The Michigan Single Business Tax (SBT) is a 1.9 percent value-added tax imposed
on all persons engaged in business activity in Michigan. The SBT is scheduled
to be repealed for tax years beginning after December 31, 2009.
Who does it apply to?
The Michigan SBT applies to a broad group of potential taxpayers
including individuals, banks, partnerships, limited liability
companies, estates, trusts and corporations. Pass-through
entity principles are disregarded for purposes of this tax.
Foreign persons exempt from US federal income tax are not
exempt from the Michigan SBT.
What
is “business activity” or what are the
nexus standards?
Business activity is broadly defined and includes the sale
or rental of real or personal property and the performance
of fee-based services. Taxpayers doing business both within
and outside Michigan are entitled to apportion their tax
base. P.L. 86-272 protection does not apply for purposes
of this tax. Therefore, if a corporation is merely soliciting
sales within Michigan on a regular and systematic basis,
it will be subject to the tax.
How is the tax base computed?
The base for the SBT is generally made up of three components:
labour, capital and profit. The labour component is comprised
of employee compensation and employee benefits. The capital
component of the base is measured using depreciation, interest,
dividends and royalties paid by the taxpayer. The profit
component of the base starts with federal taxable income,
which is then adjusted for various items.
Taxpayers may choose adjusted gross receipts as an alternate
method of computing the base subject to the SBT. Under this
method, 50 percent of the computed adjusted gross receipts
would be subject to the SBT.
Michigan also provides for various credits against the tax
including investment and small business credits.
What are the return requirements?
Any
person engaged in business activity in Michigan that
has allocated or apportioned gross receipts in excess
of $350,000 is required to file a return. The return
is due the last day of the fourth month after the end
of the taxpayer’s fiscal year. For most taxpayers,
the return is required to be electronically filed. A
member of a commonly controlled group of corporations
may have to participate in a combined return filing.
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