Michigan Laws 205.54u – Extractive operation; exemptions; definition
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Terms Used In Michigan Laws 205.54u
- Contract: A legal written agreement that becomes binding when signed.
- Department: means the department of treasury. See Michigan Laws 205.51
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- Person: means an individual, firm, partnership, joint venture, association, social club, fraternal organization, municipal or private corporation whether organized for profit or not, company, limited liability company, estate, trust, receiver, trustee, syndicate, the United States, this state, county, or any other group or combination acting as a unit, and includes the plural as well as the singular number, unless the intention to give a more limited meaning is disclosed by the context. See Michigan Laws 205.51
- Personal property: All property that is not real property.
- state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories belonging to the United States; and the words "United States" shall be construed to include the district and territories. See Michigan Laws 8.3o
- Tangible personal property: means personal property that can be seen, weighed, measured, felt, or touched or that is in any other manner perceptible to the senses and includes electricity, water, gas, steam, and prewritten computer software. See Michigan Laws 205.51a
- Tax: includes a tax, interest, or penalty levied under this act. See Michigan Laws 205.51
(1) A sale of tangible personal property to an extractive operator for use or consumption in extractive operations is exempt from the tax under this act.
(2) The property under subsection (1) is exempt only to the extent that the property is used for the exempt purposes stated in this section. The exemption is limited to the percentage of exempt use to total use determined by a reasonable formula or method approved by the department.
(3) Extractive operations include the actual production of oil, gas, brine, or other natural resources. Property eligible for the exemption includes the following:
(a) Casing pipe or drive pipe.
(b) Tubing.
(c) Well-pumping equipment.
(d) Chemicals.
(e) Explosives or acids used in fracturing, acidizing, or shooting wells.
(f) Christmas trees, derricks, or other wellhead equipment.
(g) Treatment tanks.
(h) Piping, valves, or pumps used before movement or transportation of the natural resource from the production area.
(i) Chemicals or acids used in the treatment of crude oil, gas, brine, or other natural resources.
(j) Tangible personal property used or consumed in depositing tailings from hard rock mining processing.
(k) Tangible personal property used or consumed in extracting the lithologic units necessary to process iron ore.
(4) The extractive operation exemption does not include the following:
(a) Tangible personal property consumed or used in the construction, alteration, improvement, or repair of buildings, storage tanks, and storage and housing facilities.
(b) Tangible personal property consumed or used in transporting the product from the place of extraction, except for tangible personal property consumed or used in transporting extracted materials from the extraction site to the place where the extracted materials first come to rest in finished goods inventory storage.
(c) Tangible personal property that is a product the extractive operator produces and that is consumed or used by the extractive operator for a purpose other than the manufacturing or producing of a product for ultimate sale. The extractor shall account for and remit the tax to this state based upon the product’s fair market value.
(d) Equipment, materials, and supplies used in exploring, prospecting, or drilling for oil, gas, brine, or other natural resources.
(e) Equipment, materials, and supplies used in the storing, withdrawing, or distribution of oil, gas, or brine from a storage facility.
(f) Vehicles, including special bodies or attachments, required to display a vehicle permit or license plate to operate on public highways.
(5) As used in this section:
(a) “Extractive operations” means the activity of taking or extracting for resale ore, oil, gas, coal, timber, stone, gravel, clay, minerals, or other natural resource material. An extractive operation begins when contact is made with the actual type of natural raw product being recovered. Extractive operation includes all necessary processing operations before shipment from the place of extraction. Extractive operations include all necessary processing operations and movement of the natural resource material until the point at which the natural raw product being recovered first comes to rest in finished goods inventory storage at the extraction site. Extractive operations for timber include transporting timber from the point of extraction to a place of temporary storage at the extraction site and loading or transporting timber from a place of temporary storage at the extraction site to a vehicle or other equipment located at the extraction site that will remove the timber from the extraction site.
(b) An extractive operator is a person who, either directly or by contract, performs extractive operations.