SEARCH BLOG: MICHIGAN TAX
Concern, confusion, and anger all describe the reaction of Michigan residents to their state's new service tax. Relief is not a typical reaction.
The tax, which is supposed to go into effect on December 1 or January 1 depending on where you read accounts, remains a mystery to most people and businesses. A tentative list of affected business categories has been published, but no real insight regarding the way the system is to work.
Will this be a simple extension of the sales tax system or will there be another entirely new administrative maze to wander?If you have someone help you on a project where their work is integrated into a product you are selling, then you pay a tax for the service and pass the cost on to the customer who is buying your product. Currently, if that customer is another business who will sell your product as a retail item, then he is exempt from the sales tax, but ends up paying it as a hidden service tax.
Since the service tax involves business-to-business transactions... including sub-contractors and sub-sub-contractors... the issue of being taxed versus tax exempt becomes a nightmare for businesses.
The state effectively revokes the sales tax exemption and makes the product cost 6% more from a Michigan retailer than a retailer in another state.Will lawmakers then say this is not what they intended and have the retailer send in a form with an accounting of all of his purchases to get a service tax rebate?
- Or will the state tell the wholesaler to eat the cost so that the retailer will buy from him instead of the company in Indiana?
- Or will businesses and taxpayers start recalling legislators who voted for this mess?
- Or will legislators see the writing on the wall and repeal this mess?
- Or will the governor simply lecture the residents of Michigan about the fact that the money they earn shouldn't be considered theirs, but rather an investment in expanding the state government?
Fire, ready, aim... good job Michigan government! Your present and future tax dollars in action.