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Michigan Sales/Use Tax Update on Dental Prostheses – Part 3

Now that the Michigan Department of Treasury has issued a notice regarding the dental prosthesis exemption, we wanted to share with you our final takeaways on this issue that has affected the industry since July. The full notice can be found here.

  • The notice confirms that dental labs that collected sales tax from dentists since July 1, 2017, must first refund the collected tax to the dentist before the state will issue a refund to the lab. Unfortunately, the notice does not say what proof Treasury will require for this requirement. We suggest that a dental lab that provides these refunds to dentists should obtain its refund by filing an amended return to the special address listed in the notice. The dental lab should include on its return a statement as follows: “We affirm that prior to submitting this sales tax refund claim, we have refunded to our customers all sales tax collected on the sale of dental prostheses.”
  • The notice confirms that dental labs may purchase equipment and materials tax-exempt for industrial processing. It is not back to the old method of treating dental labs as service providers who are taxable on their inputs.
  • Dental labs who relied on Treasury’s guidance from LR 85-20 that said they were providing a service are protected. Treasury will not come after the labs for sales tax due on sales of dental prostheses prior to July 1, 2017.
  • Dentists do not need to provide exemption certificates to dental labs when buying dental prostheses.

If you have questions about anything related to sales or use tax in your business, please contact your Rehmann advisor.

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