SALES AND USE TAXES - STORAGE FACILITIES

(Replaces Revenue Administrative Bulletin 1989-5)

RAB-90-2. This Bulletin describes the application of sales and use tax on the purchases of bins, tanks, or storage facilities (grain bins, water tanks, oil tanks, silos) in light of the passage of Public Act 519 of 1988, effective January 18, 1989, and Public Act 141 of 1989, effective January 1, 1989.

Storage Facility

A storage facility is a structural part of real estate if it is:

1. Considered to be an improvement to realty and is assessed for property taxes [William Esper v Lenox Township, MTT Docket 32106, June 14, 1979], or
   
   
2. Bolted or fastened to and/or imbedded in a concrete slab or foundation [Miedema Metal Building Systems v Department of Treasury, 127 Mich App 533 (1983)]

EXCEPT

A structure built or purchased by an agricultural producer "used to shelter grain and that is designed to be disassembled without significant damage to its component parts." [Sales Tax Act, PA 519 of 1988 amending MCL 205.54a(f); Use Tax Act, PA 141 of 1989 amending MCL 205.94(f)]

Contractor Affixing to Realty

Generally tangible personal property used by a contractor to construct, alter, improve or repair storage facilities is subject to sales or use tax. [Sales Tax Act, MCL 205.51(c); Use Tax Act, MCL 205.92(g)] This proposition assumes that the storage facility is, or becomes, a structural part of real estate.

A contractor will be allowed an exemption on the purchase of tangible personal property that becomes a structural part of real estate for a qualified nonprofit hospital or nonprofit housing entity. [Sales Tax Act, MCL 205.51(c); Use Tax Act, MCL 205.94(l); Specific Sales and Use Tax Rules, 1979 AC, R 205.71]

A contractor will be allowed an exemption on the purchase of tangible personal property:

1. When purchased for and installed as a component part of a water or air pollution control facility (for private industry only, this does not include governmental facilities), and
   
   
2. A tax exemption certificate is issued from the State Tax Commission. [Sales Tax Act, MCL 205.54a(p); Use Tax Act, MCL 205.94(v); See also MCL 323.351 to 323.358 and MCL 336.1 to 336.8]

A contractor will be allowed an exemption on the purchase of tangible personal property used to construct a grain bin for an agricultural producer. The contractor must make the claim to the seller that the tangible personal property being purchased is exempt "for resale at retail" giving the contractor's valid sales tax license number. The sale of the grain bin to the agricultural producer from the contractor will be exempt for use in agricultural production, provided a valid exemption claim is executed by the agricultural producer and retained by the contractor.

Retailer/Installer (Installs Tangible Personal Property
That Remains Personal Property After Installation)

A retailer/installer is liable for sales tax on the total selling price of the storage facility that remains tangible personal property after installation unless an exemption applies. The selling price shall include the fabrication or assembly charge of the tangible personal property (regardless of whether it occurs at the job site or location of the purchaser or elsewhere). Separately itemized installation charges are exempt from sales tax. [Sales Tax Act, MCL 205.51(g); Use Tax Act MCL 205.92(f)]

Industrial Processor

Tangible personal property purchased by an industrial processor to construct, alter, improve or repair storage facilities is subject to sales or use tax. It is irrelevant whether the storage facility is considered to be tangible personal property or real property after installation. This does not include an in-process storage facility. [Sales Tax Act, MCL 205.54a(g); Use Tax Act, MCL 205.94(g)]

An industrial processor may apply to the State Tax Commission for tax exemption for the construction of a storage facility when purchased and installed as a component part of a water or air pollution control facility.

1. If granted, the industrial processor may purchase materials tax-exempt or provide the exemption certificate to the contractor for their purchases of tangible personal property.
   
   
2. If the certificate is received after installation of the storage facility, a refund request may be submitted by the certificate holder to the Department of Treasury's Sales, Use and Withholding Taxes Division, submitting proof of tax paid on the purchases of tangible personal property.

Agricultural Producer

Where an agricultural producer purchases tangible personal property used to construct, alter, improve or repair storage facilities that are or become a structural part of real estate, sales or use tax is applicable. [Sales Tax Act, MCL 205.54a(f); Use Tax Act, MCL 205.94(f)] However, purchases of portable grain bins used to shelter grain and designed to be disassembled without significant damage to component parts are exempt from sales and use tax. [PA 519 of 1988, effective January 18, 1989; PA 141 of 1989, effective January 1, 1989]