Tax News

CCH (cch.taxgroup.com) reports:

  The Michigan Department of Treasury has issued guidance, effective retroactively to January 1, 2008, regarding the nexus standard under the Michigan business tax (MBT). There are two alternative nexus standards under the MBT: (1) a taxpayer has physical presence in the state for more than one day during the tax year or (2) the person actively solicits sales in Michigan and has Michigan gross receipts of $350,000 or more. Once nexus is established, nexus lasts for the entire tax year. Furthermore, if one member of a unitary business group has nexus with Michigan, all group members must be included to calculate the tax bases and apportionment formulas.

  A taxpayer has physical presence in Michigan if it conducts business activities in Michigan, owns, rents, or leases tangible personal or real property, or delivers goods to Michigan in its own (or leased) vehicles. Nexus may be created, depending on the facts and circumstances, with these activities: meeting with suppliers or government officials, attending occasional meetings, holding hiring events, advertising, renting to or from a customer list, and attending trade shows. Corporations incorporated in Michigan have a physical presence in the state. Also, physical presence for a portion of a day establishes physical presence for the entire day. Active solicitation is the purposeful solicitation of persons in Michigan. The quality, nature, and magnitude of the activities are examined on a facts and circumstances basis to determine if active solicitation has been established.

  P.L. 86-272 protects taxpayers from the imposition of the business income tax portion of the MBT, but not the modified gross receipts tax portion. Only the solicitation to sell tangible personal property is immune. Therefore, leasing activities and activities regarding intangible property are not protected. Solicitation includes speech or conduct that explicitly or implicitly invites an order and activities entirely ancillary to requests for an order. Protection by P.L. 86-272 is determined on a tax year by tax year basis. Examples of protected and unprotected activities are provided. De minimis activities establish only a trivial connection. However, if they are conducted on a regular or systematic basis or pursuant to company policy, then the activities are not trivial.

Revenue Administrative Bulletin 2008-4 , Michigan Department of Treasury, October 21, 2008, ¶401-392

  Other References:

  Explanations at ¶10-075