The Michigan Department of Treasury (Treasury) in Revenue Administration Bulletin 2010-5 (RAB 2010-5) has issued guidance to determine where the benefit of services is received for sales factor apportionment purposes under the Michigan Business Tax (MBT). The law provides that sales from the performance of services are sourced to Michigan if the recipient of the services receives the benefit of the services in Michigan. The recipient of the services performed may be someone other than the purchaser.
RAB 2010-5 provides that all of the benefit is received in Michigan if one of the following applies:
The service relates to real property that is located entirely in Michigan.
The service relates to tangible personal property that (1) is owned or leased by the purchaser and located in Michigan at the time that the service is received, or (2) is delivered to the purchaser in Michigan.
The service is provided to a purchaser who is an individual physically present in Michigan at the time that the service is received.
The services are received in Michigan and are in the nature of personal services that are typically conducted or performed first-hand, on a direct, one-to-one or one-to-many basis.
The service is provided to a purchaser that is engaged in a trade or business in Michigan and relates only to the trade or business of that purchaser in Michigan.
The service relates to the use of intangible property that is used entirely in Michigan.
The services provided are professional in nature, such as legal or accounting services, and are provided to a purchaser that is an individual domiciled in Michigan, or to a purchaser with business operations only in Michigan.
In addition, if the recipient of the services receives only a portion of the benefit of the services in Michigan, then the receipts are included in the apportionment factor in proportion to the extent that the benefit of the services is received in Michigan. Guidance is also provided regarding this situation.
The method to determine the extent of the benefit received in Michigan must be reasonable in light of the existing facts and circumstances. The method chosen by the taxpayer must be uniformly and consistently applied. Taxpayers are reminded that if they cannot determine where the recipient of the services has received the benefit, then the customer's location may be used.
RAB 2010-5 includes 13 examples, all of which will be discussed in detail at the MACPA series of seminars in June Cases in Michigan Business Tax: Nexus Apportionment and Unitary.
June 15th in Saginaw
June 21 in Grand Rapids
June 23 in Livonia
Register on line at the MACPA website: www.michcpa.org
In addition, a June Newsletter from EdKisscorni.com will be devoted to the new RAB.