In October 2017, the Michigan Department of Treasury (the “Department”) released a draft Revenue Administrative Bulletin (“RAB”) explaining the marihuana provisioning center tax imposed by the Medical Marihuana Facilities Licensing Act (the “MMFLA”) and the sales and use tax treatment of marihuana and marihuana-derived products under both the MMFLA and the Michigan Medical Marihuana Act (“MMMA”).
On January 18, 2018, the Department released RAB 2018-2, which sets forth the Department’s official position with respect to Michigan’s tax treatment of marihuana sales. While the draft RAB and RAB 2018-2 are substantially similar, RAB 2018-2 further elaborates on the following issues covered by the draft RAB:
Provisioning Center Tax
RAB 2018-2 makes it clear that there are no exemptions for any service or property under the MMFLA. Further, as discussed in the previous blog post, the MMFLA imposes a tax on gross retail receipts of a provisioning center at a rate of 3 percent. In RAB 2018-2, the Department concludes that a seller subject to the MMFLA’s gross receipts tax “may not pass along the incidence of the tax to its customer; the seller may, however, consider the tax in establishing its prices.” (Provisioning centers may of course pass along the cost of the tax to customers, and obviously will do so.)
Sales and Use Tax
The conclusions made with respect to sales and use taxes by the Department in the draft RAB remained the same in RAB 2018-2. It should be noted that the Department chose to amplify its longstanding position that the General Sales Tax Act (“GSTA”) and Use Tax Act (“UTA”) only impose tax on sale/use of tangible personal property not otherwise exempt under the GSTA and UTA and services specifically subject to tax.
Return and Remittance Requirements and Procedures
RAB 2018-2 clarifies certain unaddressed issues in the draft RAB concerning the return and remittance requirements and procedures. These issues were addressed by the Department by making the following additions to RAB 2018-2:
- Provisioning centers must file sales tax returns based on the frequency directed by the Department. Accordingly, it is yet to be determined whether provisioning centers will have to file sales tax returns on a monthly, quarterly or annual basis.
- Filing of sales, use, and withholding taxes must be done electronically through Michigan Treasury Online (“MTO”).
- Payment of any Michigan taxes, including the provisioning center tax, sales, use and withholding taxes, may be made through MTO or by cash or check at any Department field office.
- To process in-person payments of Michigan taxes by cash or check, the taxpayer must provide either: (i) a Medical Marihuana Tax Payment Voucher, Form 5094, or (ii) its taxpayer identification number.
- Department field offices and MTO will not accept payments that are due to any other agencies, such as the Michigan Department of Licensing and Regulatory Affairs.