Single Business Tax General
- List of Topics
The Single Business Tax (SBT) is the only general business tax levied by the State of Michigan. When enacted in 1976 it replaced seven separate business taxes, including the corporate income tax. The SBT is a Value Added Tax (VAT). Value added taxes are levied on a "Services Consumed" or "Benefits Received" principle. The SBT replaced taxation of net income with value-added taxation. The SBT base consists of essentially three components: labor, capital and profit.
- Labor is measured by the compensation
(including benefits) an employer pays to its employees.
- Capital used is measured by depreciation,
interest, dividends and royalties paid by the taxpayer.
- Profit is measured by the taxpayer's federal
taxable income as adjusted for SBT purposes.
Several different credits are available as well
as methods of reducing a taxpayer's taxable base. P.A.
531 of 2002 repeals the Single Business Tax Act for tax years beginning
after December 31, 2007.
What activity is subject to the SBT?
The SBT applies to "business activity,"
- The sale of real or personal property in
exchange for a tangible or intangible consideration.
- Property rental, including both real property
and personal property.
- Performance of a service for a fee, except
services rendered as an employee or services rendered as the director of a
What persons or activities are exempt from the
The following may be exempt from the SBT.
Each of these exemptions, however, has some restrictions.
- Most persons, other than non-US persons, who
are exempt from federal income tax under the Internal Revenue Code.
- Nonprofit cooperative housing corporations.
- Production of agricultural goods, if the
taxpayer's primary activity is production of agricultural goods.
- Partners of partnerships and shareholders of
Sub S corporations (unless they have other business activities).
Partnerships and Sub S corporations, however, are subject to the SBT.
Partners and shareholders should contact the
Individual Taxes Division at 517-636-4486 for information on Michigan income
tax filing requirements.
Who is subject to the SBT?
All persons engaged in a "business
activity" in Michigan are subject to the SBT. A "person" includes
an individual, trust, estate, and every type of business entity.
Persons engaged in "business activity"
both within and without the State of Michigan should refer to RAB
98-1 "Single Business Tax Nexus Standards" for guidance.
Who must file an SBT return?
Any "person" engaged in a business
activity in Michigan whose gross receipts allocated or apportioned to Michigan
are $350,000 or more is required to file a return.
Gross receipts include all receipts derived from
a business activity including rental and lease receipts. If a business operated
for less than 12 months (and is not a sole proprietor), it must annualize
allocated or apportioned gross receipts to determine whether it meets the filing
requirement. Special rules apply for controlled groups.
What are the filing requirements for a member
of a controlled group of entities?
If you are a member of an affiliated group, a
controlled group of corporations or an entity under common control, the group
must combine its members' allocated or apportioned gross receipts on Form
Single Business Tax Adjusted Gross Receipts For Controlled Groups, to
determine if members of the group are required to file.
Do I need to file an SBT return if my
allocated or apportioned gross receipts are below the filing requirement
($350,000 for tax years beginning after 2002)?
If your allocated or apportioned gross receipts
are below the filing requirement, you are not legally required to file a return.
There may be situations in which you choose to file; for example, to allow a
business loss or credit carryforward to remain viable for a subsequent year.
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What is the tax rate?
Please see the Single
Business Tax Rate Tables for more information.
How is the SBT calculated?
The SBT liability starts with calculation of the
total tax base. For most taxpayers the primary components of the tax base are
compensation, business income (federal taxable income), and several additions or
- Compensation includes salaries and wages, plus
the employer's costs for nearly all fringe benefits. Beginning in 2004, there
is a partial exclusion of certain medical benefit costs. Compensation does not include FICA, unemployment
insurance or workers' compensation.
- Additions include depreciation, taxes based on
income, net operating loss carryover or carryback, dividend and interest
payments, and certain royalty expenses. These are added only to the extent
they were deducted on the federal return.
- Subtractions include dividend, interest and
certain royalty income reported on the federal return.
- There are numerous other exemptions,
reductions and credits that may be allowed. These modify the value-added
nature of the SBT and reduce the tax liabilities for taxpayers that qualify
to use them.
Once the total tax base is determined, multiply
it by the tax rate, then subtract any eligible credits. (See
an example of Single Business Tax calculation.)
What is the compensation exclusion for medical
Beginning in 2004, the definition of compensation
is modified by partially excluding an employer's costs of providing medical
benefits to employees who are Michigan residents. This includes medical
insurance premiums, if an employer purchases medical insurance for its
employees. It includes both direct and administrative costs for an employer that
absorbs such costs internally (sometimes called "self-insured") rather
than buying insurance. Only a percentage of employer medical costs are
excludable, as follows, for tax years beginning in:
- 2004: 5%
- 2005: 20%
- 2006: 40%
- 2007 or later: 50%
The excluded amount is calculated in the
taxpayer's work papers, not on the return. Include the net amount, after
exclusion, on the "Employee insurance" line of the form. Costs of any
other type of insurance provided to employees, such as disability income or life
insurance, must be included in full.
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How to File
Single Business Tax
Which SBT return should be filed?
All businesses that have allocated
or apportioned gross receipts of $350,000 or more, with the exception of
insurance companies, must file either Form
Single Business Tax Annual Return or, if eligible, Form
Single Business Tax Simplified Return. Insurance companies must file
Form 1366, Insurance Company Annual
Return for SBT and Retaliatory Tax.
If my allocated or apportioned gross receipts
are less than the filing requirement and I have made estimated payments during
the year, do I need to file a return?
Any person who wishes to claim a refund must file
an SBT annual return on Form C-8000,
Single Business Tax Annual Return, or Form
Single Business Tax Simplified Return. However, only gross receipts, Form
C-8000H, SBT Apportionment
Formula, if taxable in another state, and the amount of the estimated
payments need to be reported as well as a request for a refund of the
overpayment if allocated or apportioned gross receipts are less than the filing
When is the return due?
The return is due on the last day of the 4th
month after the tax year ends. It must be filed for the same tax period covered
by the federal income tax return.
What form do you use to file an amended SBT
To file an amended SBT return for tax years 1995
forward, use Form C-8000X, SBT
Amended Return or Form C-8044X, SBT
Simplified Amended Return. To file an amended SBT return for a tax year
prior to 1995, use the appropriate year's Form
Single Business Tax Annual Return or Form
SBT Simplified Return and write "AMENDED" at the top of the
Can an individual having separate sole
proprietorship businesses (meat market, grocery, and bar) file separate SBT
returns for each separate business?
Single Business Tax Act
defines a "person" as "an individual, firm, bank, financial
institution, limited partnership, co-partnership, partnership, joint venture,
association, corporation, receiver, estate, trust, or any other group or
combination acting as a unit." The SBT is imposed on the adjusted tax base
of every "person". If you own more than one business that is
registered as an individual, you must file one SBT return and use the combined
gross receipts to determine filing requirements.
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How is an extension requested?
To request a Michigan extension, file
Form 4, Application for Extension of Time to File Michigan Tax Returns
by the original due date of the return, with full payment of the estimated tax
due. If you have paid estimates and met the statutory requirements for estimated
payments during the year, the estimated payments will be considered as a payment
on a tentative return. You must complete the appropriate lines on the extension
application. If you did not make estimated payments during the year, you must
include a payment with Form 4 or an
extension will not be granted.
What is the SBT policy on extensions?
The SBT return is due the last day of the fourth
month after the end of the tax year. If it has been determined that additional
time is needed to file an annual SBT return, then Form
4, Application for Extension of Time to File Michigan Tax Returns,
must be filed by the original due date of the return with full payment of the
estimated tax due. Form 4 must be filed
to request an extension, even if the Internal Revenue Service has approved a
federal extension. Treasury grants an extension for filing of the annual return,
not an extension for payment of tax due.
- Estimated payment or payment with Form
4 must be received or an extension request will not be accepted.
- Extension applications received without proper
payment will not be processed.
- If Form 4
is received with a copy of the federal extension by the due date of the
return and with proper payment on the account, Treasury will grant a state
extension for the same length of time as the federal extension plus 60 days.
- If Form 4
is received without a copy of the federal extension, Treasury will grant a
180-day extension on the state return.
For example, if an SBT extension is granted, a
2005 calendar-year filer who has a federal extension has an SBT return due date
of December 31, 2006. The same filer without a federal extension has an SBT due
date of October 31, 2006.
It is important that Form
4 shows the total amount of payments made during the tax year and those
included with the extension application. If you do not owe tax, you do not need
to file a Michigan extension to avoid late penalty. However, without an approved
extension, you must file your annual return as soon as the information is
available to do so. An extension of time to file will also extend the statute of
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Who must file SBT quarterly tax estimates?
If the estimated liability for the tax year is
over $600, quarterly estimated payments must be filed. For calendar year
taxpayers, quarterly returns are due the last day of April, July, October and
January. For fiscal year filers, quarterly returns are due the last day of the
first month after each quarter.
How are quarterly estimates calculated?
Estimated payments must equal at least 85 percent
of the liability for the tax year, and the amount of each estimated payment must
reasonably approximate the tax liability for that quarter. A taxpayer whose
preceding year's tax liability was $20,000 or less, may file four equal
installments, the sum of which equals the previous year's tax liability. If the
year's tax liability is $600 or less, quarterly returns are not required. See Form
C-8020, SBT Penalty and
Interest Computation for Underpaid Estimated Tax.
What form should be used to file my SBT
To file SBT estimated payments use Form
Single Business Tax Quarterly Return. If your return is prepared using
computer software, the software program should create pre-identified SBT
estimated payment vouchers for you to use. Using the pre-identified vouchers
will speed processing and improve the accuracy of the payment posting.
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How does the SBT apply to taxpayers doing
business in more than one state?
Taxpayers doing business in Michigan and in other
states apportion their tax base to Michigan using a formula based on their
percentage of property, payroll and sales in Michigan. Financial organizations
and transportation companies use a single factor formula based on gross business
and revenue miles, respectively. See Form
SBT Apportionment Formula.
Does the SBT recognize the unitary method of
No. Only firms actually engaged in business
activity in Michigan are subject to the SBT. A foreign subsidiary or parent
corporation with no Michigan business activity is not subject to the SBT.
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How do I request the tax forms?
Current and prior year SBT forms may be obtained
by one of the following methods: Downloading the desired form from our
forms page or by calling (800) 367-6263 and placing your request. Please allow 30
days for forms to be mailed. These services are available 24 hours a day 7 days
a week. To request information for new businesses, contact the Michigan Economic
Development Corporation at (517) 373-9808.
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> SBT Brochure Example
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