moves from raw materials storage and ends when finished goods first come to rest in inventory storage” [Mich. Comp. Laws Ann. §205.54t(7)(a)]. This exemption applies to many items used in the manufacturing process and the skilled sales tax consultants at Agile Consulting are ready to assist Michigan manufacturers with the nuance of the tax law.

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Chicago skyline with a waterfront pavilion and Ferris wheel under a hazy blue sky

Sales Tax Exempt Industrial Processing Manufacturing Items

  • Industrial machinery and equipment and their repair and maintenance
  • Consumables
  • Fuel and Energy used in industrial processing
  • Material handling equipment used in industrial processing
  • Data processing equipment used in industrial processing
  • Ingredient or component parts that become part of the finished product sold at retail

Taxable Items

  • Real property repair (i.e. HVAC, plumbing, lighting, electrical, etc. systems)
  • Office equipment and supplies not used in industrial processing
  • Material handling equipment used outside the industrial processing process (i.e. receiving and storage)
  • Preservation or maintenance of finished goods already in finished goods inventory storage
  • Returnable shipping containers or materials not used in industrial processing
  • Tangible personal property used in the production of computer software designed exclusively for the purchaser
Close-up of a metal lathe carriage and toolpost in a workshop

How to Claim the Michigan Sales Tax Exemption for Manufacturing

Michigan manufacturers can easily purchase exempt manufacturing items by supplying their vendors with “Michigan Sales and Use Tax Certificate of Exemption – Form 3372”. This form can be found on the Michigan Department of Treasury’s website. The manufacturer will fill out and send in one form for each of their qualifying vendors. On the exemption certificate the manufacturer will check box 7 “Industrial Processing” and use code 4 for “Manufacturing” on section 4 on the exemption certificate. Once the vendor has this certificate on file, the manufacturer can purchase qualifying items tax exempt. Agile Consulting has experienced sales tax consults eager to help Michigan manufacturers take advantage of the Michigan sales tax exemption for manufacturing.

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How to Recover Michigan Industrial Processing Sales Tax

Purchasers are entitled to a refund of sales tax dollars erroneously paid on manufacturing items. The state of Michigan allows purchasers to request a refund on items purchased up to 4 years (48 months) from the date of purchase. Due to a recent change in refund procedures (Public Act 168) purchasers may request a sales tax refund directly from the Michigan Department of the Treasury as of January 2019. In order to receive the refund, the manufacturer must fill out sign and send in “Purchaser Refund Request for a Sales or Use Tax Exemption – Form 5633” into the Michigan Department of Treasury. Please note that while the purchaser is now able to request a refund directly from the Treasury, form 5633 has a statement that indicates that the seller paid tax on the original transaction and will not seek a refund. This statement must be signed by the seller. Once the refund request is received by the Treasury it will be assigned to an auditor for review. Once the review is completed and both sides agree, a refund check will be sent to the purchaser. Please consult Agile’s knowledgeable sales tax consultants for help in the refund recovery process.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing  Michigan sales and use tax exemptions.

Agile Consulting Group

If you have any questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

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