University Policy Office

2.16—Sales and Use Taxes

Effective: 07/02/2014
Senate Proposal: No
Responsible University Officer: Executive Director, Financial Services and Operations
Responsible Office: Financial Services and Operations

Policy Statement

The University is liable for the collection and payment of taxes on sales and rental transactions to non-exempt individuals and organizations.

Policy Requirements

All University departments engaged in retail sales or rental transactions must collect and deposit sales and use tax.

Purpose

This policy has been developed to allow University compliance with the State of Michigan Tax Act. Departments should consult Financial Services and Operations for questionable taxable or non-taxable items.

Even though the University is liable for the collection and payment of sales and use tax, the University is exempt from the payment of sales and use taxes on purchases of retail goods and applicable rentals. This exemption is per the determination letter issued by the Internal Revenue Service stating the University is an instrumentality of the State of Michigan, which qualifies the University for exempt status.

Persons and organizations that are not part of the University may not use the University's exemption. Student organizations are examples of organizations that are not part of the University.

Organizations determined to be exempt under Sections 501(c)(3) or 501(c)(4) of the Internal Revenue Code are not subject to sales or use tax. Refer to the links below for the Internal Revenue Service definitions of exempt requirements for 501(c)(3) and 501(c)(4):

  • 501(c)(3): http://www.irs.gov/Charities-%26-Non-Profits/Charitable-Organizations/Exemption-Requirements-Section-501(c)(3)-Organizations
  • 501(c)(4): http://www.irs.gov/Charities-&-Non-Profits/Other-Non-Profits/Types-of-Organizations-Exempt-under-Section-501(c)(4)

Contacts

Office/Unit Name Telephone Number
Financial Services and Operations 906-487-2449

Definitions

Exempt Transactions - Sale and rental transactions not subject to sales and use tax, which includes, but is not limited to:

  • sales for resale;
  • sales or rentals to the United States government, the State of Michigan, or their agencies;
  • sales or rentals to entities outside the State of Michigan;
  • sales or rentals to qualified non-profit health, welfare, educational, charitable, religious organizations, and hospitals;
  • sales or rentals for agriculture or industrial processing;
  • sales or rentals to 501(c)(3) or 501(c)(4) exempt organizations.

Non-Exempt Transactions - Sale and rental transactions subject to sales and use tax.

Sales Tax - A six percent tax imposed by the State of Michigan at the point of sale on retail goods. It is collected by the University and paid to the State of Michigan.

Subject to sales tax (non-exempt transactions) includes, but is not limited to:

  • Food and Meals
    • Sales of food for immediate consumption, such as concessions or sales in a restaurant-type atmosphere.
    • Alcoholic beverages.
    • Sales of food to employees or non-enrolled students.
  • Sales at the Campus Store, University Images, and Mineral Museum.
  • Equipment Sales.
  • Pro Shop sales at the golf course, ski hill, tennis center.
    • Books, pamphlets, duplicated materials sold in a commercial manner. To be sold in a commercial manner, the item must be sold at retail and priced to generate a profit.
  • Conferences. When the University provides meals and/or lodging for conferences, the department must collect sales tax on all non-student meals and lodging.
  • Sales to Student Organizations. Student organizations are generally subject to sales tax. If the student organization has its own tax exempt status, an exemption certificate must be obtained.

Not subject to sales tax (exempt transactions) includes, but is not limited to:

  • Food and Meals
    • Sales of meals to enrolled students at university facilities.
    • Sales of food for human consumption at home (vending type items).
  • Conferences. When the University provides meals and/or lodging for conferences sponsored by an organization that is exempt from tax, no sales tax is collected.
  • Sales for resale.
  • Sales to the United States government, the State of Michigan, or their agencies.
  • Sales to entities outside the State of Michigan.
  • Sales to qualified non-profit health, welfare, educational, charitable, religious organizations, and hospitals.
  • Sales for agriculture or industrial processing.
  • Sales to 501(c)(3) or 501(c)(4) exempt organizations.

Use Tax - A six percent tax imposed by the State of Michigan on the use, storage, or consumption of property in the state. It is collected by the University and paid to the State of Michigan.

Subject to use tax (non-exempt transactions) includes, but is not limited to:

  • Caps and gowns.
  • Guest rooms in the residence halls, Memorial Union, and Ford Forestry Center (when the duration of stay by the occupant is less than 30 consecutive days).
  • Rental of Meeting Rooms
    • If the University provides overnight lodging to the general public in a commercial manner, use tax is applicable on the rental of meeting rooms.
  • Equipment Rentals.
  • Rentals to Student Organizations. Student organizations are generally subject to sales and use tax. If the student organization has its own tax exempt status, an exemption certificate must be obtained.

Not subject to use tax (exempt transactions) includes, but is not limited to:

  • Lodging
    • Lodging furnished directly to a tax-exempt organization.
    • Lodging provided for a continuous period of more than one month.
    • Lodging for Summer Camps.
  • Rental of Meeting Rooms
    • If overnight lodging is not provided in the building, meeting rooms and classrooms rentals are not taxable.
  • Rentals to the United States government, the State of Michigan, or their agencies.
  • Rentals to entities outside the State of Michigan.
  • Rentals to qualified non-profit health, welfare, educational, charitable, religious organizations, and hospitals.
  • Rentals for agriculture or industrial processing.
  • Rentals to 501(c)(3) or 501(c)(4) exempt organizations.

Responsibilities

All University Departments Engaged in Retail Sales or Rental Transactions -

  • Collect and deposit sales and use taxes in accordance to departmental procedures.
  • Secure and retain all completed exemption certifications from purchasers.
  • Retain all supporting documentation for a period of seven years.

Exempt Organizations -

  • Provide proof they are not subject to sales and/or use taxes under the Internal Revenue Codes.
  • Complete a Michigan Form 3372 to claim the exemption from the State.

Financial Services and Operations -

  • Remits monthly, the sales and use tax to the State of Michigan.
  • Submits annually, the Annual Return for Sales, Use and Withholding Taxes to the State of Michigan.

Procedures

In support of this policy, the following procedures are included:

Forms and Instructions

Form:

Adoption Date

07/02/2014 Approved by the Executive Director, Financial Services and Operation

Revisions

04/10/2017 Transfer of policy page from HTML to CMS. Business and Finance numbers renamed from "2.2000" to "2. Business and Finance". Specifically from "2.2016—Sales and Use Taxes" to "2.16—Sales and Use Taxes".