Michigan House legislators ponder business and personal tax exemptions for coronavirus PPE

The Michigan House of Representatives took its second tentative steps to eliminate sales taxes on COVID-19 personal protection equipment for Michigan businesses.

If approved as currently amended, a package of bills would render all businesses expenses for PPE retroactive to March 10, the day Gov. Gretchen Whitmer declared a public health emergency, and sunset on Dec. 31, 2021.

The House Tax Policy Committee heard arguments Tuesday for and against House Bills 6033, 6034 and 6035. The three bipartisan bills were introduced on July 23.

HB 6033 would amend the 1937 General Sales Tax Act to allow an exemption for costs incurred by employees for the purchase of PPE and equipment required as a condition of employment. The bill is sponsored by Rep. Michael Webber, R-Rochester Hills.

HB 6034, also sponsored by Webber and Rep. Jim Lilly, R- Park Township, would amend the 1937 Use Tax Act by exempting PPE storage, use or consumption during the course of conducting regular business of a qualified employer operating under COVID-19 exposure prevention, preparedness and response plan.

HB 6035, sponsored by Webber and Rep. James Tate, D-Detroit, would amend the Income Tax Act of 1967 to give business owners a credit “against the tax imposed … in an amount equal to the … percentage of the purchase price paid by the taxpayer during the tax year to purchase personal protective equipment and supplies for its employees in this state….”

When asked by Committee Vice Chair James Lowe, R-Cedar Lake, who would benefit from these three bills, Tate responded the hospitality industry would be among the primary ones to recognize a tax advantage.

Matt Patton, on behalf of the Detroit Regional Chamber, told the committee in a prepared statement the bills would prevent the state from profiting from the necessity of businesses and employees to purchase PPE for their own protection and the protection of their respective clientele.

Opposing the bill package was Rachel Richards, director of Legislative Affairs at the Michigan Department of Treasury.

According to Richards, the bills raise two concerns. First, she said, was the proposed legislation poses a potential significant revenue impact or corresponding spending cuts for the state.

Second, she noted, was the three bills could raise the issue of noncompliance with Michigan’s sales and tax use bills as already codified in Michigan law.

The House Fiscal Agency estimated how much the legislative package would cost the state in revenue if approved as is.

HB 6033 and 6034, as written, could reduce state tax collections by $5 million in fiscal year 2019-20; $10 million in fiscal year 2020-21; and $4 million in fiscal year 2021-22.

HB 6035, as currently written, could reduce state collections of corporate income tax by as much as $40 million and further lower personal income tax by as much as $3 million.

As much as 30 percent of those potential lost revenues could impact the state’s education budget.

Both Tate and Webber acknowledged the bills will more than likely be amended further before returning to the full House for a vote.

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