SST Compliance Review and Interpretations Committee (CRIC) Finds Fault
During a conference call held on November 3, 2011, the Streamlined Sales Tax (SST) Compliance Review and Interpretations Committee (CRIC) voted 4-0, three absent, in favor of finding Michigan out of compliance with the Agreement. The call was the fifth in a series of weekly calls during which the CRIC performs its annual review of the compliance status of each SST member state. The CRIC will complete its 2011 review of the remaining states during weekly conference calls continuing in November until all states have been reviewed.
With respect to telecommunications (generally taxable under Michigan's use tax act), Michael Eschelbach, representing the Michigan Depart of Treasury, responded that Michigan's certificate of compliance should be revised to indicate that prepaid calling service (other than wireless prepaid service) is exempt and that a comment should be added indicating that prepaid calling cards and prepaid authorization numbers are taxable under the state's sales tax act.
Eschelbach indicated that citations will be added, changed, or deleted throughout the state's certificate of compliance as indicated in the CRIC's preliminary recertification report for Michigan. Eschelbach further indicated that the answer in the state's taxability matrix as to whether tax is imposed on products transferred electronically other than specified digital products will be changed from "Yes" to "No." In Section 333 of the certificate of compliance (Use of Specified Digital Products), on the question of whether the state includes any product transferred electronically in its definition of tangible personal property, Eschelbach agreed that the response will be changed to "No" and the comment that tangible personal property includes prewritten computer software will be deleted. However, Eschelbach pointed out that the certificate of compliance language does not state that prewritten computer software is not included in the definition of specified digital products. He explained that as a result, the state attempted to remedy the situation by responding "No" in Section 333 and entering a comment that the state does not tax specified digital products.
The CRIC's preliminary recertification report for Michigan indicates that the state's statute for taxing telecommunications service excludes one-way paging service, but that the Agreement defines "paging service" as including both one-way and two-way service. The report further indicates that Michigan has had this issue since its 2009 recertification review. Eschelbach indicated on the call that though draft legislation has been submitted, the Michigan Legislature has not yet addressed this issue. As a result, committee members voted 4-0 in favor of finding Michigan out of compliance with the Agreement. Discussion of a Michigan issue related to remote use of prewritten computer software was deferred until a later date.