Michigan Supreme Court denied use tax exemption without proof of sales tax payment

July 2014


On June 23, 2014, the Michigan Supreme Court held that in order to be entitled to the use tax exemption, one must show that sales tax was both due and paid on the sale of tangible personal property. The burden of proving entitlement to the exemption is on the taxpayer. The taxpayer had to show it paid sales tax on the purchase of property before it could claim an exemption and since it did not submit evidence that sales tax was paid, the taxpayer was not entitled to the exemption. Andrie Inc., v. Department of Treasury, Michigan Supreme Court, No. 145557 (6/23/2014)
Based on the Court’s decision, taxpayers are not entitled to a presumption that sales tax has been paid when their Michigan invoices do not list sales tax as a separate item. Therefore, companies purchasing tangible personal property from Michigan vendors should identify whether sales tax is delineated on receipts in order to determine whether a use tax liability may be imposed. If Michigan sales tax is not separately stated, companies should consider contacting retailers to request new invoices or other evidence to support that sales tax was paid.

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