There has been significant discussion in recent days regarding the repeal of the new sales tax on services and adding an M.B.T. surcharge to offset the loss. As currently being discussed, such a proposal would have a disastrous effect on the entire construction industry.
According to various reports, the added M.B.T. surcharge would be required of all companies with gross receipts over $18 million. A large percentage of construction companies would likely surpass this threshold even though they never truly benefit from a majority of that revenue. The lion’s share of the revenue that passes through a construction company is used to pay for materials and subcontracts.
By taxing the full amount of those gross receipts before any deductions or credits are given creates a cascade effect of taxing the same pot of money over and over. This was the same problem that required a legislative solution when the M.B.T. was adopted earlier this summer. In many cases, construction companies were facing up to a 400 percent increase in tax liability.
MITA has begun lobbying the Legislature, saying that it is absolutely critical that project material purchases, subcontracts and owner compensation costs must continue be deducted before calculating any new surcharge tax threshold.
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.
