Revenue Administrative Bulletin 2014-5 Discusses Three Nexus Standards
The Michigan Department of Treasury has issued a Revenue Administrative Bulletin discussing the corporate income tax nexus standards.
There are three alternative ways to establish nexus:
- The taxpayer has physical presence in the state for more than one day during the tax year. Physical presence is determined on a facts and circumstances basis, although corporations incorporated within the state have physical presence in Michigan. Also, physical presence exists for one day when physical presence is established for any portion of a day.
- The taxpayer actively solicits sales in Michigan and has Michigan gross receipts of $350,000 or more. Active solicitation includes, but is not limited to, solicitation through (a) the use of mail, telephone, and email, (b) advertising, and (c) maintenance of an Internet site through which sales transactions occur.
- The taxpayer has an ownership interest or beneficial interest in a flow-through entity, directly or indirectly, through one or more flow-through entities that has nexus in Michigan. There is no minimum ownership percentage or degree of control threshold that a taxpayer-owner of a flow-through entity must have in order for nexus with Michigan to exist.
Effective January 1, 2012, the nexus standards apply to corporations for the corporate income tax and financial institutions for the franchise tax, but they do not apply to insurance companies.
A corporation whose activities are limited to those protected by P.L. 86-272 is not subject to the corporate income tax. So long as one member of a unitary business group has nexus with Michigan and exceeds the protections of P.L. 86-272, all members of the unitary business group (including those protected by P.L. 86-272) must be included when calculating the unitary business group’s tax base and apportionment.
RAB 2014-5 discusses P.L. 86-272 extensively. Protection under P.L. 86-272 is determined on a tax-year by tax-year basis. Types of de minimis activities are provided in the RAB.
The same nexus standard used to determine nexus for out-of-state taxpayers, will be applied to determine whether a taxpayer is taxable in another state for purposes of apportionment.
The Michigan Corporate Income Tax Nexus Standard will be discussed at the Michigan State and Local Tax Update seminars in Traverse City and Troy in May.
Michigan State and Local Tax Update (30637 - MSLTTC)
Monday, May 12, 2014
Holiday Inn Traverse City - West Bay - Traverse City, MI
Michigan State and Local Tax Update (30641 - MSLTTR)
Monday, May 19, 2014
MSU Management Education Center - Troy, MI