Creating a new sales tax on services after midnight has its drawbacks.
In the dead of night last weekend, legislators passed a plan to put a sales tax on some services. Included in the new tax were various “consulting” services and “landscaping” services. At the same time, policymakers exempted construction from the new service tax. So, what happens when environmental consulting and landscaping are part of a construction contract?
The Michigan Department of Treasury is currently trying to determine just that.
In the area of landscaping, MITA has been arguing that adding value and property improvement like planting trees and grass are the last phase of a construction project, therefore should be considered construction rather than a “landscape service”. MITA contends that the Legislature intended to tax only landscape maintenance activities, not those activities required for construction.
One area of “consulting services” for the heavy construction industry that could potentially be taxed is environmental and geo-technical consulting. MITA is arguing that property restoration and environmental assessment are required for the construction process and therefore should be exempt as well.
Another conflict that MITA has uncovered is in the area of governmental contracts. Would a government contractor be required to pay sales tax on the work? Initial indications from Treasury suggest that government contracts would not be taxed.
Although it will likely take a while for many of these issues to be fully addressed, MITA encourages members to evaluate the impact the new service tax would have on their business and forward your questions and concerns to our office. In the meantime, we will continue to work with the Department of Treasury to ensure that all phases of the construction process are exempted from paying new taxes. Click here to view the MITA letter to the Department of Treasury.
For a complete list of services being taxed, click 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.
