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7. How are the sales of services and intangible products determined?

Sales of other than tangible personal property (e.g., services, trademarks, patents, and royalties) are in Michigan if:

(1) The business activity is performed in Michigan; or

(2) The business activity is performed both in Michigan and in another state(s) and a greater proportion of the business activity is performed in Michigan, based on costs of performance.

When income from the sale of intangible products is subject to apportionment, Michigan “sales” and total “sales” are determined using the cost of performance method. Each sale is viewed separately on a job-by-job or contract-by-contract basis. If the majority of the cost to perform a job or contract occurred in Michigan, then that specific intangible sale would be considered a Michigan sale.  Michigan sales are reported in the numerator and total sales everywhere are reported in the denominator on the Michigan Schedule of Apportionment (Form MI-1040H).