The Film Production Expenditures Credit is discussed in a Notice issued by the Department of Treasury on June 25, 2010.
The Michigan Department of Treasury (Treasury) has issued a notice discussing the film production expenditures credit available against the Michigan Business Tax (MBT). Treasury and the Michigan Film Office do not make determinations or issue letters designating who is (or who is not) a qualified vendor for the credit. The credit is available to eligible production companies at a specified percentage of direct production expenditures and qualified personnel expenditures.
For a transaction to qualify as a direct production expenditure, two questions to consider are:
(1) What is the source within Michigan? and
(2) What is the nature of the qualified transactions?
For a source to be within Michigan, the vendor of property or services must have a non-temporary established level of physical presence in the state (i.e., at least one year of bricks and mortar storefront and at least one full-time employee).
Regarding the nature of the transactions, several factors will be considered:
industry standard markups for individual product categories,
orders for goods or services to be used by a production company must be placed with suppliers by the seller,
drop shipment arrangements must be supported by facts and documentation,
the seller should not be directed or bound by the production company's choice of supplier,
the seller must have adequate staffing and the staff must have the requisite skill levels to perform the functions attributed to them,
the seller should bear the risk of the breach of contract, and
the seller should have taken legal title to the goods before the possession of the goods passes to the production company.
This list is not all inclusive. The totality of the facts, circumstances, and supporting documentation will be considered. Treasury has included 17 examples in the notice.
Notice to Taxpayers Regarding Michigan Business Tax Film Production Credit Qualified Vendors, Michigan Department of Treasury, June 22, 2010,