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Nexus & Apportionment 8. An out-of-state company has an employee located in Michigan. The out-of-state company has no sales or business activities in Michigan. Does the out-of-state company have nexus with Michigan under the CIT?

Yes. Under the CIT, a taxpayer, other than an insurance company, has nexus with Michigan if (a) the taxpayer has a physical presence in Michigan for more than one day in a tax year, (b) the taxpayer actively solicits sales in Michigan and has unapportioned gross receipts of $350,000 or more sourced to Michigan, or (c) the taxpayer has an ownership interest or a beneficial interest in a flow-through entity, directly, or indirectly through 1 or more other flow-through entities, that has substantial nexus in Michigan. MCL 206.621(1). The presence of a permanent employee in Michigan constitutes physical presence in this state and creates nexus under the CIT.

However, absent Michigan sales and business activities, that company is unlikely to meet or exceed the filing threshold of $350,000 in allocated or apportioned gross receipts. MCL 206.685(1). In that case, the out-of-state company need not pay the CIT or file a return, even though it would have nexus with Michigan.