205.52. Sales tax; rate, M.C.L.A. 205.52

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M.C.L.A. 205.52

MICHIGAN COMPILED LAWS ANNOTATED

CHAPTER 205. TAXATION

GENERAL SALES TAX ACT

205.52. Sales tax; rate

Sec. 2. (1) Levy; rate. Except as provided in section 2a, 1 there is hereby levied upon and there shall be collected from all

persons engaged in the business of making sales at retail, as defined in section 1, 2 an annual tax for the privilege of engaging

in that business equal to 4% of the gross proceeds thereof, plus the penalty and interest when applicable as provided by law,

less deductions allowed by this section.

(2) Separate accounting practices; penalty. Any person engaged in the business of making sales at retail who is at the same

time engaged in some other kind of business, occupation, or profession not taxable under this act, shall keep books to show

separately the transactions used in determining the tax levied by this act. If the person fails to keep separate books, there shall

be levied upon him or her the tax provided for in subsection (1) equal to 4% of the entire gross proceeds of both or all of his or

her businesses. The taxes levied by this section shall be a personal obligation of the taxpayer.

1986 Main Volume Credit(s)

Amended by P.A.1984, No. 228, § 1, Imd. Eff. July 30.

1

 Section 205.52a.

2

 Section 205.51.

HISTORICAL NOTES

HISTORICAL AND STATUTORY NOTES

1986 Main Volume Historical and Statutory Notes

Source:

P.A.1933, No. 167, § 2, Imd. Eff. June 28.

C.L.1948, § 205.52.

P.A.1949, No. 272, § 2, Eff. July 1.

P.A.1960, 2nd Ex.Sess., No. 1, § 1, Eff. Jan. 1, 1961.

C.L.1970, § 205.52.

The 1949 amendment, in the first paragraph, substituted “sections 4 and 4a” for “section 4”; and, in the second sentence of

the second paragraph substituted “the tax hereinbefore mentioned equal to 3% of the entire gross” for “a tax based upon the

entire gross”.

The 1960 amendment substituted “4%” for “3%” throughout.

P.A.1960, 2nd Ex.Sess., No. 1, § 2 provided that the act should take effect Jan. 1, 1961. It was ordered to take immediate

effect, and approved Dec. 13, 1960.

ATTACHMENT 3
205.52. Sales tax; rate, M.C.L.A. 205.52

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P.A.1980, No. 254, § 1, enacted an amendment to this section the effect of which was contingent upon Senate Joint Resolution

X (Ballot Proposal C) of the 1980 regular session of the legislature becoming a part of the constitution, and also contingent

upon other 1980 legislation. Ballot Proposal C was not approved by the voters at the November 4, 1980 election.

P.A.1981, No. 23, § 1, enacted an amendment to this section the effect of which was contingent upon House Joint Resolution

G (Ballot Proposal A) of the 81st Legislature becoming a part of the constitution. Ballot Proposal A was not approved by the

voters at the May 19, 1981 election.

The 1984 amendment rewrote this section, which prior thereto read:

“There is hereby levied upon and there shall be collected from all persons engaged in the business of making sales at retail,

as hereinbefore defined, an annual tax for the privilege of engaging in such business equal to 4% of the gross proceeds thereof,

plus the penalty and interest when applicable as hereinafter provided, less deductions allowed in sections 4 and 4a.

“Any person engaged in the business of making sales at retail who is at the same time engaged in some other kind of business,

occupation, or profession not taxable under this act, shall keep books to show separately the transactions used in determining

the tax herein levied. In the event of such person failing to keep such separate books, there shall be levied upon him the tax

hereinbefore mentioned equal to 4% of the entire gross proceeds of both or all of his businesses. The taxes levied hereunder

shall be a personal obligation of the taxpayer.”

REFERENCES

CONSTITUTIONAL PROVISIONS

1986 Main Volume Constitutional Provisions

Article 9, § 1, provides that the legislature shall impose taxes sufficient with other resources to pay the expenses of state

government.

Article 9, § 8, precludes the legislature from imposing a sales tax on retailers at a rate of more than four per cent of their gross

taxable sales of tangible personal property.

CROSS REFERENCES

1986 Main Volume Cross References

Use tax, levy, rate, see § 205.93.

LAW REVIEW COMMENTARIES

1986 Main Volume Law Review Commentaries

Advertised value of trading stamps as basis for state sales tax. 64 Mich.L.Rev. 1165 (1966).

Sales taxes, interstate trade barriers, and Congress. M.R. Schlesinger, 39 Mich.L.Rev. 755 (1941).

State and local taxation: Annual survey of Michigan law 1975. M. Burns Stanley, Edward W. Tunstall, Loren M. Opper, 22

Wayne L.Rev. 587 (1976); Annual survey of Michigan law 1981. Sheryl A. Giddings and Aleksandra A. Miziolek, 28 Wayne

L.Rev. 1075 (1982).

LIBRARY REFERENCES

1986 Main Volume Library References
205.52. Sales tax; rate, M.C.L.A. 205.52

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Taxation 1281, 1313.

C.J.S. Licenses §§ 46, 49.

M.L.P. Taxation § 509.

ANNOTATIONS

NOTES OF DECISIONS

In general 2 .................................................. enter p

Actions and proceedings 9 ..................................... enter p

Governmental agencies or properties 8 ......................... enter p

Other business 6 .............................................. enter p

Other taxes 7 ................................................. enter p

Particular transactions 5 ..................................... enter p

Penalties 10 .................................................. enter p

Persons liable for tax 3 ...................................... enter p

Public agencies 8 ............................................. enter p

Sales at retail 4 ............................................. enter p

Validity 1 .................................................... enter p

1. Validity

Liability for payment of sales tax is controlled by statute and cannot be imposed by administrative rulings or regulations.

Garavaglia v. Michigan Dept. of Revenue (1954) 61 N.W.2d 612, 338 Mich. 467; R.C. Mahon Co. v. Department of Revenue

(1943) 11 N.W.2d 280, 306 Mich. 660.

Difference between corporation wholly owned by United States and corporation owned by private persons or corporations

and operated, in part, for their benefit, affords a valid basis for difference in classification for tax purposes, and exemption of

proceeds from sales to the former type of instrumentality, while including the latter, in computation of retailers' sales tax, did

not render the sales tax act unconstitutional as class legislation. Federal Reserve Bank of Chicago v. Department of Revenue

of State (1954) 64 N.W.2d 639, 339 Mich. 587.

Provisions of a taxing act exempting governmental units or property devoted to public use did not render the act invalid as

a denial of due process or equal protection of the laws. Federal Reserve Bank of Chicago v. Department of Revenue of State

(1954) 64 N.W.2d 639, 339 Mich. 587.

License tax (P.A.1933, No. 265) exacted of chain stores did not render sales tax unconstitutional as “double taxation,” since

the license tax was a tax upon right to do business in more than one store, and the sales tax was a privilege tax measured by

amount of business done. C.F. Smith Co. v. Fitzgerald (1935) 259 N.W. 352, 270 Mich. 659, appeal dismissed 56 S.Ct. 115,

296 U.S. 659, 80 L.Ed. 470.

2. In general

A tax which on its face purports to be an exercise of the taxing power is no less a tax because it is burdensome, or because it has

a regulatory effect, since every tax is in some measure regulatory. Heitsch v. Kavanagh (D.C.1951) 97 F.Supp. 749, affirmed

200 F.2d 178, certiorari denied 73 S.Ct. 829, 345 U.S. 939, 97 L.Ed. 1365.

The sales tax imposed by Michigan statute is a “privilege fee” exacted from retailers for the right of doing business within the

state. Miles Laboratories v. Simon (D.C.1940) 33 F.Supp. 962.

Under the General Sales Tax Act, retailers are allowed to shift the economic burden of any tax levied to consumers. Sims v.

Firestone Tire & Rubber Co. (1976) 245 N.W.2d 13, 397 Mich. 469.
205.52. Sales tax; rate, M.C.L.A. 205.52

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Sales tax must be collected upon entire gross proceeds from retail sale of tires, including amount of federal manufacturers

excise tax. Op.Atty.Gen.1985, No. 6320, p. ——.

Sales tax is a tax upon the privilege of doing business at retail. Op.Atty.Gen.1941-42, No. 19260, p. 104.

The Sales Tax Act as written did not permit the use of tokens or prepaid tax receipts. Op.Atty.Gen.1935-36, No. 115, p. 310.

The sales tax is a tax levied for the privilege of doing business and applies even though the business incidentally affects

interstate commerce. Op.Atty.Gen.1935-36, No. 17, p. 65.

3. Persons liable for tax

Carrying charges computed retroactively and paid by lessees of construction equipment at time lessees' purchase options were

exercised were a component of the price of the product and not a service charge or payment required in “some other kind of

business, occupation or profession,” and were, therefore, part of the gross proceeds of sale of the equipment and subject to sales

tax. Earle Equipment Co. v. Department of Treasury, Revenue Div. (1984) 358 N.W.2d 16, 136 Mich.App. 536.

Provision of § 205.51 in General Sales Tax Act permitting Department of Treasury to regard certain persons as agents for

purposes of Act did not impose liability on bank for sales tax as agent for coin dealer, but merely restated law that principal,

or dealer, can be held liable, tax-wise, for acts of its agent, and did not impose liability upon agent for acts of his principal.

Michigan Nat. Bank v. Department of Treasury (1983) 339 N.W.2d 515, 127 Mich.App. 646.

Even though plaintiff was not a “taxpayer” defined under this section of the General Sales Tax Act as a person “engaged in

the business of making sales at retail,” it could be found liable for sales tax under portion of provision of § 205.67 of the Act

applicable to “Any person knowingly making a sale of tangible personal property to another not licensed under this act.” Arbor

Sales, Inc. v. Department of Treasury (1981) 304 N.W.2d 522, 104 Mich.App. 181.

State sales tax is a tax upon seller, not consumer. Laurentide Leasing Co. v. Schomisch (1968) 157 N.W.2d 482, 9 Mich.App.

459, order affirmed in part, reversed in part on other grounds 169 N.W.2d 322, 382 Mich. 155.

This section creates no liability to pay tax on buyer's part unless tax is incorporated in or added to price and buyer accepts the

tangible personal property with such understanding. Laurentide Leasing Co. v. Schomisch (1968) 157 N.W.2d 482, 9 Mich.App.

459, affirmed in part, reversed in part on other grounds 169 N.W.2d 322, 382 Mich. 155.

Under Sales Tax Act which does not require, as matter of law, that any part of tax shall be passed on by retailer to purchaser,

sales to banking associations organized under Federal Reserve Act are taxable, even though economic burden of tax is, in the

main, passed on to consumer. National Bank of Detroit v. Dept. of Revenue of the State of Michigan (1954) 66 N.W.2d 237,

340 Mich. 573, appeal dismissed 75 S.Ct. 781, 349 U.S. 934, 99 L.Ed. 1264.

Under Sales Tax Act which does not require, as matter of law, that any part of tax shall be passed on by retailer to purchaser,

legal incidence of tax is on retailer who is made liable to state for payments. National Bank of Detroit v. Dept. of Revenue of

the State of Michigan (1954) 66 N.W.2d 237, 340 Mich. 573, appeal dismissed 75 S.Ct. 781, 349 U.S. 934, 99 L.Ed. 1264.

Merchant sellers are neither agent collectors of the Michigan sales tax nor remitters of sales taxes collected, but, rather,

they are, in fact, the taxpayers under the General Sales Tax Act, § 205.51 et seq., and are liable for the payment of the tax.

Op.Atty.Gen.1981, No. 5998, p. 420.

4. Sales at retail

Legislature did not intend General Sales Tax Act [§ 205.52] to apply only to legal sales transactions, so that sale of marijuana

is “sale at retail” for the meaning of statute. Greer v. Department of Treasury (1985) 377 N.W.2d 836, 145 Mich.App. 248.
205.52. Sales tax; rate, M.C.L.A. 205.52

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Only “sales at retail” are taxable under General Sales Tax Act, and those sales are defined as transaction where tangible personal

property is transferred. Natural Aggregates Corp. v. Department of Treasury (1984) 350 N.W.2d 272, 133 Mich.App. 441.

Transactions which occurred when members of church used the distribution of low cost articles, flowers and candy, to facilitate

the solicitation of funds, the primary purpose of which was to raise money for the church, a bona fide religious organization,

were not classifiable as “sales at retail” and, hence, were not subject to retail sales taxes. Holy Spirit Ass'n for Unification of

World Christianity v. Department of Treasury (1984) 347 N.W.2d 707, 131 Mich.App. 743.

Where no agreement between consumer and out-of-state dealer existed, nor did consumer know of existence or identity of outof-state dealer nor did dealer know of existence or identity of consumer, and dealer charged bank for Krugerrands and delivered

them to bank and bank in turn charged consumer and was paid by consumer, whereupon it delivered coins to consumer, there

was a sale of coins by out-of-state coin dealer to bank and resale at retail by bank to consumer for consideration, the latter transfer

of ownership being a taxable event upon which bank was obligated to pay sales tax, despite contention that bank was only

conduit between consumer and coin dealer in light of its maintaining no inventory of coins. Michigan Nat. Bank v. Department

of Treasury (1983) 339 N.W.2d 515, 127 Mich.App. 646.

Seller of small goods to volunteer and fraternal organizations who, in turn, resell the items to local merchants and other

individuals was not liable for sales tax under provision of § 205.52 requiring all persons “engaged in the business of making

sales at retail” to pay annual sales tax. Arbor Sales, Inc. v. Department of Treasury (1981) 304 N.W.2d 522, 104 Mich.App. 181.

5. Particular transactions

Where corporation contracted to erect or repair steel structures in accordance with plans and specifications, and after structural

steel had been fabricated it could not be sold as a separate and distinct product, use of structural steel in performance of contracts

was not merely incidental to transfer of ownership of tangible personal property, and transaction was not a proper basis of

computation of tax on sales of tangible personal property. Acorn Iron Works v. Auditor General (1940) 294 N.W. 126, 295

Mich. 143, 139 A.L.R. 368.

Sales to or purchases by a motel operator of tangible personal property were taxable transactions under both the sales and use

tax acts notwithstanding that the property so acquired was made available to a person for use or consumption during period of

occupancy of motel accommodations. Op.Atty.Gen.1961-62, No. 4005, p. 317.

Domestic or foreign suppliers of trading stamps are subject to sales or use taxes based upon the tangible intrinsic value of the

stamps; no taxable sale results on transfer of stamps from stamp company to merchant or from merchant to customer, but a

taxable sale at retail occurs when customer redeems stamps for merchandise at redemption store with result that a redemption

store must be licensed. Op.Atty.Gen.1959-60, Vol. 2, No. 3463, p. 66.

Sale of materials to cost-plus-fixed-fee contractors for use by them in performing contract for federal government, state

government, and other tax exempt agencies and institutions were subject to sales tax. Op.Atty.Gen.1941-42, No. 21885, p. 435.

Sales of bunker coal, food supplies and other tangible personal property to vessels operating on the Great Lakes, which sales

were completed within the boundaries of the state, were subject to sales tax. Op.Atty.Gen.1941-42, No. 19260, p. 104.

6. Other business

Sand and gravel company's delivery service for its customers constituted service business which was not taxable under General

Sales Tax Act where delivery service was separately contracted for and separately billed, trucking charges were not figured

in calculating gross price of product and delivery charge was not incidental to purchase price. Natural Aggregates Corp. v.

Department of Treasury (1984) 350 N.W.2d 272, 133 Mich.App. 441.
205.52. Sales tax; rate, M.C.L.A. 205.52

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For business which engages in sales at retail to have “some other kind of business” not properly taxable under General Sales

Tax Act, second business need not be totally unrelated to transfer of ownership of tangible personal property. Natural Aggregates

Corp. v. Department of Treasury (1984) 350 N.W.2d 272, 133 Mich.App. 441.

7. Other taxes

Where corporation installed wrecker equipment and bodies, furnished within state, on trucks belonging to out-of-state

customers and trucks were immediately returned to customers after installation in state, fact that other states might impose a use

tax upon same property was immaterial in determining whether corporation was immune from state sales tax. Ashton Power

Wrecker Eq. Co. v. Department of Rev. (1952) 52 N.W.2d 174, 332 Mich. 432.

The cigarette tax [P.A.1947, No. 265 (§ 205.501 et seq.) ] attached and accrued to every cigarette imported into state from an

unlicensed dealer at moment of importation or acquisition, and chains of stores importing cigarettes into state from unlicensed

manufacturer could not deduct cigarette tax from gross proceeds in computing sales tax. Op.Atty.Gen.1947-48, No. 503, p. 386.

8. Governmental agencies or properties

Incidence of Michigan sales tax fell upon federal credit unions as purchasers, rather than on retailers, in determining propriety

of imposing tax on federal credit unions. U.S. v. State of Mich., C.A. 6 (Mich.)1988, 851 F.2d 803, rehearing denied.

Section 205.54 declaring in part that no person subject to retail sales tax need include in amount of his gross proceeds used for

computation of tax any proceeds derived from sales to United States, its unincorporated agencies and instrumentalities, or to

any incorporated agency or instrumentality of United States wholly owned by United States or by corporation wholly owned by

United States, did not excuse retailers from including proceeds of business derived from sales to federal reserve bank, whose

stock was owned by commercial banks which were members of federal reserve system, since such bank is an incorporated

instrumentality of the United States, not wholly owned by the United States. Federal Reserve Bank of Chicago v. Dept. of

Revenue of State (1954) 64 N.W.2d 639, 339 Mich. 587.

The title to statute imposing sales tax, which remained unchanged, was sufficient to cover statute as amended to expressly

include in the term “person” municipal corporations, as well as private corporations. Bay City v. State Board of Tax

Administration (1940) 290 N.W. 395, 292 Mich. 241.

It would be assumed that as matter of public policy the legislature, in enacting sales tax statute, sought in measure to protect

private industry and private employment by keeping them, so far as taxation is concerned, on a parity with municipally owned

utilities which, going outside performance of purely governmental functions, become competitors of others privately engaged

in like activities. Id.

Municipal corporations owning and operating gas and electric plants were not “persons” engaged in business of making “sales

at retail” of electricity and gas within sales tax act. City of Wyandotte v. State Board of Tax Administration (1937) 270 N.W.

211, 278 Mich. 47.

The sale by state highway department of houses acquired in the purchase or condemnation of rights of way, which houses

were removed or removable by purchasers from the lands of the department, was subject to sales tax, and highway department

was required to be licensed by department of revenue. Op.Atty.Gen.1961-62, No. 4004, p. 301.

Retail sales made by liquor control commission were subject to sales tax since the state was a “person” and was engaged in

the liquor traffic with the object of gain. Op.Atty.Gen.1949-50, No. 1095, p. 417.

Municipality owning and operating a light and power plant, in view of statutory definitions of “sale at retail” and “business”,

was liable for payment of sales tax upon sale of electricity and gas. Op.Atty.Gen.1935-36, No. 113, p. 295.

9. Actions and proceedings
205.52. Sales tax; rate, M.C.L.A. 205.52

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Retail purchasers who paid sales tax which was added to sales price and remitted by sellers to state could not maintain equitable

action against sellers to recover taxes based on sale of labor and services. Sims v. Firestone Tire & Rubber Co. (1974) 224

N.W.2d 103, 56 Mich. 440, affirmed 245 N.W.2d 13, 397 Mich. 469.

10. Penalties

In view of fact that General Sales Tax Act defines “tax” to include penalties levied under the Act and in view of § 205.73

which allows retailers to shift the economic burden of any “tax” levied to consumers, retailers who were required to pay penalty

for failing to keep separate records of taxable and nontaxable transactions were permitted to reimburse themselves by adding

the amount of the penalty to the sales price of products sold. Sims v. Firestone Tire & Rubber Co. (1976) 245 N.W.2d 13,

397 Mich. 469.

Amount which retailer may be required to pay pursuant to this section which imposes a 4% tax on gross proceeds if retailer

fails to keep separate records of taxable and nontaxable transactions is a “penalty” and not a tax. Id.

In view of Const. Art. 9, § 8, that legislature shall not impose a sales tax on retailers at a rate more than 4% of their gross

taxable sales, any amount imposed on retailer in excess of 4% of sales of tangible personal property must be construed to be

a “penalty” rather than a tax. Id.

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