A25. How does a taxpayer with a fiscal year end calculate tax under the MBT for estimate purposes?(This answer replaced A21 on 1/14/08)
If estimated tax liability for the year is over $800.00 a taxpayer must file estimated quarterly returns and payments. MCL 208.1501(1). Quarterly returns for fiscal year taxpayers are due the 15th day of the first month after each quarter. MCL 208.1501(2). Any quarter less than 3 months is due on the 15th day of the month immediately following the final month of the quarter. In the case of a short taxable year, no estimated tax payment is required if the short taxable year is a period of less than four full calendar months; or the estimated tax liability for the year is $800.00 or less. See IRS Reg. 1.6655-5(b); MCL 208.1501(1).
The estimated payment made with each quarterly return must be for the total estimated business income tax base, modified gross receipts tax base and surcharge for the quarter, or 25% of the estimated annual liability including surcharge. MCL 208.1281(5), 1501(3). To avoid interest charges, estimated payments must equal at least 85% of the liability for the tax year, and the amount of each estimated payment must reasonably approximate the tax liability for each quarter. MCL 208.1501(4)(a). If the year's tax liability is $800.00 or less, quarterly returns are not required. MCL 208.1501(1). Estimates cannot be based on the prior year's SBT liability, and can no longer be based on 1% of gross receipts.
For taxpayers whose apportioned or allocated gross receipts equal $350,000 or more, the MBTA imposes a 4.95% business income tax and a modified gross receipts tax at the rate of 0.8%. MCL 208.1201, 1203. A credit reduces the tax correspondingly if gross receipts are between $350,000 and $700,000. MCL 208.1411.
For most taxpayers, the business income tax base is essentially that part of federal taxable income derived from business activity, modified by the following to the extent included in, excluded from, or deducted in arriving at federal taxable income:
- Interest income and dividends derived from obligations or securities of states other than Michigan,
- Taxes on or measured by net income and the tax imposed under the MBT,
- Any carryback or carryover of a net operating loss,
- Loss attributable to another taxable entity,
- Royalty, interest, or other expense paid to a person related to the taxpayer by ownership or control for the use of an intangible asset if the person is not included in the taxpayer's unitary business group.
- Dividends and royalties received from persons other than United States persons and foreign operating entities,
- Income attributable to another taxable entity,
- Interest income derived from United States obligations,
- Earnings that are net earnings from self-employment as defined under section 1402 of the internal revenue code of the taxpayer or a partner or limited liability company member of the taxpayer except to the extent that those net earnings represent a reasonable return on capital.
Business Income does not include personal transactions as defined by MCL 208.1105(2)
The modified gross receipts tax base consists of gross receipts less purchases from other firms. MCL 208.1111. Gross receipts is defined as the entire amount received by a taxpayer from any activity carried on for direct or indirect gain, benefit, or advantage to the taxpayer or to others, with certain specific exceptions. MCL 208.1111. "Purchases from other firms" is generally limited to inventory acquired during the tax year, depreciable assets acquired during the tax year, and materials and supplies directly connected to inventory on depreciable assets. MCL 208.1113(4). Gross Receipts does not include personal transactions as defined by MCL 208.1111(1)(v)(v).
The surcharge is calculated on a taxpayer's liability after allocation or apportionment and before the calculation of credits. MCL 208.1281(1). The surcharge is imposed in the amount of 21.99% of liability and capped at $6 million for all taxpayers except financial institutions. MCL 208.1281(3) and 208.1281(1)(a).