Michigan State and Local Tax Updates October 2020

Guidelines issued for taxability of retail sale of vehicles by leasing companies

The Michigan Dept. of Treasury has issued guidelines for the taxability of the retail sale of vehicles by leasing companies licensed with the Secretary of State. Leasing companies generally are engaged in two separate and distinct businesses: the leasing of automobiles and the selling of used automobiles. A leasing company is presumed to be in the business of making retail sales when selling or offering for sale three or more used vehicles in the previous 12 months. Leasing companies may therefore be required to obtain a sales tax license, file sales tax returns and remit sales tax to the department when making sales of motor vehicles.

Tax assessed against electric power plant upheld

In a dispute involving the tax assessed against an electric power plant, the Michigan Court of Appeals upheld the Michigan Tax Tribunal’s determination of the true cash value of the personal property for tax year 2016 and the Tribunal’s order imposing sanctions on the township and county. The taxpayer at issue isn’t a utility, but rather a merchant generator of electricity that sells electricity on the open market. The appeals court found that the Tribunal had jurisdiction over the dispute, because the taxpayer protested the assessments and exemptions before the board of review for each petition. (Dkt. Nos. 348720 and 348721)

Michigan Tax Tribunal determines winery valuation correct

The Michigan Tax Tribunal’s determination of the valuation of a taxpayer’s parcel of real property was affirmed by the Michigan Court of Appeals. This case involved a township’s valuation of two structures on the taxpayer’s property: an observation/wine tasting room constructed as an addition to an arena used for horse training and a secondary residential house. The property is classified as residential, and it’s located in a district zoned for agricultural and rural-residential uses. The court rejected the taxpayer’s arguments that the Tax Tribunal erroneously valued the observation/wine tasting room as a commercial winery. (Dkt. No. 348938)

No community foundations were certified for the 2020 Michigan Business Tax credit

Qualifying business taxpayers that elect to file returns under the Michigan Business Tax Act (MBTA) for tax year 2020 are eligible to take a credit for contributions made to endowment funds held by community foundations certified by the Michigan Dept. of Treasury. Under the MBTA, a taxpayer that makes a contribution to a certified community foundation may claim a nonrefundable credit against the taxpayer’s Michigan business tax liability equal to 50% of the taxpayer’s contribution, $5,000 or 5% of the tax liability, whichever is less. However, no community foundations were certified for tax year 2020.


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