Michigan Utility Sales Tax Exemption
Michigan provides a sales and use tax exemption on utilities such as electricity, natural gas, and steam used directly in industrial processing, agricultural production, or other qualifying business operations. To qualify, the utility must be used more than 50% of the time in exempt activities. If this threshold is met, 100% of the utility usage may be exempt under MCL 205.54t and Rule 29 (R 205.132).
Utility Study
To substantiate eligibility, businesses must conduct a detailed utility usage analysis that:
- Lists all equipment and systems consuming the utility
- Allocates utility usage between exempt and non-exempt functions
- Estimates consumption based on manufacturer specs, load factors, or metering
- Demonstrates that more than 50% of the utility is consumed in exempt activities
- Provides backup documentation in case of audit
Utility studies should be kept up to date and reflect any changes in equipment or production volume that may affect exemption eligibility.
Filing Requirements
To claim the exemption businesses must provide a completed Michigan Form 3372 (Michigan Sales and Use Tax Certificate of Exemption) to the utility provider. The certificate must specify the exemption reason and include a description of the exempt use. If tax was previously paid on qualifying usage, businesses may apply for a refund by filing a Claim for Refund directly with the Michigan Department of Treasury. Refund claims may be submitted for tax paid within four years of the date of overpayment.