Michigan State and Local Tax Updates June 2019

Northern Michigan taxpayers with past-due debts targeted by aggressive mail-based scam

June 26, 2019

The Michigan Department of Treasury is warning northern Michigan taxpayers with past-due debts of an aggressive scam making the rounds through the U.S. Postal Service. Recently, an Emmet County taxpayer received what appeared to be an official-looking letter about an overdue tax bill, asking the individual to immediately contact a toll-free number to resolve his outstanding state tax debt. The letter threatened to seize the taxpayer’s assets if the state tax debt wasn’t settled. The department reminds taxpayers that, if they have questions about an outstanding state tax debt, they should contact the department through a verified phone number.

For more information: https://bit.ly/2L7pUBg


Operator of a municipal-owned golf course correctly subjected to lessee-user tax

June 19, 2019

The Michigan Department of Treasury has provided guidance for determining if drone services are subject to sales and use tax. Considered by themselves, drone services aren’t subject to sales and use tax. But, it’s possible for a single sales transaction to involve a mixture of nontaxable services and taxable tangible personal property. Many, if not most, sales of drone services may include the sale of related tangible personal property. When such a single mixed sales transaction occurs, the service provider must determine the predominant nature of the transaction to determine whether the transaction is taxable. The transaction will be either taxable or nontaxable: an “all or nothing” result.

 


Michigan rescinds 3.2 gallon per vehicle allowance for motor fuel tax refunds

June 19, 2019

Beginning July 1, 2019, the Michigan Department of Treasury will rescind its 3.2 gallon per vehicle standard allowance (safe harbor) relating to motor fuel tax refund claims. This is based on the decision in “AutoAlliance International, Inc. v. Department of Treasury.” For AutoAlliance-based refund claims filed after July 1, 2019, taxpayers must provide documents substantiating the actual fuel fill (gallons) per vehicle during the tax period for which the refund is claimed. For additional information: https://bit.ly/2Xtlo3n

 


Operator of a municipal-owned golf course correctly subjected to lessee-user tax

June 12, 2019

Court: The operator of a municipal-owned golf course was correctly subject to lessee-user tax. The Michigan Court of Appeals has held that the Michigan Tax Tribunal properly determined that the taxpayer is responsible for the payment of tax under the lessee-user statute. While the court was concerned that the Tribunal may have taken a broad view of “use” of the property, it nevertheless found that the definitions of “users” or “use” are consistent with the taxpayer’s operations at the golf course. The court found that the taxpayer had presented little argument that it’s not a “user” under the statute, beyond the fact that the golf course has consistently operated at a loss. (Dkt. No. 337374)

 


Michigan Supreme Court vacates Court of Appeals decision that held that a taxpayer lacked sufficient nexus

June 12, 2019

The Michigan Supreme Court has vacated a MI Court of Appeals decision that held that a taxpayer lacked sufficient nexus to be subject to Detroit, MI local income tax because it wasn’t “doing business in the city.” Even though the taxpayer possessed a Detroit mailing address, it didn’t have employees or own property and didn’t sell goods or provide services in Detroit. The MI Court of Appeals held that the activities of the taxpayer’s directors weren’t conducted “on behalf” of the taxpayer. The Michigan Supreme Court vacated the judgment of the court of appeals and remanded the case to the court of appeals for reconsideration in light of South Dakota v. Wayfair, Inc. (Dkt. No. 338218)

 


Michigan rules that pet breeders must collect sales tax when selling animals as pets

June 5, 2019

The Michigan Department of Treasury has issued a notice that pet breeders must collect sales tax when selling animals as pets. The department notes that many pet breeders in Michigan don’t realize that they’re required to pay Michigan sales tax when they sell animals as pets. In Michigan, the sale of an animal as a pet is the sale of tangible personal property, and such sales are subject to Michigan’s 6% sales tax. Breeders who sell animals as pets are required to register with the department and obtain a sales tax license and timely pay the tax due on applicable sales. The requirement to pay sales tax applies to all sales of animals in Michigan unless a specific exemption applies.

 


Michigan Department of Treasury now offers alternative to full field audits

June 5, 2019

The Michigan Department of Treasury now offers an alternative to full field audits during some cash-basis audits and may offer to close some audits without an extensive, time-consuming full field audit. Department auditors will project a taxpayer’s tax liability by comparing normative industry data to his or her preliminary audit data. Whether the department decides to offer a closing agreement depends on a variety of factors, including the quality of the taxpayer’s records and the size of the records’ variance from normative data. If the taxpayer accepts the offer, he or she waives appeal rights and the audit is closed without full field testing.

 

© 2019

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