Notice from Michigan Department of Treasury Regarding Expansion of the Industrial Processing Exemptions

The industrial processing exemptions under MCL 205.54t and MCL 205.94o (collectively, “IP Statutes”) were recently amended by the passage of Public Acts 27 and 30 of 2023 (the “Acts”), to address sales and use taxes relating to property used to process aggregate for construction and related real property projects located in Michigan.  The amendments made through the Acts are effective May 8, 2023 (the “Effective Date”).
 
The Acts expand the industrial processing exemptions for sales and use taxes in several ways.
 
First, the Acts expand the list of enumerated industrial processing activities in subsection (3) of the IP Statutes to include “production, manufacturing, or recycling of aggregate” by the property, and for the purpose, described in the newly added subsection (4)(i) to the IP Statutes, but only if that aggregate is subject to use tax.
 
Second, the Acts amend the types of property that are eligible for the industrial processing exemption under subsection (4) of the IP Statutes by adding a new subdivision (i) that involves “property that performs an industrial processing activity upon an aggregate product or material that will be used as an ingredient or component part for the construction, maintenance, repair, or reconstruction” of real property in Michigan but only if that aggregate product or material is subject to use tax.  This property is not disqualified from eligibility for the exemption simply for being used in any of activities described in subsection (6) of the IP Statutes (e.g., construction or maintenance of real property) or because there is no retail sale of the aggregate; instead, the aggregate must have been subject to use tax.
 
Finally, the Acts amend the definitions under subsection (7) of the IP Statutes for the terms “industrial processing” and “industrial processor” consistent with the changes described above and add a definition for the term “aggregate” in subsection (7) of the IP Statutes.
 
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