Michigan Treasury Expands Applicability of Industrial Processing Exemption

The Department of Treasury has amended the sales and use tax provisions by expanding the manufacturing exemption to include certain industrial processing activities performed on some aggregate products or materials.

“Aggregate” is defined as “common variety building material,” to include:

• Sand
• Gravel
• Crushed stone
• Slag
• Recycled concrete
• Recycled asphalt
• Geosynthetic aggregates

The legislation provides that machinery and equipment that performs an industrial processing activity on an aggregate product that will be used as an ingredient or component part for the construction, maintenance, repair, or reconstruction of real property is eligible for certain industrial processing exemptions. Machinery and equipment used in aggregate production will be exempt from sales and use tax if sales or use tax is paid on the aggregate product. Equipment used in processing aggregates includes:

• Loaders
• Feeders
• Crushers
• Screens
• Conveyors
• Dust control
• Generators

Tax relief provided by the Acts will require Treasury to cancel all outstanding balances related to sales or use tax liabilities involving industrial processing activities and property described in the Acts. The tax liabilities are for outstanding “Notices of Intent to Assess” and “Final Assessments,” even if they are in an Informal Conference or on appeal before a court. In addition, Treasury is not allowed to issue any new assessments for tax periods occurring before May 8, 2023. The Acts do not establish a right to a refund of taxes that a taxpayer has already remitted to Treasury prior to the effective date.

The change is effective May 8, 2023. [House Bill 4054, 2023; Senate Bill 97, 2023 – Amending section MCL 205.54t.]. Treasury will issue a revised Revenue Administrative Bulletin to replace the current 2000-4 bulletin.

Although this is the current equipment listed under the expanded exemption criteria, additional pieces of equipment may be added in a future amendment. Our dedicated construction accounting specialists will continue to look out for any updates to this revenue administrative bulletin and provide updates when possible. If you are unsure if your business equipment would be eligible for the credit, contact a member of our construction practice.