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A Better Partnership


Jul 2020
July 30, 2020

Michigan Department of Treasury Confirms Personal Protective and Safety Equipment Used in Industrial Processing is Exempt from Sales and Use Tax

The Michigan General Sales Tax Act imposes a 6% tax on sales of tangible personal property at retail. The Use Tax Act imposes a similar 6% tax on the out-of-state purchase of tangible personal property that will be used, stored or consumed in Michigan.
The Michigan Sales and Use Tax both include “industrial processing” exemptions. “Industrial processing” is defined as “[t]he activity of converting or conditioning tangible personal property by changing the form, composition, quality, combination, or character of the property for ultimate sale at retail or for use in the manufacturing of a product to be ultimately sold at retail.” Exempt sales are generally sales of tangible personal property to be used in an industrial processing activity. These include sales to a person who is not an industrial processor (such as an employee) if the tangible personal property will be used by that person to perform an industrial processing activity for or on behalf of an industrial processor.
In Revenue Administrative Bulletin (RAB) 2020-9, approved July 20, 2020, the Michigan Department of Treasury confirmed that the industrial processing exemption applies to the purchase of personal protective and safety equipment used in an industrial processing activity so long as:
  1. It is purchased by the industrial processor or another person engaged in an industrial processing activity on behalf of an industrial processor, including purchases made directly by an employee of an industrial processor;
  2. It is used for the safety of employees or other authorized personnel; and
  3. It is used in an industrial processing activity.

The RAB includes several examples of exempt and nonexempt sales. If a manufacturer purchases face masks for employees to wear while working on the production line to help stop the spread of disease, the purchase is eligible for the industrial processing exemption. However, the purchase of face masks for personnel in a marketing department are not exempt as marketing is not “industrial processing.” Another example indicates that if a thermometer is purchased for screening employees prior to allowing them to enter a facility, then the thermometer is exempt only to the extent used to scan employees engaged in industrial processing activities. If there are other employees entering the facility, then the exemption must be apportioned.

If you have any questions regarding this exemption, please contact Jay Kennedy, Sean Cook, Bill Lentine, Jeff Segal or any member of Warner’s Tax Practice Group.

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