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Corporate Income Tax

Corporate Tax Base 13. How are gross receipts used under the CIT?

Unlike under the MBT, gross receipts are not used directly to determine a taxpayer's liability. In other words, unlike under the MBT, there is no modified gross receipts tax and gross receipts are not subject to tax. Gross receipts are, however, used in other contexts under the CIT.

First, gross receipts are used to determine whether a taxpayer has nexus in Michigan. There are three separate alternative nexus standards under the CIT. One of these is that a taxpayer has nexus with Michigan if the taxpayer actively solicits sales in Michigan and has gross receipts of $350,000 or more sourced to Michigan. Therefore, the amount of a taxpayer's gross receipts, in conjunction with active solicitation of sales, is determinative of whether a taxpayer has nexus in Michigan.

Second, gross receipts are used as a threshold to determine whether a taxpayer is required to file an annual CIT return and pay the tax. A taxpayer, other than an insurance company or a financial institution, whose apportioned or allocated gross receipts are less than $350,000 is not required to file a return or pay the tax imposed under the CIT. MCL 206.685(1). A taxpayer whose gross receipts exceed this amount must file a return and pay the tax.

Finally, gross receipts are used to determine whether a taxpayer qualifies for a small business alternative credit under MCL 206.671. Subject to other disqualifying conditions set forth at MCL 206.671, the credit is available to a taxpayer with gross receipts that do not exceed $20,000,000 for the tax year, adjusted annually for inflation. In addition, the credit is reduced by a fraction where the taxpayer's gross receipts exceed $19,000,000 up to the $20,000,000 disqualifying threshold.