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Contact Information:
Edward S. Kisscorni, CPA
290 Suncrest Court, SW
Grandville, MI 49418

Office: 616/233-0667
Cell: 616/443-6730
Fax: 616/233-0667




Monday, July 23 2012

Membership Interest is an Intangible Asset Not Eligible for the Investment Tax Credit


In Phillips Stevens Building Company, LLC v. Michigan Department of Treasury,  Michigan Tax Tribunal, No. 433192, June 27, 2012, the Tax Tribunal ruled the taxpayer could not claim an investment tax credit (ITC) carryforward against the Michigan Single Business Tax (SBT) for the years 2006 and 2007 because the sale and purchase of an intangible membership interest does not qualify for the ITC.


In 2005, a 27.7% membership interest in the taxpayer was sold, and, subsequently, a 43.2% membership interest was sold by the taxpayer's member to two living trusts. Pursuant to IRC 708, as a result of the sale of more than 50% of the total interest in the partnership, a "technical" termination occurred. A partnership that terminates under the sale or exchange rule is considered to contribute all of its assets to a new partnership and make a liquidating distribution of its interests in the new partnership. Therefore, the trusts contributed the taxpayer's property to the new partnership, and the partnership property was not purchased by the taxpayer due to the technical termination. The transaction that occurred was the sale and purchase of the taxpayer's membership interest, which as an intangible asset did not qualify for the ITC.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Friday, July 20 2012

Legislation Advocated by the MACPA Sent to the House


In a very significant development, a major piece of legislation originally developed by the Michigan Association of Certified Public Accountants (MACPA) has passed out of the Michigan Senate and has been sent to the House Tax Policy Committee.


The MACPA says the amendments are needed to eliminate ambiguities, problems and misinterpretations of the tax.  The four-year life of the MBT ended January 1, 2012 when it was replaced by Michigan's new corporate income tax. 


Others are saying:  Why amend a repealed tax? The MBT is far from gone and the items targeted in Senate Bill 1037 will affect returns that have been filed and are still being filed.  The Department of Treasury (Treasury) has four years to audit MBT returns.  Many of the ambiguities addresses in Senate Bill 1037 will undoubtedly become issues in the audits. 

On several issues, there is major disagreement with Treasury's interpretation of what can be deducted as a "purchase from other firms".  If Senate Bill 1037 doesn't become law, appeals and lawsuits are inevitable. 

The MACPA began an analysis of the MBT shortly after its 2007 passage and identified areas where the law was unclear or where it did not appear that Treasury's interpretation was consistent with the statute or its intent.  The group, which presented the issues first to the Granholm administration and then the Snyder administration, has seen a few items addressed, but the bulk still lingers. 

The issue with the widest implications has to do with the MBT deduction for materials and supplies; part of the MBT is a modified gross receipts tax based on a business' gross receipts minus purchases from other firms.  Under current law, those purchases include inventory, depreciable assets, and materials and supplies to the extent they are not included in inventory or assets.  But by Treasury's interpretation, a host of purchases are excluded. For example, office supplies bought by a service business and used at its headquarters would not be deductible because they do not fall under the prescribed connection with inventory or assets, Treasury says.  The Department of Treasury imposes a very rigid restriction on the scope of what would be deductible.  It goes against the commonly understood meaning that a material or supply is simply a tangible item that is purchased and listed as an expense on a company's books. 

Service businesses, because they don't produce goods, are affected the most by the issue. But, it affects all businesses to some degree, because all businesses will have some amount of materials and supplies that are related to their general or administrative activities, or overhead. 

The new legislation, which would be retroactive to the January 2008 start of the MBT, clarifies that materials and supplies are all tangible items consumed.  The Department of Treasury estimates the legislation would reduce state revenue by as much as $110 million a year and could add up to as much as $440 million over four years of tax returns. 

A number of businesses will file amended returns and seek refunds if the legislation passes, others may not see the financial impact of the materials and supplies change as substantial enough to do so.  The magnitude of refunds may not be as large as what Treasury estimates many businesses may have filed their returns consistent with the legislation's proposed language.  Thus, no refunds would be due. 

Following is a list of key provisions in Senate Bill 1037: 

1.      COD Income - Clarify the ability to exclude COD income and discharge of nonrecourse debt from the MGR tax base to avoid a "deemed receipt" where no actual receipt exists.

2.      Clarify Definition of "Officer" - Further define officer to include "major decision making duties and responsibilities" or by clarifying "with similar duties."

3.      Self-constructed Assets - Clarify that self constructed assets (including the cost of labor and services), were intended to be included in the definition of depreciable assets for modified gross receipts purposes. 

4.      Materials and Supplies - Clarify that "materials and supplies" has the plain meaning of tangible items consumed and not otherwise deducted as a component of purchases from other firms MGR deduction.

5.      Reasonable Return of Capital - Clarify the income tax treatment of a partner's self-employment income. For purposes of the deduction from business income a partner's self-employment income should be the amount reported as the partner's self-employment income on his or her K-1.  Further, the reference to excluding earnings that represent a reasonable return on capital should be eliminated from the statute because such amounts are not included in self-employment income.

6.      Income Base NOL Successorship - Clarify that former SBT policy allowing loss carry-forwards to survive corporate reorganizations also applies to the MBT.

7.      Clarify Ultimate Destination - Clarify the phrase "ultimate destination" in the sourcing rule for tangible personal property ensure temporary storage of goods does not constitute coming to rest.

8.      Credit Ordering - Clarify that Section 403 and 405 credits are claimed first before carryovers of former SBT credits.

9.      ITC Recapture - Establish "to extent used" requirement in MBT ITC recapture provision (which exists in SBT ITC recapture provision) to prevent double tax effect of recapturing a credit which was never utilized.

10.  Local Classification of Industrial Property - Clarify impact of local classification on industrial property tax credit by specifying that misclassifications do not control for purposes of the credit.

11.  Renaissance Zone Credit - Revise credit calculation to eliminate arbitrary limit based on prior SBT credit amount and give effect to intended elimination of all MBT liability on activity within the zone.

12.  Expand Intercompany Eliminations for a Unitary Business Group - Clarify that intercompany eliminations for a unitary business group filing a combined return include exemptions, deductions, subtractions and credits.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Thursday, July 19 2012

Public Act 232 Defines Property Occupied By A Public School Academy

Public Act 232 of 2012, effective June 29, 2012 exempts property occupied by a public school academy.  The property is exempt from Michigan property taxes levied for school operating purposes. "Property occupied by a public school academy" means property occupied by a public school academy, urban high school academy, or school of excellence that is used exclusively for educational purposes.



Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Wednesday, July 18 2012
Large Sales and Use Tax Payment Schedule Changed for 2014

In a Sales and Use Tax Information release dated July 6, 2012, the Michigan Department of Treasury has reminded taxpayers that beginning January 1, 2014, a retailer subject to accelerated electronic funds transfer (one with sales and use tax liabilities of $720,000 or more in the prior calendar year) must remit, by the 20th of the month, an amount equal to 75% of its liability in the immediately preceding month. Also due will be a reconciliation payment equal to the difference between the tax liability determined for the previous month and the amount of tax previously paid for that month.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Tuesday, July 17 2012

Property Taxes are a Personal Liability of the Transferor to Whom the Delinquent Taxes Were Originally Billed


Public Act 234 of 2012, effective June 29, 2012, provides that a person is liable for delinquent local Michigan property taxes that are owed on property that the person sold, transferred, or otherwise conveyed to an Indian tribe that is recognized by the United States, an enrolled member of a recognized tribe, a tribal corporation that is incorporated under the tribe's own laws or under federal law, or an unincorporated tribal entity that is owned exclusively by the tribe and/or its members, making the property exempt under federal law from forfeiture, foreclosure, and sale under the general property tax provisions for the delinquent taxes. Specifically, the taxes are a personal liability of the transferor to whom the delinquent taxes were originally billed. The transferor is subject to the collection of the delinquent taxes.

Posted by: Ed Kisscorni AT 11:05 am   |  Permalink   |  Email
Monday, July 16 2012

Board of Review Can Prospectively Uncap the Taxable Value to Correct an Error


In Ryzyi v. Township of Bagley, Michigan Court of Appeals, No. 295759, June 28, 2012, the Michigan Tax Tribunal correctly determined that the taxable values of taxpayers' single-family residence for property tax years 2005 through 2008 could not be retroactively uncapped because this case was controlled by the Michigan Supreme Court's decision in Michigan Properties, LLC v. Meridian Township, Nos. 143085, 143086, 143087, and 143281 (2012), which held that taxable value could not be retroactively uncapped, but the March board of review did possess the power to prospectively uncap the taxable value to correct an error in failing to previously uncap the taxable value.  Therefore, the Michigan Court of Appeals affirmed the determination by the Tax Tribunal on remand of the taxable values for tax years 2005 through 2008.  However, the appellate court ruled that the Tax Tribunal erred in concluding that the March board of review in 2009 could not uncap the taxable value beginning in 2009.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Friday, July 13 2012

Exemption Must Assist in the Creation of Jobs, Investment, or Other Economic Development Benefits


Public Act 222 of 2012, effective June 28, 2012, provides that a land bank fast track authority is allowed to exempt eligible tax reverted property from the Michigan eligible tax reverted property specific tax if the exemption would assist in the creation of jobs, investment, or other economic development benefits in the city, village, or township in which the eligible tax reverted property is located. Eligible tax reverted property that is exempt from the specific tax is subject to the collection of taxes under the general property tax provisions.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Thursday, July 12 2012

Interest on Property Tax Judgments to Accrue at One Percentage Point Above the Adjusted Prime Rate


Public Act 220 of 2012, effective June 28, 2012, amends the Tax Tribunal Act, beginning July 1, 2012, to provide for interest on property tax judgments of the Michigan Tax Tribunal to accrue at one percentage point above the adjusted prime rate, instead of the rate currently prescribed.


"Adjusted prime rate" means the average predominant prime rate quoted by at least three commercial banks to large businesses, as determined by the Department of Treasury. The adjusted prime rate is based on the average prime rate charged by at least three commercial banks during the six-month periods ending on March 31 and September 30.  One percentage point is added to the adjusted prime rate, and the resulting sum is divided by 12 to establish the current monthly interest rate.  The resulting current monthly interest rate that is based on the six-month period ending March 31 becomes effective on the following July 1, and the resulting current monthly interest rate that is based on the six-month period ending September 30 becomes effective on January 1 of the following year.


Currently, the Tax Tribunal interest rate is calculated once a year rather than monthly.  The interest rate is set each year based on the average rate of the 91-day treasury bills in the immediately preceding state fiscal year, plus 1%, as certified by the Department of Treasury.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Wednesday, July 11 2012

Property Owner Never Filed a Claim for Principal Residence Exemption

In Mikelonis v. Department of Treasury, Michigan Court of Appeals, No. 304054, June 26, 2012, the Court of Appeals ruled the Michigan Tax Tribunal misinterpreted the Department of Treasury's authority under the property tax principal residence exemption statute by allowing the Department of Treasury to use the three-year clawback provision to collect taxes from a taxpayer for years 2005 through 2008 because the taxpayer never filed a claim for a principal residence exemption for her property.  The three-year clawback provision established procedures for the department to evaluate the validity of a taxpayer's claim for the exemption and to deny the claim if the department determined that the property was not the principal residence of the owner claiming the exemption.  The provision references the word "claim," and a claim for an exemption was not properly filed unless the owner submitted an affidavit with the taxing unit.  In this case, the taxpayer did not file an affidavit with the township, nor was it disputed that she did not claim the exemption.  Therefore, it was not possible for the department to determine the validity of, or to deny, an exemption that was never claimed.





Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Tuesday, July 10 2012

Yacht Brought Into Michigan Within 90 Days of Purchase


In Podmajersky v. Department of Treasury,  Michigan Tax Tribunal, No. 410949, June 5, 2012, an assessment for Michigan use tax on a yacht was upheld because the taxpayer first brought the yacht to Michigan within 90 days of its purchase, and, therefore, the taxpayer could not rebut the presumption of taxability. The yacht was first brought to Michigan approximately 38 days after its purchase, and it rarely left the state over the next few years. Though the taxpayer initially intended to transport the yacht to Chicago, it became necessary to obtain repairs in Michigan. Though the taxpayer claimed that it was eligible for the presumption of exemption for property brought into the state by nonresidents more than 90 days after its purchase, the facts did not support this presumption. The yacht's first entry into the state occurred approximately 38 days after its purchase, and though it subsequently traveled to Chicago for two weeks and returned to Michigan more than 90 days after its acquisition, the first entry was controlling.


Posted by: Ed Kisscorni AT 12:51 pm   |  Permalink   |  Email
Monday, July 09 2012

Changes Made to Tobacco Products Provisions


Public Act 188 of 2012, effective June 20, 2012, makes changes to provisions of the Michigan tobacco products tax. The tobacco products tax is a tax imposed on the consumer of tobacco products at the time of purchase.


The definition of "manufacturer" has been amended to include a person who operates or who permits any other person to operate a cigarette-making machine in Michigan for the purpose of producing, filling, rolling, dispensing, or otherwise generating cigarettes. A person who is a manufacturer constitutes a nonparticipating manufacturer in the master settlement agreement. A person operating or otherwise using a machine or other mechanical device, other than a cigarette-making machine, to produce, fill, roll, dispense, or otherwise generate cigarettes is not considered a manufacturer so long as the cigarettes are produced or otherwise generated in that person's dwelling and for his or her self-consumption.


A "cigarette making machine" is any machine or other mechanical device that meets all of the following criteria:

       -it is capable of being loaded with loose tobacco, cigarette tubes or papers, and any other components related to the production of cigarettes, including filters;

       -it is designed to automatically or mechanically produce, roll, fill, dispense, or otherwise generate cigarettes;

       -it is commercial-grade or otherwise designed or suitable for commercial use; and

       -it is designed to be powered or otherwise operated by a main or primary power source other than human power.


The legislation also does the following:

       -it requires the Department of Treasury to issue a request for proposal to acquire and use digital stamps that contain a unique nonrepeating code that can be read by a device that identifies the taxed product and also contains other security and enforcement features as determined by the department;

       -it allows stamping agents to retain 0.5% of the tax due on cigarettes as compensation for equipment and technology upgrades that are necessitated by digital stamps;

       -it allows stamping agents to retain from monthly remittances, for 18 months, 5.55% of direct costs incurred for the initial purchase of eligible equipment;

       -it allows licensees to retain an amount equal to 1.5% of the total amount of the tax due on sales of untaxed cigarettes to Indian tribes; and

       -it requires the Michigan Department of State Police to initiate inquiries or otherwise obtain data from the Treasury Department in order to support its enforcement activities.

"Eligible equipment" means a cigarette tax stamping machine that meets all of the following conditions:

       -it was purchased by a stamping agent who was licensed as a stamping agent as of December 31, 2011;

       -it enables the stamping agent to affix digital stamps to individual packs of cigarettes as required by law;

                       -it was purchased for the primary purpose of permitting the stamping agent to affix digital stamps to individual packs of cigarettes to be sold in Michigan after the implementation of the use of digital stamps.
Posted by: Ed Kisscorni AT 01:47 pm   |  Permalink   |  Email
Saturday, July 07 2012

Michigan Legislature Accelerates Individual Income Tax Rate Reduction

Individual Income Tax Personal Exemption Amount Increased


Public Act 223 of 2012, effective June 29, 2012, will accelerate a scheduled personal income tax rate reduction.  The rate will be reduced from 4.35% to 4.25% on October 1, 2012, instead of January 1, 2013.


Public Act 224 of 2012, effective June 29, 2012, will increase the Michigan personal income tax exemption amount to $3,950 from $3,700, beginning October 1, 2012.  The amount for the 2012 tax year will be annualized.  Beginning January 1, 2014, the exemption will be $4,000. The exemption will continue to be multiplied by the number of personal or dependency exemptions allowed on the taxpayer's federal income tax return.



Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Friday, July 06 2012

Highest and Best Use Involved Its Current Use


In Palace Sports & Entertainment, Inc. v. City of Auburn Hills, Michigan Court of Appeals, Nos. 294051 and 294185, June 21, 2012, an appeal involving the local real property tax assessments of a company's property for the 2003, 2004, 2005, and 2006 tax years, the Michigan Court of Appeals remanded the case to the Tax Tribunal because the tribunal neglected to increase the property's taxable values beginning in 2004 and, therefore, it entered incorrect taxable values for the 2005 and 2006 tax years.  The court also found that ample evidence reflected that the property's highest and best use involved its current use as an arena that hosted a professional basketball team, other sports teams, and entertainment events, and that the property received significant income from its lease agreement with the basketball team. However, none of the city's complaints that the tribunal made inadequate findings in other respects were supported by the evidence. Moreover, the court concluded that the city's contention that the tribunal in any respect improperly relied on the value of publicly owned arenas to value the company's property, a privately owned arena, lacked merit.

Posted by: Ed Kisscorni AT 01:46 pm   |  Permalink   |  Email
Thursday, July 05 2012

Supreme Court Permits Board of Review to Adjust Immediately Preceding Year Assessment


In Michigan Properties, L.L.C. v. Meridian Township,  Michigan Supreme Court, Nos. 143085, 143086, 143087, and 143281, June 14, 2012, an appeal of two cases involving the proper interpretation of the general property tax provisions, the Michigan Supreme Court held that, in one case, the failure to adjust the taxable values in the year immediately following a transfer of ownership of property produced erroneous taxable values because the taxable values were not in compliance with the general property tax provisions.  Further, the general property tax provisions did not preclude a March board of review from correcting an erroneous taxable value that resulted from the failure of an assessor to adjust a property's taxable value in the year immediately following its transfer. Accordingly, the court held that a March board of review may adjust the erroneous taxable value in a subsequent year in order to bring the current taxable value into compliance with the general property tax provisions.


In the second appeal, the court addressed the issue of whether the Tax Tribunal had the authority to reduce an unconstitutional increase in the taxable value of property when the erroneous taxable value was not challenged in the year of the increase. The court held that the tribunal did have the authority to reduce an unconstitutional previous increase in taxable value for purposes of adjusting a taxable value that was timely challenged in a subsequent year. Once the tribunal's jurisdiction is properly invoked, the tribunal possesses the same powers and duties as those assigned to a March board of review under the general property tax provisions, including the duty to adjust erroneous taxable values to bring the current tax rolls into compliance with the general property tax provisions.

Posted by: Ed Kisscorni AT 01:45 pm   |  Permalink   |  Email
Wednesday, July 04 2012

Exemptions From Withholding Requirements for Flow-Through Entities Added


Public Act 217 of 2012, Senate Bill 1104, effective June 28, 2012 revises the Michigan personal income withholding tax requirements for flow-through entities adding exemptions from withholding and clarify filing requirements.


Exemption Certificate

A corporation may give a flow-through entity an exemption certificate. In this case, the flow-through entity is not required to withhold tax on the distributive share of that corporation's business income, provided that these conditions are met:


       the exemption certificate is completed and certifies that the corporation will file corporate income tax returns, pay the tax on the distributive share of business income received from any flow-through entity in which the corporation is a member or in which the corporation has an ownership or beneficial interest, and submit to Michigan's taxing jurisdiction;

       the corporation must file the exemption certificate with the Department of Treasury and include a copy to the flow-through entity;

       the flow-through entity must attach a copy of the exemption certificate to its annual reconciliation return; and

       the corporation and the flow-through entity must keep a copy of the exemption certificate.


The department may revoke the election to use an exemption certificate if the corporation or flow-through entity is not abiding by the certificate's terms.


Other Withholding Exemptions

Flow-through entities are not required to withhold for a member that voluntarily elects to file a return and pay the tax. Also, there is no withholding required for a person who disburses annuity payments under the terms of a qualified charitable gift annuity.


Filing Requirements

The flow-through entity withholding quarterly payments are due April 15, July 15, October 15, and January 15. Previously, the quarterly payments were due April 15, June 15, September 15, and January 15. This change conforms the statute to the department's instructions for Form 4917, Flow-Through Withholding Quarterly Return.


Finally, to calculate the $200,000 withholding threshold for flow-through entities, taxpayers should apportion business income to Michigan with the flow-through entity's sales factor. The sales factor's numerator is total sales in Michigan during the tax year, and the sales factor's denominator is total sales everywhere during the tax year.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Tuesday, July 03 2012

Several Checkoff Designations Have Been Removed


Public Act 151 of 2012, effective May 30, 2012, amends the provisions for the Michigan personal income tax checkoff designations.  Several checkoff designations have been removed, including those for prostate cancer research, Amanda's fund for breast cancer prevention, Michigan housing and community development, law enforcement officers memorial monument, renewable fuels, Michigan council for the arts, foster care, children's miracle network, and children's hospital of Michigan.  The separate contributions schedule can include up to 10 different designations per tax year.  Previously, a maximum limit was not in place.  A contribution designation must be removed if it fails to raise $50,000 (previously, $100,000) in any tax year for two consecutive tax years. Finally, the law also provides a list of things that the Legislature must consider when granting approval to add other contribution designations.

Posted by: Ed kisscorni AT 01:43 pm   |  Permalink   |  Email
Monday, July 02 2012

Michigan Statute of Limitations is Suspended During Federal Audit, Appeal or refund Claim


In Krueger v. Department of Treasury,  Michigan Court of Appeals, No. 302246, May 29, 2012, the four-year statute of limitations for claiming a refund of Michigan personal income taxes was tolled for the period between the time that the taxpayers filed their claim for a federal refund and the IRS granted it, and also for an additional year, pursuant to the applicable statute's tolling provision.


The taxpayers were entitled to claim an additional loss from the discharge of indebtedness by an S corporation. The appellate court adopted the analysis provided in Fegert v. Department of Treasury,  Ct. App., docket no. 270236, Dec. 19, 2006, which applied the rules of statutory construction to determine that the four-year limitation period must be suspended pending a final determination of tax and for one year after that period (M.C.L. 205.27a).  Examining the applicable dates, the taxpayers' state refund claims were not untimely.


Another statute (M.C.L. 206.325(2)) provided that an amended return must be filed within 120 days after the final alternation, modification, recomputation or determination of a deficiency.  The department argued that under this statute a failure to file an amended return within 120 days resulted in the loss of a right of the claim, even if the applicable statute of limitations was still open.  The court disagreed.  The standard statute of limitations law did not limit the statute of limitations in these types of cases.  Thus, the 120-day rule was merely a filing requirement and not a separate and superceding statute of limitations requirement.

Posted by: Ed Kisscorni AT 01:41 pm   |  Permalink   |  Email
Sunday, July 01 2012

Purchases from A Michigan Vendor Not Taxable to the Michigan Purchaser


In Andrie, Inc. v. Department of Treasury, Michigan Court of Appeals, No. 301615, April 26, 2012, a Michigan Department of Treasury Motion for Reconsideration was denied making the Published opinion the law of the land pending an appeal to the Michigan Supreme Court.


The Department of Treasury argued in Andrie that the Court of Claims erred when it failed to impose the Michigan use tax on purchases of tangible personal property from a Michigan vendor.  The seller was required to be licensed under the General Sales Tax Act.  The property was purchased in Michigan. The Court of Appeals disagreed.


Here, plaintiff purchased certain items from Michigan retailers. After plaintiff failed to prove that any sales tax was paid on the purchases, defendant assessed use tax on those items.  The trial court determined that since they were sold within the state, the transaction was only subject to sales tax.


The General Sales Tax Act, MCL 205.51 et seq., imposes a tax on retail sales of "tangible personal property" within the state of Michigan. World Book v Dep't of Treasury, 459 Mich 403, 407-408; 590 NW2d 293 (1999).  The sales tax is imposed on the retailer for "the privilege of engaging in the business of making retail sales." Combustion Eng'g, 216 Mich App at 467.  The retailer is not obligated to include the sales tax in the property's selling price, although the retailer has this option. Id. Thus, while the sales tax is "ordinarily passed on to the purchaser at retail, the retailer is obligated to pay the tax due and bears the direct legal incidence of the General Sales Tax Act." Id.  Additionally, "the use tax exempts from taxation property on which a sales tax is paid." Id. at 468, citing MCL 205.94(a).


Our Supreme Court and this Court have held on multiple occasions that the mere fact that a transaction is subject to sales tax necessarily means that the transaction is not subject to use tax.  See, e.g., Elias Bros Restaurants v Dep't of Treasury, 452 Mich 144, 146 n 1; 549 NW2d 837 (1996) ("The Use Tax Act, as amended, is an ?excise' or ?privilege' tax that covers transactions not subject to the general sales tax."); Fisher & Co v Dep't of Treasury, 282 Mich App 207, 209; 769 NW2d 740 (2009) ("The Use Tax Act is complementary to the Michigan General Sales Tax Act . . . and is designed to cover those transactions not subject to the sales tax.").


In the present case, there is no dispute that the transactions in question involved Michigan retailers and transfers of title within the state of Michigan.  Because the retailer has the ultimate responsibility to pay any sales tax, it is erroneous to place a duty on a purchaser to show that the sales tax was indeed paid to the state. Combustion Eng'g, 216 Mich App at 469. Thus, the transactions are not subject to use tax, and the trial court properly held in favor of plaintiff on this issue.


Any Michigan taxpayer currently undergoing a use tax audit, appealing at informal conference, the Tax Tribunal or the courts should be aware of the published opinion and their cases should be settled accordingly.


Posted by: Ed Kisscorni AT 01:21 pm   |  Permalink   |  Email


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