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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

Blog: www.EdKisscorni.com/Blog1
Email: Ed@EdKisscorni.com
 



 



 

 Blog 
Wednesday, June 25 2014

Purchasers of Property from Licensed Michigan Vendors Cannot Assume Sales Tax Paid

Following is a synopsis provided by the Supreme Court.  The synopsis is followed by the conclusion paragraph.  In the next few days the entire opinion as well as the dissenting opinion will be studied.

ANDRIE INC v DEPARTMENT OF TREASURY

Docket No. 145557.  Argued November 6, 2013 (Calendar No. 1).  Decided, June 23, 2014.

Andrie Inc. brought an action in the Court of Claims, seeking a refund of use taxes it had paid under protest for the years 1999 through 2006 after an audit by the Department of Treasury determined that Andrie had understated the taxes it owed for that period under the Use Tax Act (UTA), MCL 205.91 et seq., by $398,755.  To arrive at this amount, the department’s auditor had reviewed Andrie’s purchases of fuel and other tangible items, some of which Andrie had purchased in Michigan from Michigan sellers, for use in its business of shipping asphalt and other products across the Great Lakes.  The auditor requested that Andrie provide proof that sales tax due under the General Sales Tax Act (GTSA), MCL 205.51 et seq., was paid, either by Andrie or the retail seller, on items that were determined to be subject to use tax, applying the exemption in MCL 205.94(1)(a) if Andrie did so and assessing Andrie use tax for those items if not.  The department ultimately imposed use tax on fuel and supply purchases Andrie made in Michigan, from Michigan-based retail sellers, if the invoice did not list sales tax as a separate line item and establish that sales tax had been paid.  Andrie filed suit in the Court of Claims, arguing that it was entitled to rely on an alleged requirement of the GSTA that the sales tax be included in the price of the goods purchased regardless of whether the sales tax was separately stated.  The Court of Claims, Paula J. M. Manderfield, J., held that Andrie was entitled to a partial refund of use tax for those purchases that were subject to sales tax, reasoning that because Andrie was entitled to a presumption that sales tax was included in the price of goods purchased, Andrie was not required to provide proof that the retail sellers had remitted sales tax to the department.  The department appealed.  The Court of Appeals, FITZGERALD, P.J., and WILDER and MURRAY, JJ., affirmed on this issue, holding that because the retailer was responsible for paying sales tax, it was erroneous to place a duty on the purchaser to show that the sales tax had been paid.  296 Mich App 355 (2012).  The Supreme Court granted the department’s motion to stay the precedential effect of the Court of Appeals opinion and also granted the department’s application for leave to appeal.  493 Mich 900 (2012).

In an opinion by Chief Justice YOUNG, joined by Justices MARKMAN, KELLY, MCCORMACK, and VIVIANO, the Supreme Court held:

            In order to be entitled to the exemption from the use tax found in MCL 205.94(1)(a), one must show that the sales tax was both due and paid on the sale of that tangible personal property.  The burden of demonstrating entitlement to the use tax exemption rested on the taxpayer seeking it.  Because Andrie did not submit any evidence that sales tax had been paid, Andrie was not entitled to the use tax exemption.  The Court of Appeals judgment was reversed to the extent it held that the use tax could never be levied on property if the purchase of that property was subject to sales tax.

  1. The use and sales taxes are complementary and supplementary, and their potential applications are not mutually exclusive.  The UTA imposes a 6% tax on the use, storage, and consumption of all tangible personal property in Michigan, while the GSTA imposes a 6% tax on the sale of all tangible personal property in Michigan.  Absent an exception, tangible personal property sold and used in Michigan is subject to both use and sales tax.  The text of each taxing statute indicates that they may be levied on the same property, as long as the respective predicate taxable events have taken place.  The legal responsibility for the use tax falls solely on the consumer, while the legal responsibility for the sales tax falls on the retail seller.  The retail seller is authorized to pass the economic burden of the sales tax by collecting the tax at the point of sale from the consumer, but whether the consumer remits sales tax to the retail seller or the seller pays the sales tax from another source, the seller is responsible for remitting the sales tax to the department.  Under MCL 205.94(1)(a), property sold in Michigan on which tax was paid under the GSTA is exempt from use tax if the tax was due and paid on the retail sale to a consumer.  This provision unambiguously requires payment of the sales tax before the exemption applies.  Therefore, the department properly assessed use tax on those in-state purchases for which Andrie failed to submit evidence that sales tax was actually paid at the time of sale. 
  2. Taxpayers are not entitled to a presumption that sales tax was included in the prices paid to retailers when their receipts to do not list sales tax as a separate line item.  A taxpayer is entitled to the use tax exemption in MCL 205.94(1)(a) when it proves that it paid sales tax to the retail seller, even if the retail seller, who bears the legal responsibility for payment of the sales tax, did not remit the tax to the department.  However, a purchaser was not entitled to a presumption that it paid the sales tax at the point of sale.  The burden of proving entitlement to an exemption rests on the party asserting the right to the exemption, and a presumption of sales tax payment would shift this burden to the department.  Furthermore, a presumption that sales tax is always included in an item’s purchase price would effectively entitle a purchaser to the exemption whenever sales tax is merely due without having to satisfy its burden to show the tax was paid, which would render superfluous the requirement in MCL 205.94(1)(a) that sales tax be both due and paid.  Because Andrie submitted no evidence that it paid sales tax to the retail seller, or that the seller remitted sales tax to the department on that sale, it did not meet its burden, and it was not entitled to the exemption.  
  3. MCL 205.73(1), which states that a retail seller may not state or imply that an item’s purchase price does not include sales tax, did not relieve Andrie of its duty to prove that sales tax was paid.  MCL 205.73(1), as an advertising statute, was only a restriction on retail sellers’ representations to the public; it did not purport to define the actual components of an item’s purchase price.  

                         Court of Appeals judgment reversed in part.

                         Justice CAVANAGH concurred in the result only.

Justice ZAHRA, dissenting, stated that because MCL 205.52(1) places the burden of paying sales tax only on retailers and not on consumers, the Court should have afforded consumers a presumption that retailers had actually paid sales tax if it was evident that sales tax was due under the statute.  He would have permitted the state to rebut this presumption by producing evidence that the tax was not paid or that the consumer transacted with an erroneous belief that, if true, would have entitled the transaction to be exempted from sales tax.  Once the presumption was rebutted, the burden would return to the consumer to present evidence that the sales tax was actually paid or to establish that the consumer was properly entitled to some other exemption.

CONCLUSION

In order to be entitled to the exemption from the use tax found in MCL 205.94(1)(a), one must show that the sales tax was both due and paid on the sale of that tangible personal property.  The burden of demonstrating entitlement to this tax exemption rests on the taxpayer seeking the exemption.  Accordingly, because Andrie has not submitted any evidence that sales tax was paid, Andrie has not carried its burden and is not entitled to the exemption delineated in MCL 205.94(1)(a).  We reverse that portion of the Court of Appeals’ judgment which held that the use tax can never be levied on property if the purchase of that property was subject to sales tax.

                                                                                                 

Posted by: Ed Kisscorni AT 10:00 am   |  Permalink   |  Email
Friday, June 20 2014

Amendments to the Revenue Act (1941 PA 122)

On Thursday, January 30, 2014, the Governor signed what is now Public Act 3 of 2014.  (2014 PA 3)  The legislation amended the Revenue Act making monumental changes effecting the administration of Michigan taxes.  Changes were made to the time limit to complete an audit and to issue a final assessment, successor liability, officer liability which is now responsible person liability, statute of limitations and refund of tax overpayments.

This is the fifth of five Blogs discussing 2014 PA 3 with changes noted in red.  

Refund of Tax Overpayments

(2) A taxpayer who paid a tax that the taxpayer claims is not due may petition the department for refund of the amount paid within the time period specified as the statute of limitations in section 27a. If a tax return reflects an overpayment or credits in excess of the tax, the declaration of that fact on the return constitutes a claim for refund. If the department agrees the claim is valid, the amount of overpayment, penalties, and interest shall be first applied to any known liability as provided in section 30a, and the excess, if any, shall be refunded to the taxpayer or credited, at the taxpayer’s request, against any current or subsequent tax liability. Claims for refunds, other than those made under part 1 of the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532, that have not been approved, denied, or adjusted within 1 year of the date received may be treated as denied at the election of the taxpayer, and may be appealed by the taxpayer in accordance with section 22.  [MCL 205.30(2)]

2014 PA 3 will be discussed in depth at the Michigan Sales and Use Tax seminars scheduled for Livonia and Traverse City.

Register on line at the MACPA website

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Thursday, June 19 2014

Amendments to the Revenue Act (1941 PA 122)

On Thursday, January 30, 2014, the Governor signed what is now Public Act 3 of 2014.  (2014 PA 3)  The legislation amended the Revenue Act making monumental changes effecting the administration of Michigan taxes.  Changes were made to the time limit to complete an audit and to issue a final assessment, successor liability, officer liability which is now responsible person liability, statute of limitations and refund of tax overpayments.

This is the fourth of five Blogs discussing 2014 PA 3 with changes noted in red.  

Responsible Person Liability for Tax (Formerly Officer Liability)

(5) If a business liable for taxes administered under this act fails, for any reason after assessment, to file the required returns or to pay the tax due, any of its officers, members, managers of a manager-managed limited liability company, or partners who the department determines, based on either an audit or an investigation, is a responsible person is personally liable for the failure for the taxes described in subsection (14). The dissolution of a business does not discharge a responsible person’s liability for a prior failure of the business to file a return or pay the tax due. The sum due for a liability may be assessed and collected under the related sections of this act. The department shall provide a responsible person assessed under this section with notice of any amount collected by the department from any other responsible person determined to be liable under this subsection or purchaser determined to be liable under subsection (1) that is attributable to the assessment. The department shall not assess a responsible person under this section more than 4 years after the date of the assessment issued to the business. A responsible person may challenge the validity of an assessment to the same extent that the business could have challenged that assessment under sections 21 and 22 when originally issued. The department has the burden to first produce prima facie evidence as described in subsection (15) or establish a prima facie case that the person is the responsible person under this subsection through establishment of all elements of a responsible person as defined in subsection (15). In a separate proceeding before the circuit court, a responsible person found to be liable for the assessment under this section may recover from other responsible persons an amount equal to the assessment or portion of the assessment based on that person’s proportionate liability for the assessment as determined in that proceeding. Before assessing a responsible person as liable under this subsection for the tax assessed to the business, the department shall first assess a purchaser or succeeding purchaser of the business personally liable under subsection (1) if the department has information that clearly identifies a purchaser or succeeding purchaser under subsection (1) and establishes that the assessment of the purchaser or succeeding purchaser would permit the department to collect the entire amount of the tax assessment of the business. The department may assess a responsible person under this subsection notwithstanding the liability of a purchaser or succeeding purchaser under subsection (1) if the purchaser or succeeding purchaser fails to pay the assessment.  [MCL 205.27a(5)]

Subsection (5) [MCL 205.27a(5)] applies to all assessments issued to responsible persons for the following taxes administered under the Revenue Act.  [MCL 205.27a(14)]

(i) Taxes levied under the general sales tax act, 1933 PA 167, MCL 205.51 to 205.78.

(ii) Taxes levied under the use tax act, 1937 PA 94, MCL 205.91 to 205.111, that are required to be collected or were collected from or on behalf of a third person for remittance to the state.

(iii) Taxes levied under the tobacco products tax act, 1993 PA 327, MCL 205.421 to 205.436.

(iv) Taxes levied under the motor fuel tax act, 2000 PA 403, MCL 207.1001 to 207.1170.

(v) Taxes levied under the motor carrier fuel tax act, 1980 PA 119, MCL 207.211 to 207.234.

(vi) Withholding and remittance of income taxes levied under the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.713.

(vii) Any other tax administered under this act that a person is required to collect from or on behalf of a third person, to truthfully account for and to pay over to this state.

(6) Notwithstanding any other provision of this act, upon request of a responsible person who was issued an intent to assess by the department under section 21 for liability under subsection (5), the department shall disclose any documents considered in the department’s audit or investigation in determining that the person is a responsible person and is personally liable for the assessment and any other documents that the tribunal or court determines are necessary for a fair adjudication of a person’s liability under subsection (5).  [MCL 205.27a(6)]

Definitions Applicable to Responsible Person Provisions  [MCL 205.27a(15)]

(a) “Business” means a corporation, limited liability company, limited liability partnership, partnership, or limited partnership.

(b) “Responsible person” means an officer, member, manager of a manager-managed limited liability company, or partner for the business who controlled, supervised, or was responsible for the filing of returns or payment of any of the taxes described in subsection (14) during the time period of default and who, during the time period of default, willfully failed to file a return or pay the tax due for any of the taxes described in subsection (14). The signature, including electronic signature, of any officer, member, manager of a manager-managed limited liability company, or partner on returns or negotiable instruments submitted in payment of taxes of the business during the time period of default, is prima facie evidence that the person is a responsible person. A signature, including electronic signature, on a return or negotiable instrument submitted in payment of taxes after the time period of default alone is not prima facie evidence that the person is a responsible person for the time period of default but may be considered along with other evidence to make a prima facie case that the person is a responsible person. With respect to a return or negotiable instrument submitted in payment of taxes before the time period of default, the signature, including electronic signature, on that document along with evidence, other than that document, sufficient to demonstrate that the signatory was an officer, member, manager of a manager-managed limited liability company, or partner during the time period of default is prima facie evidence that the person is a responsible person.

(c) “Time period of default” means the tax period for which the business failed to file the return or pay the tax due under subsection (5) and through the later of the date set for the filing of the tax return or making the required payment.

(d) “Willful” or “willfully” means the person knew or had reason to know of the obligation to file a return or pay the tax, but intentionally or recklessly failed to file the return or pay the tax.

2014 PA 3 will be discussed in depth at the Michigan Sales and Use Tax seminars scheduled for Livonia and Traverse City.

Register on line at the MACPA website

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, June 18 2014

Amendments to the Revenue Act (1941 PA 122)

On Thursday, January 30, 2014, the Governor signed what is now Public Act 3 of 2014.  (2014 PA 3)  The legislation amended the Revenue Act making monumental changes effecting the administration of Michigan taxes.  Changes were made to the time limit to complete an audit and to issue a final assessment, successor liability, officer liability which is now responsible person liability, statute of limitations and refund of tax overpayments.

This is the third of five Blogs discussing 2014 PA 3 with changes noted in red.   

Statute of Limitations

(2) A deficiency, interest, or penalty shall not be assessed after the expiration of 4 years after the date set for the filing of the required return or after the date the return was filed, whichever is later. The taxpayer shall not claim a refund of any amount paid to the department after the expiration of 4 years after the date set for the filing of the original return. A person who has failed to file a return is liable for all taxes due for the entire period for which the person would be subject to the taxes. If a person subject to tax fraudulently conceals any liability for the tax or a part of the tax, or fails to notify the department of any alteration in or modification of federal tax liability, the department, within 2 years after discovery of the fraud or the failure to notify, shall assess the tax with penalties and interest as provided by this act, computed from the date on which the tax liability originally accrued. The tax, penalties, and interest are due and payable after notice and hearing as provided by this act.

(3) The statute of limitations shall be extended for the following if the period exceeds that described in subsection (2):

(a) The period pending a final determination of tax through audit, conference, hearing, and litigation of liability for federal income tax and for 1 year after that period.

(b) The period for which the taxpayer and the state treasurer have consented to in writing that the period be extended.

(c) The period described in section 21(6) and (7) or pending the completion of an appeal of a final assessment.

(d) A period of 90 days after a decision and order from an informal conference, or a court order that finally resolves an appeal of a decision of the department in a case in which a final assessment was not issued prior to appeal.

(4) The statute of limitations is extended only as to those items that were the subject of the audit, conference, hearing, or litigation for federal income tax or a tax administered by the department. As used in this subsection, “items that were the subject of the audit” means items that share a common characteristic that were examined by an auditor even if there was no adjustment to the tax as a result of the examination. Items that share a common characteristic include items that are reported on the same line on a tax return or items that are grouped by ledger, account, or record or by class or type of asset, liability, income, or expense.

2014 PA 3 will be discussed in depth at the Michigan Sales and Use Tax seminars scheduled for Livonia and Traverse City.

Register on line at the MACPA website

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, June 17 2014

Amendments to the Revenue Act (1941 PA 122)

On Thursday, January 30, 2014, the Governor signed what is now Public Act 3 of 2014.  (2014 PA 3)  The legislation amended the Revenue Act making monumental changes effecting the administration of Michigan taxes.  Changes were made to the time limit to complete an audit and to issue a final assessment, successor liability, officer liability which is now responsible person liability, statute of limitations and refund of tax overpayments.

This is the second of five Blogs discussing 2014 PA 3 with changes noted in red. 

Successor Liability

Sec. 27a. (1) If a person liable for a tax administered under this act sells out his or her business or its stock of goods or quits the business, the person shall make a final return within 15 days after the date of selling or quitting the business. The purchaser or succeeding purchasers, if any, who purchase a going or closed business or its stock of goods shall escrow sufficient money to cover the amount of taxes, interest, and penalties as may be due and unpaid until the former owner produces a receipt from the state treasurer or the state treasurer’s designated representative showing that the taxes due are paid, or a certificate stating that taxes are not due. Upon the owner’s written waiver of confidentiality, the department shall, within 60 days of receipt of the request, release to a purchaser a business’s known or estimated tax liability for the purposes of establishing an escrow account for the payment of taxes. The department may estimate tax liability based on prior returns and payments. If the department believes that a return made or payment does not supply sufficient information for an accurate determination, the department may make an estimate based on other available information. If the purchaser or succeeding purchasers of a business or its stock of goods fail to comply with the escrow requirements of this subsection, the purchaser is personally liable for the payment of the taxes, interest, and penalties accrued and unpaid by the business of the former owner. If the purchaser or succeeding purchasers of a business or its stock of goods comply with the escrow requirements of this subsection, the purchaser shall not be held liable for more than the known or estimated tax liability disclosed by the department and held in escrow. However, the purchaser shall not be held liable if the department has failed to provide the information requested within 60 days. For a purchaser or succeeding purchaser that has not complied with the escrow requirements of this section, the purchaser’s or succeeding purchaser’s personal liability is limited to the fair market value of the business less the amount of any proceeds that are applied to balances due on secured interests that are superior to the lien provided for in section 29(1).

2014 PA 3 will be discussed in depth at the Michigan Sales and Use Tax seminars scheduled for Livonia and Traverse City.

Register on line at the MACPA website

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Monday, June 16 2014

Amendments to the Revenue Act (1941 PA 122)

On Thursday, January 30, 2014, the Governor signed what is now Public Act 3 of 2014.  (2014 PA 3)  The legislation amended the Revenue Act making monumental changes effecting the administration of Michigan taxes.  Changes were made to the time limit to complete an audit and to issue a final assessment, successor liability, officer liability which is now responsible person liability, statute of limitations and refund of tax overpayments.

This is the first of five Blogs discussing 2014 PA 3 with changes noted in red.   

Time Limit to Complete an Audit and Final Assessment

(6) For audits commenced after September 30, 2014, the department must complete fieldwork and provide a written preliminary audit determination for any tax period no later than 1 year after the period provided for in section 27a(2) without regard to the extension provided for in section 27a(3). The limitation described in this subsection does not apply to any tax period in which the department and the taxpayer agreed in writing to extend the statute of limitations described in section 27a(2).  [MCL 205.21(6)]

(7) For audits commenced after September 30, 2014, unless otherwise agreed to by the department and the taxpayer, the final assessment issued under subsection (2)(f) must be issued within 9 months of the date that the department provided the taxpayer with a written preliminary audit determination unless the taxpayer, for any reason, requests reconsideration of the preliminary audit determination or the taxpayer requests an informal conference under subsection (2)(c). A request for reconsideration by a taxpayer permits, but does not require, the department to delay the issuance of a final assessment under subsection (2)(f).  [MCL 205.21(7)]

2014 PA 3 will be discussed in depth at the Michigan Sales and Use Tax seminars scheduled for Livonia and Traverse City.

Register on line at the MACPA website

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 05:00 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, June 11 2014

Trade Journals Properly Sourced as Sales of Tangible Personal Property for SBT Apportionment

The Michigan Court of Appeals has issued several decisions on the single business tax sourcing rules for apportionment.  The determination as to whether the taxpayer is in the business of selling tangible personal property or services is critical as different sourcing rules apply.  In BNP Media II, LLC v. Department of Treasury, Michigan Court of Appeals, No. 314458, May 20, 2014 sales of trade journals containing advertising were properly sourced as sales of tangible personal property under the single business tax (SBT) for sales factor apportionment purposes.  Under the SBT law, sales of tangible personal property were in Michigan if the property was shipped to a purchaser in Michigan.  Sales, other than sales of tangible personal property, were in Michigan if the business activities were performed in Michigan.

The court looked at Catalina Marketing Sales Corp. v. Department of Treasury, 470 Mich. 13; 678 N.W.2d 619 (2004), to determine how to source sales that consisted of both tangible personal property and services.  The taxpayer published and circulated business-to-business trade journals.  Most of the taxpayer’s revenue came from advertising, and a small amount of revenue was earned through subscriptions.  

The appellate court agreed with the Court of Claims that the taxpayer’s advertising sales were "inextricably linked" to the circulation of printed journals.  However, the taxpayer did not provide advertising or marketing services, but rather created a product, and did not match advertisers to customers.  Thus, viewing the totality of the circumstances, the court held that the taxpayer’s services were incidental and that the production and distribution of trade journals was the taxpayer’s business activity.  Accordingly, the sales were properly sourced as sales of tangible personal property.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Monday, June 09 2014

Prewritten Computer Software was Incidental to the Service

The Michigan Court of Appeals has reversed the Court of Claims in Thomson Reuters Inc. v. Department of Treasury, Michigan Court of Appeals, No. 313825, May 13, 2014.  The provider of an online tax and accounting research program was not liable for Michigan use tax on the transfer of prewritten computer software because any transfer of tangible personal property was incidental to the service provided.  The taxpayer’s customers primarily sought access to the up-to-date tax information compiled, synthesized, and organized by its content creators.  There was no evidence that the minimal amount of software transferred was the object of the transaction.

The taxpayer was in the business of selling an information service that was distinct from its print and software products, and its profit-making motive in this circumstance derived from its provision of a service, not software.  Furthermore, the taxpayer did not separately market or sell the software related to its research platform, and the intangible services provided contributed greatly to the value of the item transferred.

In Auto-owners Insurance Company v. Department of Treasury, State of Michigan Court of Claims, March 20, 2014, the Michigan Court of Claims held that a taxpayer’s purchases of cloud computing services were not subject to the use tax. 

The transactions involved remote access to a third-party provider’s technology infrastructure.  The Court of Claims characterized it as nontaxable services and not the sale of prewritten software.  The taxpayer, a property and casualty insurance provider, engaged third parties to provide services, including web-conferencing, web-hosting, payment processing, and online legal research, and information such as risk analyses and property valuations.

These two significant victories for taxpayers will most likely be appealed.

Both the Thomson Reuters case and the Auto-Owners Insurance Company case will be discussed at length at the Sales and Use Seminars scheduled for June in Livonia and Traverse City.

Register on line at the MACPA website

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Friday, June 06 2014

Michigan Treasury Online Allows Business Taxpayers to Change Registration Account Information

Michigan Treasury Online is the new online portal which allows business taxpayers to access and make

changes to their registration account information.  Updating account information will be easier than ever

and available 24 hours a day.

  • Registering a new business and getting access to Michigan Treasury Online.
  • Access to Michigan Treasury Online for existing businesses.
  • Updating addresses.
  • Adding or deleting a tax.
  • Changing, adding, or deleting an authorized representative (POA) for a business account.
  • Closing or selling a business.

The Department of Treasury has also issued a "Taxpayer’s Guide to Identity Protection," which includes information about steps taxpayers should take if they are identity-theft victims.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, June 04 2014

Public Act 121 of 2014 Changes the Retroactive Effective Date of Public Act 474 of 2012 to January 1, 2005

Public Act 474 of 2012 enacted a Michigan use tax exemption for property purchased or manufactured by a taxpayer constructing, altering, repairing, or improving real estate if the property is affixed to and made a structural part of real estate located in another state.  The effective date has been moved from January 1, 2006 to January 1, 2005.  The exemption does not depend on whether sales or use tax was due and paid in the state in which the real estate is located.  PA 474 also amended the definition of "industrial processing" to include an activity relating to property affixed to real estate located in another state.

The Department of Treasury is in the process of issuing a revised Revenue Administrative Bulletin to reflect the legislative changes.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, June 03 2014

June Seminars in Livonia and Traverse City to Cover New Legislation, Rules, RABs, Judicial Decisions and Department of Treasury Pronouncements

This seminar is an excellent opportunity to review the basics of the Michigan sales and use tax and to become up-to-date on the changes in the sales and use tax law, rules, bulletins and court cases.  The legislature has amended both the sales and use tax laws as well as the Revenue Act to address issues with the administration and compliance of the complicated laws. Over the last several years the number of sales and use tax audits as well as the intensity of such audits have increased.  Auditors are raising new issues and employing different auditing techniques.  Changes are being suggested for the appeal process.

Ed Kisscorni and Ron Kaley will discuss in detail the top ten Sales and Use Tax issues:

  1. Statute of Limitations
  2. Michigan Vendor Liability
  3. Michigan Lessor Liability
  4. Sale of Tangible Personal Property or Sale of a Service
  5. Sale of Tangible Personal Property or an Affixation to Realty
  6. Cloud Computing
  7. Recordkeeping Requirements
  8. Exemption Documentation
  9. Audit Procedures
  10. Sampling and Sample Projections

Course Outline and Major Topics

The Basics of Sales and Use Tax

  • Sales Tax
  • Use Tax 
  • Exemptions
  • Sourcing of Sales
  • Records
  • Exemption Documentation Requirements
  • Direct Pay Authorization
  • Compliance Agreements
  • Penalty and Interests

Special Industry Application of the Sales and Use Tax

  • Contractors
  • Contractors vs Retailer
  • Service vs Sale of Tangible Personal Property
  • Industrial Processing
  • Extractive Operations
  • Healthcare
  • Computer Software
  • Leasing of Tangible Personal Property
  • Interstate Motor Carrier Property
  • Delivery Services
  • Food for Human Consumption
  • Interstate Commerce
  • Isolated Sales

Register on line at the MACPA website

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Monday, June 02 2014

Senate Bill 156 Will Open Up MBT Refund Opportunities

Senate Bill 156 would amend the Michigan Business Tax (MBT) Act to do the following:

Enact a new subparagraph (ff) to create an exclusion from the definition of "gross receipts" for amounts attributable to the taxpayer pursuant to a discharge of indebtedness.  [MCL 208.1111(1)(ff)]

Enact a tax benefit rule for recapture of investment tax credit by limiting the recapture “to the extent the credit was used, and at the rate the credit was used …”.  [MCL 208.1403(3)]

Revise the credit for a taxpayer located and conducting business in a renaissance zone before December 1, 2002, by providing for the credit to be based either on the current calculation for those taxpayers, or on the calculation allowed for other business taxpayers in a renaissance zone, whichever was greater.  [MCL 1433(1)]

The bill will add a new Section 508 which will allow a taxpayer to claim a refund if, as a result of the bill's amendments, the taxpayer had an overpayment of tax.  Refunds can be claimed only for tax years starting after December 31, 2009.  The taxpayer must file a claim for refund after January 1, 2015, but no later than December 31, 2015 on a form, process or format prescribed by the Department of Treasury.   

The bill states:  "This amendatory act is retroactive and is effective for tax years beginning on and after January 1, 2010.

Now is the time to review the 2010 and 2011 MBT returns to determine if a refund claim can be filed in 2015.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email

 

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