Nexus & Apportionment 6. For purposes of apportionment under the CIT, what jurisdictional standard will be applied to determine whether a taxpayer is subject to tax in another state?
MCL 206.661(3) provides as follows:
(3) A taxpayer is subject to tax in another state in either of the following circumstances:
(a) The taxpayer is subject to a business privilege tax, a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax.
(b) That state has jurisdiction to subject the taxpayer to 1 or more of the taxes listed in subdivision (a) regardless of whether that state does or does not subject the taxpayer to that tax.
Under the CIT, a taxpayer
“has substantial nexus in this state and is subject to the tax imposed under [the CIT] if the taxpayer has a physical presence in this state for a period of more than 1 day during the tax year, if the taxpayer actively solicits sales in this state and has gross receipts of $350,000 or more sourced to this state, or if the taxpayer has an ownership interest or a beneficial interest in a flow-through entity, directly or indirectly through 1 or more flow through entities, that has substantial nexus in this state.” MCL 206.621(1).
The same standard used to determine nexus for out-of-state taxpayers, as described in MCL 206.621(1) above, will be applied to determine whether a taxpayer is subject to tax in another state for purposes of apportionment under the CIT.