Treasury is reviewing the recently enacted tax law changes, including the new Marijuana Wholesale Tax. Developing clear and accurate information for tax stakeholders is our top priority. This guidance will be posted to our website in the coming weeks.
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.