Some Decry Use Tax As Unfair

October 22, 2007
| By Pete Daly |
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The new Michigan Business Tax may have been relatively good to small business, but then the state government whipped out some new tax ideas to help avert a state government budget crisis, and one solution has left many small business owners very unhappy.

The expanded Use Tax on Services, Public Act 93 of 2007, passed by the Legislature on Oct. 1 and signed into law by Gov. Jennifer Granholm, imposes a 6 percent sales tax on 57 types of services that had not been subject to a sales tax before. It takes effect Dec. 1 and is intended to generate about $750 million a year.

“It’s very controversial, because some (businesses) are taxed and others are not. The perception is that it is very unfair,” said Edward S. Kisscorni of Echelbarger, Himebaugh, Tamm & Co.

For example, ski resorts are now subject to the Use Tax, but golf courses are not.

Many types of consultants who provide services to businesses will also be subject to the expanded Use Tax.

“The new Use Tax on Services exempts the broad classification of services offered by the CPA and legal professions,” said Kisscorni. “However, attorneys and CPAs will pay the new tax if they perform any of the taxable services — for example, ‘consulting’ services.

“The law states that it’s ‘what you do,’ not ‘who you are,’ which determines the applicability of the tax,” he added.

Business organizations, including the Michigan Chamber of Commerce, are hoping to put enough pressure on state legislators to have the expanded Use Tax repealed before Dec. 1. Failing that, there is talk of a petition drive to put repeal on the ballot next year.

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