On June 8, the Michigan legislature, in an overwhelming bipartisan vote, passed two bills providing for exemptions from the state’s sales and use tax for certain personal protective equipment and supplies (PPES). The bills (H.B. 4224 and H.B. 4225) now head to the governor’s desk. Should the governor sign this legislation, businesses such as retailers, which might not be eligible for the industrial processing exemption that typically covers purchases of protective gear by manufacturers, will be able to buy certain types of PPES to combat COVID-19 without paying sales and use tax on those purchases – and, in some cases, may be eligible for a refund of prior sales and use taxes paid.
Beginning March 10, 2020, and through December 31, 2021, the bills exempt from sales and use tax sales of PPES to a person engaged in a business enterprise that has implemented a COVID-19 safety protocol plan, to the extent that the items are used for that purpose.
A “COVID-19 safety protocol plan” is a COVID-19 exposure prevention, preparedness, and response plan that (A) complies with any applicable law, including applicable executive or epidemic orders regarding safeguards to protect Michigan workers from COVID-19, and (B) is consistent with best practices for infection prevention and industrial hygiene.
The PPES covered by this exemption are:
- Protective equipment designed to protect the wearer against exposure to COVID-19 but that is not suitable for general use, including breathing masks, face shields, respirators, protective gloves, and safety glasses and goggles.
- Disinfecting products designed to disinfect or sanitize an individual, workplace, or protective equipment and used or consumed to prevent the spread of COVID-19, including antibacterial soap, disinfecting spray, disinfecting wipes, and hand sanitizer.
- Plexiglass or similar property used as a barrier to reduce or prevent exposure to COVID-19, including plexiglass or similar property that is affixed to or made a structural part of real estate.
Eligibility for Refunds
Because the legislation is retroactive to March 10 of last year, it contains a provision allowing eligible purchasers to request a refund of sales and use taxes paid for purchases of PPES, including tax paid on transactions prior to the implementation of the business’s COVID-19 safety protocol plan.
To receive a refund, the business will need to submit the following to the Michigan Department of Treasury: (A) a copy of its COVID-19 safety protocol plan, (B) an accurate record of the eligible purchases of PPES, including the date of the purchase and the amount of sales or use tax paid to the seller, and (C) any other information that may be required by the Department of Treasury to substantiate the refund claim.
Assuming that Michigan’s governor signs this legislation into law, it is likely that the Michigan Department of Treasury will issue some form of additional guidance elaborating on the procedure and requirements for claiming a refund of prior sales and use taxes paid for eligible protective gear.
To protect their eligibility to request refunds of sales and use taxes paid for PPES to manage COVID-19, businesses should ensure that they have in place, and follow, a current COVID-19 safety protocol plan.
If you have any questions about sales and use tax exemptions for protective gear, please reach out to your Schiff Hardin contact or to any member of the firm’s Tax Practice Group for further information.