Plaintiff applies these proceeds to site approval, lease approval, construction approval, franchisee training, and assistance in opening the restaurant. The fee is nonrefundable even in the event that the franchise does not come to fruition. The second at-issue payment plaintiff receives is a monthly payment equal to five percent of a franchise's gross receipts. During months that the amount of a franchise's gross receipts would result in a percentage less than a specified minimum amount, the franchisee is obligated by its agreement with plaintiff to make the specified minimum payment. Although the parties agreed that the monthly payments were royalties, defendant asserted that plaintiff's nondeductible franchise fee income was comprised of not only a franchisee's first payment but also a franchisee's ongoing monthly payments.
Statutory interpretation is a question of law subject to review de novo.
Moreover, de novo review is appropriate because the lower court decided this issue upon defendant's motion for summary disposition. The first step in determining a taxpayer's single business tax liability is to determine its tax base. The tax base is the taxpayer's business income before apportionment, subject to certain upward or downward adjustments. One adjustment to the tax base is the deduction of royalties that a taxpayer receives, which is the adjustment at issue here. Mobil Oil, supra at 484.