Per Public Act (PA) 325 of 2006, the Single Business Tax (SBT) is repealed on business activity after December 31, 2007. The Michigan Business Tax (MBT), which replaces the SBT effective January 1, 2008, provides for a limited carry-forward of SBT business losses and credits.
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.