Additional Details and Components

Nexus

Nexus is the term used to describe whether a taxpayer has sufficient connection to a state to be subject to a tax, in this case, the Michigan Business Tax (MBT).

  • A taxpayer has substantial nexus in this state and is subject to the modified gross receipts tax if the taxpayer has a physical presence in this state for a period of more than one day during the tax year or if the taxpayer actively solicits sales in this state and has gross receipts of $350,000 or more sourced to this state.
  • Federal law, which imposes a narrower standard applicable to state income taxes, applies to the business income tax for sales of tangible personal property.

Unitary Filing

A unitary business group is required to file a combined tax return. "Unitary business group" is defined as a group of businesses, one of which owns or controls more than 50% of the ownership interest and that has business activities or operations which result in a flow of value between or among persons in the group or has business activities or operations that are integrated with, are dependent upon, or contribute to each other.

Sales Factor/Sourcing

The sale of tangible personal property is sourced-based on ultimate destination. Sale/lease of real property is sourced-based on physical location of the property. Sale from lease/rental of tangible personal property, and income from royalties or the use of intangible property, are sourced-based on utilization. Receipts from services are sourced-based on where the benefits are received. Specific rules are provided for securities brokerage services, regulated investment companies, mortgages, other loans, credit card receivables, loan servicing fees, investment and trading activities, transportation services, telecommunications services, and private communications services.

SBT Credit Carryforwards

An unused carryforward from an SBT credit may be applied against the MBT tax liability for the 2008 and 2009 tax years only.

Administrative Provisions

  • Estimated payments are required if annual liability is reasonably expected to exceed $800 (SBT was $600). For calendar year taxpayers, estimates are due April 15, July 15, October 15, and January 15.
  • If a taxpayer's 2008 tax year is less than 12 months, liability may be calculated based either on the actual period or prorated 12-month liability.
  • Annual returns for calendar year taxpayers are due April 30.
  • If apportioned gross receipts are less than $350,000, a taxpayer (other than an insurance company or financial institution) does not need to file a return or pay a tax. There is no lower limit for members of a controlled group/entity under common control.
  • If the courts find a credit, deduction, or exemption to be unconstitutional, that provision is severed from the tax.
  • The MBT is intended to be revenue neutral, providing sufficient revenue to fully replace revenue from the Single Business Tax, plus the school aid fund revenue reductions and increased expenditure requirements resulting from the personal property tax exemptions.
  • If in FY 08-FY10, the MBT receipts exceed a trigger base amount, one half of the excess is deposited into the Budget Stabilization Fund and one half of the excess is refunded to taxpayers on a pro-rata basis, based on each taxpayer's positive net cash payments made in the fiscal year.