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# 6010 - MICHIGAN: PERSONAL PROPERTY TAX
Business inventory--property intended for resale--is exempt from the personal property tax. However, daily rental property (see MCL 211.8c below) is subject to assessment under Michigan's General Property Tax Act of 1893.
In mid-2000, House Bill 5153, PA 317 of 2000, was enacted to exempt heavy earth moving equipment subject to one or more lease agreements with the same person totaling not more than one year and principally intended for sale rather than lease. The exemption applies on and after December 31, 2000. Such equipment would be classified under the act as "inventory." Dealers have maintained this equipment is intended for resale while some auditors have ruled otherwise. This act clarifies this gray area.
Heavy earth moving equipment subject to one or more lease agreements with the same person totaling not more than one year and principally intended for lease rather than sale would not be considered as inventory (and so would not be exempt). The act also excludes from the category of inventory any property allowed a deduction or allowance for depreciation or depletion under the federal Internal Revenue Code of 1986.
Excerpts from the General Property Tax Act (Act 206 of 1893) are included for further clarification.
THE GENERAL PROPERTY TAX ACT (EXCERPTS)
Act 206 of 1893 -- PERSONAL PROPERTY.
211.8 Personal property; scope.
Sec. 8. For the purposes of taxation, personal property includes all of the following:
(a) All goods, chattels, and effects within this state.
(b) All goods, chattels, and effects belonging to inhabitants of this state, located without this state, except that property actually and permanently invested in business in another state shall not be included.
(f) All other personal property not enumerated in this section and not especially exempted by law.
211.8c Daily rental property; assessment; conditions; audit; personal property; definitions.
(1) Daily rental property shall be assessed to the owner at the location of the rental business and is not assessable at its location on tax day as provided in section 2 if all of the following conditions are satisfied:
(a) The location of the rental business is in this state and the daily rental property is located in this state on tax day as provided in section 2.
(b) The daily rental property is permanently labeled with the name of the owner and either the business address or current telephone number of the owner with an indication that the property is daily rental property. The owner shall also affix a unique identifying number to the daily rental property. If the daily rental property consists of multiple small items that are part of a matched set or if it is impractical to label the daily rental property, the required statement and identifying number may be placed on the daily rental property's container used to store the daily rental property when not in use.
(c) Not later than February 20 of each year, the owner provides the assessor of the city or township where the rental business is located an itemized listing of the owner's daily rental property, as of tax day. The listing shall describe the daily rental property by manufacturer, make, and model.
(d) Not later than February 20 of each tax year, the owner shall give the assessor of the city or township where the rental business is located written authorization to provide a copy of information provided pursuant to subdivision (c) to the assessor of any other city or township in which the daily rental property may have been physically located on tax day.
(e) If the owner of daily rental property is required to provide a written statement pursuant to section 18 to any local tax collecting unit other than the local tax collecting unit in which the daily rental property is assessable, the written statement shall include a written statement indicating the jurisdiction in which its daily rental property is being reported.
(2) See Michigan Compile Laws for complete description.
[Editor's note: Otherwise, the daily rental property is assessable at the location on tax day.]
(4) As used in this section:
(a) "Daily rental property" means tangible personal property that is exclusively offered on an hourly, daily, weekly, or monthly basis for a rental term of 6 months or less pursuant to a written agreement and had an acquisition cost when new of $10,000.00 or less, including freight and sales tax. In determining whether a rental term extends beyond 6 months, the rental term shall be computed by adding all permitted or required extensions of the rental term set forth in the written agreement for the daily rental property. Daily rental property does not include tangible personal property rented in conjunction with a service contract that extends beyond 90 days.
PERSONAL PROPERTY EXEMPTED.
211.9 Personal property exempt from taxation.
Sec. 9. The following personal property is exempt from taxation:
(j) Property actually being used in agricultural operations and the farm implements held for sale or resale by retail servicing dealers for use in agricultural production. As used in this subdivision, "agricultural operations" means farming in all its branches, including cultivation of the soil, growing and harvesting of an agricultural, horticultural, or floricultural commodity, dairying, raising of livestock, bees, fur-bearing animals, or poultry, turf and tree farming, raising and harvesting of fish, and any practices performed by a farmer or on a farm as an incident to, or in conjunction with, farming operations, but excluding retail sales and food processing operations. Property used in agricultural operations includes machinery used to prepare the crop for market operated incidental to a farming operation that does not substantially alter the form, shape, or substance of the crop and is limited to cleaning, cooling, washing, pitting, grading, sizing, sorting, drying, bagging, boxing, crating, and handling if not less than 33% of the volume of the crops processed in the year ending on the applicable tax day or in at least 3 of the immediately preceding 5 years were grown by the farmer in Michigan who is the owner or user of the crop processing machinery.
(q) All equipment used exclusively in wood harvesting, but not including portable or stationary sawmills or other equipment used in secondary processing operations. As used in this subdivision, "wood harvesting" means the clearing of land for forest management purposes, the planting of trees, and all forms of cutting or chipping of trees and the loading of them on trucks for removal from the harvest area.
211.9c Exemption of personal property from tax collection; "heavy earth moving equipment" and "inventory" defined.
(1) Personal property that is inventory is exempt from the collection of taxes under this act.
(2) As used in this section:
(a) "Heavy earth moving equipment" means industrial construction equipment that meets all of the following criteria:
(i) Is self-propelled.
(ii) Weighs 10,000 pounds or more.
(iii) Is designed and principally intended to move, transport, or reconfigure dirt, earth, soil, or other construction material at a construction site.
(b) "Inventory" means 1 of the following:
(i) The stock of goods held for resale in the regular course of trade of a retail or wholesale business.
(ii) Finished goods, goods in process, and raw materials of a manufacturing business.
(iii) Materials and supplies, including repair parts and fuel.
(iv) On and after December 31, 2000, heavy earth moving equipment subject to 1 or more lease agreements with the same person totaling not more than 1 year and principally intended for sale rather than lease. A lease agreement used to support this exemption shall be made available to the assessor on request and shall be considered confidential information to be used for assessment purposes only.
(3) Inventory does not include the following:
(a) Before December 31, 2000, any of the following:
(i) Personal property under lease or principally intended for lease rather than sale.
(ii) Personal property allowed a deduction or allowance for depreciation or depletion under the internal revenue code of 1986.
(b) On and after December 31, 2000, any of the following:
(i) Personal property, other than heavy earth moving equipment, under lease or principally intended for lease rather than sale.
(ii) Heavy earth moving equipment subject to 1 or more lease agreements with the same person totaling more than 1 year or principally intended for lease rather than sale.
(iii) Personal property for which a deduction or allowance for depreciation, depletion, or amortization is allowed or has been taken under the internal revenue code of 1986.
-- May 2002