Public Act 20 and 21 of 2023
Michigan manufacturers and distributors should be aware of recent changes in the sales tax rules resulting from Public Act 20 and 21 of 2023 (“the Act”). Prior to the Act, delivery and installation charges were subject to 6 percent sales tax. The delivery and installation charges were included as a function of the overall sales price (seller) of a product.
Delivery and Installation Charges Post-Act
Post-enactment of the Act, delivery and installation charges are no longer included in the sales price 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
Utility Sales Subject to Sales and Use Tax
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.
What Are Delivery and Installation Charges?
According to the state of Michigan:
- Delivery charges are costs in a transaction associated with the preparation and transportation of tangible items or services; and
- Installation charges are costs associated with the service of placing or setting up tangible items for use
Continue the Conversation
It’s important for business owners to be aware of this change as the amendment results in buyers paying less sales tax on purchases. If you have questions about the recent sales and use tax rule changes resulting from Public Act 20 and 21 of 2023, please reach out.