View Page As PDF
Share Button
Tweet Button

In October 2013, Michigan Governor Rick Snyder signed a bill (S.B. 89), which provided a phased-in exemption from sales tax on the agreed-upon value of a motor vehicle or recreational vehicle when the trade-in is used as partial payment for the purchase of a new or used motor vehicle or recreational vehicle. On Dec. 21, 2013, the governor signed S.B. 90 which provides a similar exemption from use taxes.

 

In general, businesses and individuals that purchase tangible personal property or certain services for use, storage or consumption in their state of residence are supposed to pay use taxes if they purchase such property or services without paying sales tax. Without S.B. 90, a business or individual who is eligible to receive this exemption from sales tax on the agreed-upon value of a motor vehicle or recreational vehicle may instead need to pay use tax on the value of such trade-in. S.B. 90 makes it clear that the value of such trade-in is also exempt from use taxes.

 

Similar to S.B. 89, S.B. 90 provides for a phased-in exemption up to the full agreed-upon value of the trade-in motor or recreational vehicle. Beginning on Dec.15, 2013, up to $2,000 of the agreed-upon value of the trade-in vehicle is exempted from use tax when used as partial payment for the purchase of a new or used vehicle purchased from a new vehicle dealer or a used or secondhand vehicle dealer licensed in the state if such agreed-upon value is separately stated in the invoice, bill of sale or similar document given to the purchaser.

 

Beginning Jan. 1, 2015, and each Jan. 1 thereafter, the amount of such exemption will be increased by $500 each year until the exemption amount equals $14,000. Once the exemption amount exceeds $14,000, there will no longer be a limit on the amount of the exemption. However, such annual increases will stop if the recently enacted Medicaid expansion legislation is repealed.

 

Similar to S.B. 89, S.B. 90 provides that beginning Nov.15, 2013, the full agreed-upon value of a titled watercraft will be exempted from use tax when used as partial payment for the purchase of a new or used titled watercraft purchased from a watercraft dealer if such agreed-upon value is separately stated in the invoice, bill of sale or similar document given to the purchaser.

 

Click here to read the prior Multistate Tax Update about S.B. 89.

Click here to read the full text of S.B. 90.

COMMENT
+