Senate Panel Passes Sales Tax on the Difference Escalation

The Senate Finance Committee met this week and approved Senate Bills 10 and 11 which amend the General Sales and Use Tax Acts to accelerate the schedule that excludes from taxation the value of a motor vehicle traded in for a new or used vehicle.

Under this legislation, exemption from the “sales tax on the difference” between the purchase price of a motor vehicle and what a purchaser actually pays after deducting the trade-in value of the vehicle it replaces would be fully implemented in 10 years rather than 23 years.

Under current law, vehicles purchased in 2015 would see $2,500 of a trade-in exempted from the sales tax, with that increasing $500 each year until 2039 when the entire value would be exempt. These bills would double the exemption for the current year as well as the annual increase, making the full value exempt in 2025.

Speaking in support of the legislation in Committee were representatives from the Auto Dealers Association, arguing the current exemption had contributed to the increase in vehicle purchases in the state. School and local government groups opposed the measure; however, arguing they had agreed to current law and could not absorb the revenue cut the bills would cause.

The Senate Fiscal Agency estimated the bills would cost the state $23.9 million in the current fiscal year ($19.5 million from the School Aid Fund, $1.2 million from the Comprehensive Transportation Fund, and $3.2 million from the General Fund), as well as cost local governments $2.78 million in constitutional revenue sharing. The school groups opposing these bills indicated they would remove their opposition if there was language holding the School Aid Fund harmless from any reductions. Senator Steve Bieda (D-Warren) said he would introduce such an amendment on the Senate floor.

The other bills in the package, SB 232 and SB 233, simply correct language in the law that currently applies it only to Michigan deals. If these bill become law it would ensure vehicles purchased out of state would have the same tax treatment as those purchased right here in Michigan.

posted by PAA Online , Friday, March 27, 2015 12:56 PM
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