Mich. Admin. Code R 205.132 — Lease or rental

Rule 82. (1) A lessor is a person engaged in the business of renting or leasing
tangible personal property.
(2) The terms “lease” and “rental” have the same meaning and may be used
interchangeably. For agreements entered into after September 1, 2004, a lease or rental
means either of the following:
(a) Any transfer of possession or control of tangible personal property for a fixed or
indeterminate term for consideration and may include future options to purchase or
extend.
(b) An agreement covering motor vehicles or trailers if the amount of consideration
may be increased or decreased by reference to the amount realized upon sale or
disposition of the property, as that term is defined in 26 USC 7701(h)(1).
(3) A lease or rental does not include any of the following:
(a) A transfer of possession or control of tangible personal property under a security
agreement or deferred payment plan that requires the transfer of title upon completion of
the required payments.
(b) A transfer of possession or control of tangible personal property under an
agreement requiring transfer of title upon completion of the required payments and
payment of an option price that does not exceed $100.00 or 1% of the total required
payments, whichever is greater.
(c) Except as provided in subrule (4) of this rule, the provision of tangible personal
property along with an operator for a fixed or indeterminate period of time, where that
operator is necessary for the equipment to perform as designed. To be necessary, an
operator shall do more than maintain, inspect, or set up the tangible personal property.
(4) Beginning March 29, 2019, a lease also includes the transfer of possession or
control for consideration, for a fixed or indeterminate term and including future options
to purchase or extend, of a school bus primarily used in the performance of a contract
entered into with an authorized representative of a school for the transportation of
preprimary, primary, or secondary school pupils to or from a school or school-related
events authorized by the administration of the school. A transaction described in this
subrule qualifies as a lease even if the operator of the school bus is also provided under
the lease.
(5) A lessor may elect to pay use tax on the rental receipts for tangible personal
property that would otherwise be taxed on the full cost at the time of purchase. The
election to pay on rental receipts is made on each item of tangible personal property. The
election is made by claiming an exemption from sales or use tax at the time of purchase
and paying use tax on the rental receipts.
(6) A lessor remitting tax on rental receipts must hold a sales tax license, or register
under the Use Tax Act, 1937 PA 94, MCL 205.91 to 205.111. For aircraft, a person shall
register for use tax with the department of treasury by the earlier of the date set for the
first payment of use tax under the lease or rental agreement or 90 days after the lessor
first brings the aircraft into this state.
Courtesy of Michigan Administrative Rules
(7) The remittance of use tax on rental receipts is the obligation of the lessor. If the
lessor places the economic burden of the tax on the lessee, the charge must be separately
itemized.
(8) A taxpayer that makes the lessor election will lose that election if tangible
personal property is converted to personal use. Tax is owed at the time of conversion on
the original purchase price of the property.