Michigan State University
Controller's Office

Administration Bldg
426 Auditorium Rd, Rm 305
East Lansing, MI 48824
517 355-5020

SECTION 50: Sales and Use Tax

Last updated: September 2018

I. Applicability

The tax applies to sales or rentals of tangible personal property that take place in Michigan.

  1. Michigan State University as Purchaser

    Michigan State University, as an instrumentality of the State of Michigan and exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code, is exempt from the payment of sales and use taxes on purchases of tangible property and applicable rentals.  See Exhibit 50–A (MI Form 3372, which is most frequently required by vendors) or exhibit 50–B (letter, which may also be accepted by some vendors) for examples of the Certificates of Exemption that MSU should complete when claiming exemption.

    1. Direct Purchases by MSU – The Michigan Sales and Use Tax Certificate of Exemption should be completed and submitted to the vendor only when the payment is being made directly by MSU. It cannot be used when the employee makes the purchase with personal funds and then seeks reimbursement from MSU.
    2. Online Purchases – The Michigan Sales and Use Tax Certificate of Exemption may only be used for online purchases when using an MSU issued PCard. In those cases when a PCard is being used to make authorized purchases (see Section 271 for PCard policy), it must be the only card on the account or a separate business account (if available) must be set up to ensure that only the MSU purchases are receiving the exemption.

      Example – Amazon
      An Amazon.com business account may be set up as stand-alone account or as an account section within a regular/personal Amazon account. To set up the account, log in to your Amazon account. Go to “Your Account”, “Settings”, and click on “Register for a Business Account”.

      1. Employees may use the same Amazon account for both personal credit card (personal purchases) and PCard (MSU business purchases) provided an Amazon business account is created within the regular/personal Amazon account. MSU’s tax exemption may then be set up on the business account section only.
      2. Employees may open an entirely separate Amazon account for only MSU business. Under this account, MSU’s tax exemption may be set up.
      3. No matter the option selected, the MSU PCard may be included as a payment option ONLY under a stand-alone Amazon business account or under the business account section held within an Amazon regular/personal account.
      4. MSU’s tax exemption may not be present on any Amazon account that is not a business account as described in options 1 and 2.
  2. Michigan State University as Seller

    The university is liable for the collection and payment of tax on sales and rental transactions to non-exempt individuals or organizations.  If the organization claims exemption, see Section VI below for required documentation.  If the entity cannot (or does not) provide the required documents then the sale or rental is taxable.

II. Collection

All university departments engaged in sales or rental transactions subject to the Michigan sales or use tax must collect such taxes, keep records of the transactions, and report and submit the tax collected when deposits are made or accounts receivable are billed. When tax is collected via cash or check, please refer to Section 15.IV.B for deposit instructions. When tax is collected via payment (credit/debit) card, the Distribution of Income and Expense e-doc (DI) is to be used by departments to move the funds into the sales and use tax account number AD023236, (object code 4069 for sales tax, and object code 4070 for use tax). The DI needs to include supporting documentation or a reference to where applicable reports are retained. Tax deposits should be made in a timely fashion, generally by the end of the month for the preceding month’s sales and rental transactions.

III. Sales Tax

Generally, sales tax applies to sales of tangible personal property to consumers in the State of Michigan.  The following would be included as sales subject to sales tax:

  1. Books, pamphlets, copied/printed materials (including copy machines).
  2. T-shirts, mugs, logoed souvenirs.
  3. Meals, except to currently enrolled students. (Meals provided to elementary and secondary school students enrolled in MSU summer camps are also exempt.)
    Example: Meals sold to parents, faculty, staff, and the general public are subject to sales tax.
  4. Food items intended for immediate consumption.
    Example: Sales of coffee, open snack/concessions items, and meals in a restaurant-type atmosphere are subject to sales tax. However, sales of bottled water and packaged snack/concessions items are not subject to sales tax.
  5. Pharmaceutical (non-prescription drugs) and optical wear.
  6. Sales to student organizations which cannot provide proof of exemption see Section VI below for required documentation). This includes charges to MSU Agency accounts (sub-fund groups of AM, AR and AS).

IV. Use Tax

This tax applies to the rental of tangible personal property to renters or lessees and to rental charges for lodging or accommodations.

The following rental transactions would be included in rents subject to use tax:

  1. Films, audio and video tapes.
  2. Equipment (including sports or recreational equipment).
  3. Lodging and accommodations for 30 days or less in duration.
  4. Telephone service.
  5. Room rentals in a building where overnight accommodations are available.

V. Tax Exempt Numbers

The Michigan Department of Treasury does not issue "tax exemption numbers" for any type of organization.  Sellers should not accept a "number" as evidence of exemption from sales and use taxes.  A properly executed Michigan Sales and Use Tax Certificate of Exemption is the only form that should be accepted. See Section VI below for required documentation.

VI. Certificate of Exemption

  1. The Michigan Department of Treasury's prescribed "Certificate of Exemption" is included as Exhibit 50–A.  The Department will also accept any exemption certificate contained in a Sales and Use Tax Administrative Rule (see Exhibit 50–C for samples of industry specific claim forms), and the Uniform Sales and Use Tax Certificate approved by the Multistate Tax commission. Collectively, these items are referred to as "exemption claims", and represent the only acceptable formats.
  2. An exemption claim must be presented to MSU prior to or when tangible personal property is sold or rented.  The buyer must state a valid reason for claiming exemption and complete an appropriate "exemption claim" document(s).  The more common exemptions allowed by the General Sales Tax Act and the Use Tax Act are listed below; more details about each exemption can be found on the Michigan Department of Treasury website.
    1. Sales for Resale
    2. Sales to Agricultural Producers
    3. Sales to Industrial Processors (Manufacturers)
    4. Sales to Governmental Entities
    5. Sales Not for Resale to Nonprofit Schools, Nonprofit Hospitals, and Churches
    6. Sales Not for Resale to other Nonprofit Organizations
  3. The Michigan Certificate of Exemption and the Federal exemption letter are required to be retained with the sales records for four years and may be subject to audit.

VII. Blanket Exemption Claims

Blanket exemption certificates are accepted by the State of Michigan.  The statutory language of the General Sales Tax Act requires that the blanket exemption certificate cover a three year period, unless the buyer and the seller mutually agree upon a shorter period.

A blanket exemption claim is filed once and maintained in the seller's records, which states that all of the defined purchases made by the presenter of the certificate are exempt from tax.

The seller must exercise reasonable care and effort to determine that the purchaser is entitled to the exemption.  If the seller becomes aware that an item will be used in a taxable manner rather than the exempt use stated on the certificate, the items purchased must be taxed.

VIII. Assessment of Tax

  1. The rate of tax to be assessed on sale or rental transactions is 6% of the sale price or rental charge.
  2. Departments that include the sales or use tax in their advertised price should use the denominator of 17.67 to determine the tax collected. EXAMPLE: Sale price of $1.00 includes $1.00/17.67 or 6 cents (5.66 cents) tax.

IX. Sales Tax in Other States

  1. Michigan State University as Seller.
    1. Michigan is the only state that Michigan State University is licensed to collect and remit sales tax in.
    2. Sales tax collection and remittance for other states should be evaluated on a case-by-case basis.
    3. If your department will be physically conducting sales of tangible personal property outside of Michigan (see example below) please contact the Office of Tax Services (355-5029 or TaxReporting@ctlr.msu.edu). Please allow adequate time, minimum of four weeks, to research the state rules/laws for sales tax before the sales event will occur.

    Example – An MSU department will be sending an employee to a conference in Seattle, WA where they plan to sell MSU t-shirts at the conference. Both the collection of money and exchange of tangible personal property will occur in Seattle, WA. At least four weeks prior to the conference, the department should contact the Office of Tax Services, who will research WA sales tax rules/laws and advise the department if and how they should proceed.

  2. Michigan State University as Purchaser.

    Whether Michigan State University is exempt from sales tax varies from state to state. Please reference Exhibit 50–D for a breakdown of exemption by state.

X. Questions

Questions regarding the taxability of certain transactions or regarding exemption claims, etc. can be directed to the Office of Tax Services, Hannah Administration Building, 426 Auditorium Road Rm. 301, ph. 355-5029, TaxReporting@ctlr.msu.edu.

XI. Exhibits/Forms