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Michigan Business Tax
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M14. (Answer rescinded, replaced by M67) What are purchases from other firms?
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Answer:
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"Purchases from other firms" are deducted from a taxpayer's gross receipts to calculate the modified gross receipts tax base. In general, purchases from other firms means:
Inventory acquired during the tax year. Inventory ? defined at MCL 208.1111 ? means the stock of goods, including electricity and natural gas, held for resale in the ordinary course of a retail or wholesale business, and finished goods and good in process of a manufacturer, including raw materials purchased from another person. Inventory also includes floor plan interest for licensed new car dealers and shipping and engineering charges so long as such charges are included in the original contract price for the associated inventory.
Depreciable assets acquired during the tax year. Deductible depreciable assets are those that are or will become eligible for depreciation, amortization, or accelerated capital cost recovery under the IRC. The cost of depreciable assets includes costs of fabrication and installation.
Materials and supplies. Materials and supplies means tangible personal property acquired during the tax year to be used or consumed in ? and directly connected to ? the production or management of inventory or the operation or maintenance of depreciable assets as described above. "Materials and supplies" includes repair parts and fuel.
Staffing company compensation. Wages, benefits, and certain payroll taxes paid to personnel provided to the clients of staffing companies as defined under the MBT.
Payments to subcontractors. For persons included in SIC codes 15, 16, and 17 ? such as general contractors, operative builders, and trade contractors ? payments to subcontractors for construction projects so long as such payments are made pursuant to a contract specific to that project. For a more complete list of those persons within SIC codes 15, 16, and 17, see http://www.osha.gov/pls/imis/sic_manual.html.
Select Payments by Theater Owners. For the 2009 tax year, 50% of film rental or royalty payments paid by a theater owner to a film distributor and/or a film producer. For the 2010 tax year and beyond, all film rental or royalty payments paid by a theater owner to a film distributor and/or a film producer.
The more specific statutory definition of "purchases from other firms" is found at MCL 208.1113(6).
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