22 Percent MBT Surcharge Replaces Service Tax

Legislators finally agreed on a replacement plan for the controversial sales tax on services this weekend.

MITA opposed the replacement plan because medium size companies will see a sizeable 22-percent increase in their MBT liability under the proposal. However, many MITA members will be exempt from the tax increase because they do not reach the $20 million small business gross receipts threshold.

The initial replacement plan passed in the House included a 33-percent surcharge. MITA blasted that plan to media and legislators, saying that companies in Michigan couldn’t afford such enormous increases on top of an already-anemic economy. MITA also was successful in fighting for the same deductions on the surcharge as the MBT itself.

Ultimately, the new law includes the 22-percent surcharge, a $6 million cap and a 2017 sunset. The cap forced the state’s largest companies to shoulder more of the tax burden that allowed the surcharge rate to be reduced from the originally-proposed amount of 33 percent.

An analysis of the legislation can be found by clicking here.

A copy of the final Public Act can be seen by clicking here.

If you have any questions please contact Mike Nystrom, Vice President of Government and Public Relations at mikenystrom@mi-ita.com; or Keith Ledbetter , Director of Legislative Affairs at keithledbetter@mi-ita.com; or by calling the MITA office at (517) 347-8336.