Opinion ID: 843023
Heading Depth: 1
Heading Rank: 8

Heading: the single business tax act

Text: The SBT is a value-added tax imposed on any person undertaking business activity in the state of Michigan. MCL 208.31. This includes companies that do all their business in Michigan as well as companies, like plaintiff, whose business activity is predominantly outside Michigan. A value-added tax measures a firm's total business activity. Trinova Corp. v. Michigan Dep't of Treasury, 498 U.S. 358, 364, 111 S.Ct. 818, 112 L.Ed.2d 884 (1991). The tax is on what a business has added to the Michigan economy, not on what the business has derived from this state's economy. Columbia Assoc., LP v. Dep't of Treasury, 250 Mich.App. 656, 666-667, 649 N.W.2d 760 (2002). In order to determine the proper SBT for a multistate taxpayer, the tax base must be apportioned to Michigan. MCL 208.41. The formula used for apportioning the tax base consists of the sum of the sales factor, the payroll factor, and the property factor, divided by three. [2] At issue in this case is the calculation of plaintiff's sales factor. The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the tax year, and the denominator of which is the total sales of the taxpayer everywhere during the tax year. MCL 208.51(1). Section 52 of the SBTA, MCL 208.52, dictates when the sale of tangible personal property is in Michigan, while § 53 covers other sales, such as the sale of services. This case involves the application of § 53, which provides as follows: Sales, other than sales of tangible personal property, are in this state if: (a) The business activity is performed in this state. (b) The business activity is performed both in and outside this state and, based on costs of performance, a greater proportion of the business activity is performed in this state than is performed outside this state. (c) Receipts derived from services performed for planning, design, or construction activities within this state shall be deemed Michigan receipts. [MCL 208.53.] It is subsection c that controls the disposition of this case.