Mich. Admin. Code R. 205.132 : Treasury —Bureau of Tax & Economic Policy —General Sales and Use Tax Rules —SPECIFIC SALES AND USE TAX RULES — Rentals
Rule 82.
(1) A person engaged in the business of renting or leasing tangible personal property to others shall pay the Michigan sales or use tax at the time he purchases tangible personal property, or he may report and pay use tax on the rental receipts from the rental thereof. A person remitting tax on the purchase price as a purchaser-consumer or remitting tax on rental receipts as a lessor, shall follow 1 or the other methods of remitting for his entire business operation. A person remitting tax on rental receipts shall be the holder of a sales tax license, or a registration as is provided in the use tax act. Each month such lessor shall compute and pay use taxes on the total rentals charged.
(2) A lessor remitting tax on rental receipts may deduct direct rentals to the United States, the state of Michigan or its local governmental entities, churches (excluding vehicles), schools and other qualified nonprofit institutions or agencies, or to persons or concerns for use in agricultural producing or industrial processing. However, rentals to construction contractors engaged in contract work for such entities are taxable.