TaxBytes | TaxValet | Michigan Updates Guidance on Use Tax Liability

The Michigan Department of Treasury issued Revenue Administrative Bulletin 2023-13 (RAB) on August 15, 2023, that provides updated guidance on how sales and use tax applies to lease transactions. This RAB replaces Revenue Administrative Bulletin 2020-16 and covers various aspects of leasing tangible personal property, such as:

• How to determine if a transaction is a lease or a service
• How to make a lessor election to pay use tax on rental receipts instead of on the purchase price of the property
• How to source lease payments for tax purposes
• How to claim exemptions for certain leases of school buses or transportation-related services
• How to avoid use tax liability as a lessee
• The RAB also reflects the changes made by Public Acts 673 and 679 of 2018 and Public Acts 20 and 21 of 2023, which affect the tax treatment of certain leases of school buses or transportation-related services. 

The RAB also incorporates the revisions to Mich. Admin. Code, R205.132 which became effective on August 11, 2023.

Overall, the RAB is intended to help lessors and lessees understand their tax obligations and avoid common pitfalls when leasing tangible personal property in Michigan. 

If you have any questions or need further assistance, please contact the Treasury at (517) 636-6925 or visit https://www.michigan.gov/taxes