Sales tax: exemptions; motor fuel sales; exempt, the official text

Act
No. 17

Public
Acts of 2025

Approved
by the Governor

October
7, 2025

Filed
with the Secretary of State

October
7, 2025

EFFECTIVE
DATE:  October 7, 2025

state of michigan

103rd Legislature

Regular session of 2025

Introduced by Reps. Steele, Hoadley, Bierlein, Thompson,
BeGole, Johnsen, Tisdel, Borton, Kelly, Cavitt, Woolford, Kuhn, Prestin, St.
Germaine, Frisbie, DeBoyer, Markkanen, Meerman, Roth, Jenkins-Arno, Bollin,
Alexander, Bruck, Lightner, Rigas, Kunse, Martin, Outman and VanderWall

ENROLLED HOUSE BILL No. 4180

AN ACT to amend 1933 PA 167,
entitled “An act to provide for the raising of additional public revenue by
prescribing certain specific taxes, fees, and charges to be paid to the state
for the privilege of engaging in certain business activities; to provide,
incident to the enforcement thereof, for the issuance of licenses to engage in
such occupations; to provide for the ascertainment, assessment and collection
thereof; to appropriate the proceeds thereof; and to prescribe penalties for
violations of the provisions of this act,” by amending sections 6a and 25 (MCL
205.56a and 205.75), section 6a as amended by 2015 PA 264 and section 25 as
amended by 2023 PA 20, and by adding section 4gg.

The People of the State of
Michigan enact:

Sec.
4gg. (1) Beginning January 1, 2026, the sale of eligible fuel is exempt from
the tax under this act.

(2) As used in this section:

(a) “Alternative fuel” means that term as defined in section
151 of the motor fuel tax act, 2000 PA 403, MCL 207.1151.

(b) “Eligible fuel” means motor fuel, alternative fuel, and
leaded racing fuel, except that eligible fuel does not include any of the
following:

(i) Motor fuel that is sold for use in
aircraft if the purchaser paid the privilege tax imposed by section 203 of the
aeronautics code of the state of Michigan, 1945 PA 327, MCL 259.203, on the
motor fuel and the purchaser is registered under section 94 of the motor fuel
tax act, 2000 PA 403, MCL 207.1094, if required to be registered under that
section.

(ii) Aviation fuel on which the privilege tax
is due under section 203 of the aeronautics code of the state of Michigan, 1945
PA 327, MCL 259.203.

(iii) Motor fuel on which the privilege
tax imposed under section 203 of the aeronautics code of the state of Michigan,
1945 PA 327, MCL 259.203, has been paid and that is identified on the shipping
paper or invoice as aviation fuel and sold as aviation fuel.

(iv) Motor fuel or alternative fuel
sold for residential, commercial, or industrial use for heating, cooling, or
ventilation purposes, such as for use in home or building utility systems,
furnaces, boilers, space heaters, water heaters, dryers and similar appliances,
and heat pumps, including, but not limited to, motor fuel or alternative fuel
that is exempt from the sales tax at the additional rate of 2% approved by the
electors on March 15, 1994 under section 4n.

(v) Liquified petroleum gas, unless the
liquified petroleum gas is used or for use as those terms are defined in
section 151(j) of the motor fuel tax act, 2000 PA 403, MCL 207.1151.

(c) “Leaded racing fuel” means that term as defined in
section 4 of the motor fuel tax act, 2000 PA 403, MCL 207.1004.

(d) “Liquified petroleum gas” means that term as defined in
section 151 of the motor fuel tax act, 2000 PA 403, MCL 207.1151.

(e) “Motor fuel” means that term as defined in section 4 of
the motor fuel tax act, 2000 PA 403, MCL 207.1004.

Sec.
6a. (1) Beginning April 1, 2016 through December 31, 2025, at the time of purchase or shipment in
this state from a refiner, pipeline terminal operator, or marine terminal
operator, a purchaser or receiver of fuel other than an exporter or supplier
for immediate export, as evidenced by the terminal’s shipping papers or bill of
lading, shall prepay a portion of the tax imposed by this act at the rates
provided in this section to the refiner, pipeline terminal operator, or marine
terminal operator for the purchase or receipt of fuel. If the purchase or
receipt of fuel is made outside this state for shipment into and subsequent
sale within this state, the purchaser or receiver, other than a refiner,
pipeline terminal operator, or marine terminal operator as part of a bulk
transfer, shall make the prepayment required by this section directly to the
department. Prepayments for gasoline must be made at a cents-per-gallon rate
determined by the department and must be based on 6% of the statewide average
retail price of a gallon of self-serve unleaded regular gasoline as determined
and certified by the department rounded up to the nearest 1/10 of 1 cent.
Prepayments for diesel fuel must be made at a cents-per-gallon rate determined
by the department and must be based on 6% of the statewide average retail price
of a gallon of undyed No. 2 ultra-low sulfur diesel fuel as determined and
certified by the department rounded up to the nearest 1/10 of 1 cent. A person
that makes prepayments directly to the department shall make those prepayments
according to the schedule in subsection (4).

(2) Through the tax period ending December 31, 2025, the
department must determine the rates of prepayment applicable to gasoline and
diesel fuel under this section every month and publish notice of those rates
not later than the tenth day of the month immediately preceding the month in
which the rate is effective.

(3) A person subject to tax under this act that makes
prepayment to another person as required by this section for gasoline may claim
an estimated prepayment credit on its regular monthly return filed pursuant to
section 6. The credit must be for prepayments made during the month for which
the return is required and must be based upon the difference between
prepayments made in the immediately preceding month and collections of prepaid
tax received from sales or transfers during the month for which the return
required under section 6 is made. A sale or transfer for which collection of
prepaid tax is due the taxpayer is subject to a bad debt deduction under
section 4i, whether or not the sale or transfer is a sale at retail. The credit
must not be reduced because of actual shrinkage. A taxpayer that does not, in
the ordinary course of business, sell gasoline in each month of the year may,
with the approval of the department, base the initial prepayment deduction in
each tax year on prepayments made in a month other than the immediately
preceding month. The difference in actual prepayments must be reconciled on the
annual return pursuant to procedures prescribed by the department.

(4) Notwithstanding the other provisions for the payment and
remitting of tax due under this act, a refiner, pipeline terminal operator, or
marine terminal operator shall account for and remit to the department the
prepayments received under this section pursuant to the following schedule:

(a) On or before the twenty-fifth of each month, prepayments
received after the end of the preceding month and before the sixteenth of the
month in which the prepayments are made.

(b) On or before the tenth of each month, payments received
after the fifteenth and before the end of the preceding month.

(5) A refiner, pipeline terminal operator, or marine terminal
operator that fails to remit prepayments made by a purchaser or receiver of
fuel is subject to the penalties provided by 1941 PA 122, MCL 205.1 to 205.31.

(6) The refiner, pipeline terminal operator, or marine
terminal operator shall not receive a deduction under section 4 for receiving
and remitting prepayments from a purchaser or receiver pursuant to this
section.

(7) The purchaser or receiver of fuel that makes prepayments
is not subject to further liability for the amount of the prepayment if the
refiner, pipeline terminal operator, or marine terminal operator fails to remit
the prepayment.

(8) A person subject to tax under this act that makes
prepayment to another person as required by this section for diesel fuel may
claim an estimated prepayment credit on its regular monthly return filed
pursuant to section 6. The credit must be for prepayments made during the
month for which the return is required and must be based upon the difference
between the prepayments made in the immediately preceding month and collections
of prepaid tax received from sales or transfers during the month for which the
return required under section 6 is made. A sale or transfer for which
collection of prepaid tax is due the taxpayer is subject to a bad debt
deduction under section 4i, whether or not the sale or transfer is a sale at
retail. The credit must not be reduced because of actual shrinkage. A taxpayer
that does not, in the ordinary course of business, sell diesel fuel in each
month of the year may, with the approval of the department, base the initial
prepayment deduction in each tax year on prepayments made in a month other than
the immediately preceding month.

(9) As used in this section:

(a) “Alcohol” means fuel grade ethanol or a mixture of fuel
grade ethanol and another product.

(b) “Blendstock” includes all of the following:

(i) Any petroleum product component of fuel,
such as naphtha, reformate, or toluene.

(ii) Any oxygenate that can be blended for
use in a motor fuel.

(c) “Boat terminal transfer” means a dock, a tank, or
equipment contiguous to a dock or a tank, including equipment used in the
unloading of fuel from a ship and in transferring the fuel to a tank pending
wholesale bulk reshipment.

(d) “Bulk transfer” means a transfer of fuel from, or
purchase for resale by, a refiner, pipeline terminal operator, or marine
terminal operator to or from another refiner, pipeline terminal operator, or
marine terminal operator through pipeline tender or marine delivery, including
pipeline movements of fuel or marine vessel movements of fuel. Bulk transfer
also includes a transaction involving the transfer by any transportation means
to, or purchase for resale by, a refiner, pipeline terminal operator, or marine
terminal operator of alcohol to be used exclusively for blending with gasoline.
Notwithstanding anything to the contrary in this definition, fuel transferred
to, or purchased for resale by, a refiner, pipeline terminal operator, or
marine terminal operator must be delivered to, or otherwise remain within, the
bulk transfer terminal system before removal across the rack to constitute a
bulk transfer.

(e) “Bulk transfer terminal system” means the fuel
distribution system consisting of refineries, pipelines, marine vessels, and
terminals and includes fuel storage tanks and fuel storage facilities that are
part of a refinery, boat terminal transfer, or terminal owned, operated, or
controlled by a refiner, marine terminal operator, or pipeline terminal
operator.

(f) “Diesel fuel” means any liquid other than gasoline that
is capable of use as a fuel or a component of a fuel in a motor vehicle that is
propelled by a diesel-powered engine or in a diesel-powered train. Diesel fuel
includes number 1 and number 2 fuel oils, kerosene, and mineral spirits. Diesel
fuel also includes any blendstock or additive that is sold for blending with
diesel fuel and any liquid prepared, advertised, offered for sale, sold for use
as, or used in the generation of power for the propulsion of a diesel-powered
engine, airplane, or marine vessel. An additive or blendstock is presumed to be
sold for blending unless a certification is obtained for federal purposes that
the substance is for a use other than blending for diesel fuel. Diesel fuel
does not include dyed diesel fuel, dyed kerosene, or an excluded liquid.

(g) “Dyed diesel fuel” means diesel fuel that is dyed
pursuant to Internal Revenue Service rules or pursuant to any other Internal
Revenue Service requirements, including any invisible marker requirements.

(h) “Dyed kerosene” means kerosene that is dyed pursuant to
Internal Revenue Service rules or pursuant to any other Internal Revenue
Service requirements, including invisible marker requirements.

(i) “Excluded liquid” means that term as defined in 26 CFR
48.4081-1.

(j) “Export” means to purchase or receive fuel in this state
for immediate shipment and subsequent sale outside of this state.

(k) “Exporter” means a person that exports fuel and is
licensed under section 86 of the motor fuel tax act, 2000 PA 403, MCL
207.1086.

(l) “Fuel” means gasoline and diesel fuel
that is subject to tax under this act, collectively, except when gasoline or
diesel fuel is referred to separately.

(m) “Gasoline” means and includes gasoline, alcohol, gasohol,
casing head or natural gasoline, benzol, benzine, naphtha, methanol, transmix,
any blendstock additive, or other product that is sold for blending with
gasoline or for use on the road, other than products typically sold in
containers of less than 5 gallons. Gasoline also includes a liquid prepared,
advertised, offered for sale, sold for use as, or used in the generation of
power for the propulsion of a motor vehicle, airplane, or marine vessel,
including a product obtained by blending together any 1 or more products of
petroleum, with or without another product, and regardless of the original
character of the petroleum products blended, if the product obtained by the
blending is capable of use in the generation of power for the propulsion of a
motor vehicle, airplane, or marine vessel. The blending of all of the
above-named products, regardless of their name or characteristics, shall
conclusively be presumed to have been done to produce fuel, unless the product obtained
by the blending is entirely incapable of use as fuel. An additive or blendstock
is presumed to be sold for blending unless a certification is obtained for
federal purposes that the substance is for a use other than blending for
gasoline. Gasoline does not include diesel fuel, dyed diesel fuel, dyed
kerosene, or an excluded liquid.

(n) “Kerosene” means all grades of kerosene, including, but
not limited to, the 2 grades of kerosene, No. 1-K and No. 2-K, commonly known
as K-1 kerosene and K-2 kerosene, respectively, described in American Society
for Testing and Materials specification D-3699, in effect on January 1, 1999,
and kerosene-type jet fuel described in American Society for Testing and
Materials specification D-1655 and military specifications MIL-T-5624r and
MIL-T-83133d (grades jp-5 and jp-8), and any successor Internal Revenue Service
rules or regulations, as the specification for kerosene and kerosene-type jet
fuel. Kerosene does not include dyed kerosene or an excluded liquid.

(o) “Marine terminal operator” means a person that stores
fuel at a boat terminal transfer.

(p) “Pipeline terminal operator” means a person that stores
fuel in tanks and equipment used in receiving and storing fuel from interstate
and intrastate pipelines pending wholesale bulk reshipment.

(q) “Purchase”, “receipt”, or “shipment” does not include a
two-party exchange, a bulk transfer, or a receipt of fuel as part of a bulk
transfer.

(r) “Rack” means a mechanism for delivering fuel from a
refiner, a pipeline terminal operator, or a marine terminal operator into a
railroad tank car, a transport truck, a tank wagon, or the fuel supply tank of
a marine vessel.

(s) “Refiner” means a person that meets all of the following
requirements:

(i) Manufactures or produces fuel at a
refinery by any process involving substantially more than the blending of fuel.

(ii) Is a taxable fuel registrant that is a
refiner for purposes of 26 CFR 48.4081-1.

(t) “Refinery” means a facility used by a refiner to produce
fuel from crude oil, unfinished oils, natural gas liquids, or other
hydrocarbons and from which fuel may be removed by pipeline or marine vessel or
at a rack.

(u) “Removal” or “removed” means a physical transfer other
than by evaporation, loss, or destruction of fuel from a refiner, pipeline
terminal operator, or marine terminal operator.

(v) “Supplier” means a supplier or permissive supplier
licensed under section 70 or 73 of the motor fuel tax act, 2000 PA 403, MCL
207.1070 and 207.1073.

(w) “Tank wagon” means a straight truck having 1 or more
compartments other than the fuel supply tank designed or used to carry fuel.

(x) “Terminal” means a fuel storage and distribution facility
that meets all of the following requirements:

(i) Is registered as a qualified terminal by
the Internal Revenue Service.

(ii) Is supplied by pipeline or marine
vessel.

(iii) Has a rack from which fuel may be
removed.

(y) “Transport truck” means a semitrailer combination rig
designed or used for the purpose of transporting fuel over the public roads or
highways.

(z) “Transmix” means the mixed product that results from the
buffer or interface of 2 different products in a pipeline shipment, or a
mixture of 2 different products within a terminal operated by a pipeline
terminal operator, within a boat terminal transfer operated by a marine
terminal operator, or at a refinery that results in an off-grade mixture.

(aa) “Two-party exchange” means a transaction, including a
book transfer, in which fuel is transferred from 1 supplier to another
supplier where all of the following occur:

(i) The transaction includes a transfer of
fuel from the person who holds the original inventory position for the fuel in
fuel storage tanks as reflected in the records of the refiner, pipeline
terminal operator, or marine terminal operator.

(ii) The exchange transaction is completed
before removal across the rack by the receiving supplier.

(iii) The refiner, pipeline terminal operator,
or marine terminal operator in its books and records treats the receiving
exchange party as the supplier that removes the fuel across a rack for purposes
of reporting the transaction to the department under the motor fuel tax act,
2000 PA 403, MCL 207.1001 to 207.1170.

Sec.
25. (1) All money received and collected under this act must be deposited by
the department in the state treasury to the credit of the general fund, except
as otherwise provided in this section.

(2) Fifteen percent of the collections of the tax imposed at
a rate of 4% must be distributed to cities, villages, and townships pursuant to
the Glenn Steil state revenue sharing act of 1971, 1971 PA 140, MCL 141.901 to
141.921.

(3) Sixty percent of the collections of the tax imposed at a
rate of 4% must be deposited in the state school aid fund and distributed as
provided by law. In addition, all of the collections of the tax imposed at the
additional rate of 2% approved by the electors on March 15, 1994 must be
deposited in the state school aid fund.

(4) Except as otherwise provided in this subsection, not less
than 27.9% of 25% of the collections of the general sales tax imposed at a rate
of 4% directly or indirectly on fuels sold to propel motor vehicles upon
highways, on the sale of motor vehicles, and on the sale of the parts and
accessories of motor vehicles by new and used car businesses, used car
businesses, accessory dealer businesses, and gasoline station businesses as
classified by the department must be deposited each year into the comprehensive
transportation fund. For the fiscal year ending September 30, 2021 only, the
amount deposited into the comprehensive transportation fund under this
subsection must be reduced by $18,000,000.00 and that $18,000,000.00 must be
deposited into the transportation administration collection fund.

(5) Beginning October 1, 2016 and the first day of each
calendar quarter thereafter, an amount equal to the collections for the
calendar quarter that is 2 calendar quarters immediately preceding the current
calendar quarter of the tax imposed under this act at the additional rate of 2%
approved by the electors on March 15, 1994 from the sale at retail of aviation
fuel must be distributed as follows:

(a) An amount equal to 35% of the collections of the tax
imposed at a rate of 2% on the sale at retail of aviation fuel must be
deposited in the state aeronautics fund and must be expended, on appropriation,
only for those purposes authorized in the aeronautics code of the state of
Michigan, 1945 PA 327, MCL 259.1 to 259.208.

(b) An amount equal to 65% of the collections of the tax
imposed at a rate of 2% on the sale at retail of aviation fuel must be
deposited in the qualified airport fund and must be expended, on appropriation,
only for those purposes authorized under section 35 of the aeronautics code of
the state of Michigan, 1945 PA 327, MCL 259.35.

(6) The department shall, on an annual basis, reconcile the
amounts distributed under subsection (5) during each fiscal year with the
amounts actually collected for a particular fiscal year and shall make any
necessary adjustments, positive or negative, to the amounts to be distributed
for the next successive calendar quarter that begins January 1. The state
treasurer or the state treasurer’s designee shall annually provide to the
operator of each qualified airport a report of the reconciliation performed under
this subsection. The reconciliation report is subject to the confidentiality
restrictions and penalties provided in section 28(1)(f) of 1941 PA 122, MCL
205.28.

(7) An amount equal to the collections of the tax imposed at
a rate of 4% under this act from the sale at retail of computer software must
be deposited in the Michigan health initiative fund created in section 5911 of
the public health code, 1978 PA 368, MCL 333.5911, and must be considered in
addition to, and is not intended as a replacement for any other money
appropriated to the department of health and human services. The funds
deposited in the Michigan health initiative fund on an annual basis must not be
less than $9,000,000.00 or more than $12,000,000.00.

(8) In addition to the money deposited in the state school
aid fund under subsection (3), from the collections of the tax imposed at a
rate of 4% under this act, an amount equal to the sum of the following, as
determined by the department, must be deposited into the state school aid fund:

(a) All revenue lost to the state school aid fund as a result
of the exemption under section 4a(1)(u).

(b) All revenue lost to the state school aid fund as a result
of the exemption under section 4ee. A person that claims an exemption under
section 4ee shall report the sales price of the data center equipment as that
term is defined in section 4ee and any other information necessary to determine
the amount of revenue lost to the state school aid fund as a result of the
exemption under section 4ee annually on a form at the time and in a manner
prescribed by the department. The report required under this subdivision must
not include any remittance for tax, and does not constitute a return or
otherwise alleviate any obligations under section 6.

(c) All revenue lost to the state school aid fund as a result
of the exclusion under section 1(1)(d)(xv).

(d) All revenue lost to the state school aid fund as a result
of both of the following:

(i) The exemption under section 4gg.

(ii) The exemption under section 4gg of the
use tax act, 1937 PA 94, MCL 205.94gg.

(9) The balance in the state general fund shall be disbursed
only on an appropriation or appropriations by the legislature.

(10) As used in this section:

(a) “Aviation fuel” means fuel as that term is defined in
section 4 of the aeronautics code of the state of Michigan, 1945 PA 327, MCL
259.4.

(b) “Comprehensive transportation fund” means the
comprehensive transportation fund created in section 10b of 1951 PA 51, MCL
247.660b.

(c) “Qualified airport” means that term as defined in section
109 of the aeronautics code of the state of Michigan, 1945 PA 327, MCL 259.109.

(d) “Qualified airport fund” means the qualified airport fund
created in section 34(2) of the aeronautics code of the state of Michigan, 1945
PA 327, MCL 259.34.

(e) “State aeronautics fund” means the state aeronautics fund
created in section 34(1) of the aeronautics code of the state of Michigan, 1945
PA 327, MCL 259.34.

(f) “State school aid fund” means the state school aid fund
established in section 11 of article IX of the state constitution of 1963.

(g) “Transportation administration collection fund” means the
transportation administration collection fund created in section 810b of the
Michigan vehicle code, 1949 PA 300, MCL 257.810b.

Enacting
section 1. This amendatory act does not take effect unless all of the following
bills of the 103rd Legislature are enacted into law:

(a) Senate Bill No. 578.

(b) House Bill No. 4181.

(c) House Bill No. 4182.

(d) House Bill No. 4183.

This
act is ordered to take immediate effect.

Clerk of the House of
Representatives

Secretary of the Senate

Approved___________________________________________

____________________________________________________

Governor