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TaxByte: Michigan Bills Could Exempt Some Food Items from Sales and Use Tax

Written by Glenn Amberson | Nov 8, 2023 3:19:55 PM

 

Two bills could change the way sales and use tax applies to certain food items in Michigan. House Bill 4377 (H-1) and House Bill 4378 (H-1) would exempt bottled water, candy, food sold in an unheated state, and food sold with eating utensils provided by the seller from the sales and use tax. The bills would also specify how to calculate the prepared food sales percentage for sellers who sell both taxable and nontaxable food items.

The bills are intended to align the Michigan tax law with the Streamlined Sales and Use Tax Agreement (SSUTA), which is a multistate effort to simplify and harmonize sales and use tax collection. In 2007, the Department of Treasury adopted a rule defining "food sold with eating utensils to the seller" in the Michigan Administrative Code in compliance with the Streamlined Sales. These new bills would invalidate that Treasury ruling.

According to the Michigan Department of Treasury, the bills would reduce State and local revenue by about $0.5 million per year and impact the revenue sharing of the School Aid Fund, the General Fund, and constitutional revenue.

The bills were reported on September 22, 2023. They are currently pending in the Senate Committee on Finance, Insurance, and Consumer Protection. If passed, they would be effective 90 days after final adjournment. You can also read the bill analysis here.