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Michigan Seeks to Exclude Trade-Ins from Sales Tax


Michigan House Bill No. 5696 seeks to amend the General Sales Tax "so that sales tax would be charged on the difference (emphasis added) between the price of a new or used motor vehicle … and the agreed-upon value of any trade-in." The bill would apply to new or used titled watercraft, as well.

A summary of the bill, released by the House Fiscal Agency, specifies that no sales tax would be charged on "the agreed-upon value" of "a motor vehicle or titled watercraft used as part of payment" of a new or used vehicle or watercraft.

Under the bill, the following limitations would apply to the value of a motor vehicle used as payment:

  • $7,500 in 2012
  • $10,000 in 2013
  • $12,500 in 2014
  • No limitation in 2015 and subsequent years

If House Bill 5696 is enrolled as it now stands, Michigan revenue faces an estimated  sales tax revenue reduction of $174 million the first full year and would increase to $220 million per year. The Michigan School Aid Fund, among others, would be impacted.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.