Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Michigan.
November 4, 2024
Michigan Rescinds Rule on Food for Home Consumption
Authored by: Breea Boylan, CPA and Courtney Easterday, MSA
Effective September 17, 2024, the Michigan Department of Treasury has rescinded Rule 86 of the Mich. Admin. Code R205.136 relating to specific sales and use tax rules. Rule 86 elaborated on the sales tax treatment of food for human consumption. Rule 86 had been superseded in part by Emagine Entertainment v Treasury, 334 Mich App 658 (2020). The Department has since replaced RAB 2022-4 with RAB 2024-13.
Per RAB 2024-13, food for human consumption may be taxable when:
- It is heated by the seller and sold in a heated state;
- Contains two or more ingredients mixed by the seller and is sold as a single item; and/or,
- Sold with eating utensils provided by the seller.
If you have questions about whether your business needs to collect and remit sales tax, please reach out to a member of the Withum SALT Team.
July 30, 2024
Michigan Treasury Updates Procedure to Claim Sales Tax Exemptions
Authored by: Katie Nguyen, CPA and Katerine Velasquez
On July 18, 2024, the Michigan Department of Treasury (DOT) released Revenue Administrative Bulletin 2024-11, which contains updated procedures to claim sales and use tax exemptions. The Bulletin takes effect immediately and the following guidance:
- Which formats are acceptable for sales tax exemption claims;
- Step-by-step process on how to process a blanket exemption form;
- An explanation of how purchasers can claim an exemption and how it is applicable; and
- Terms and conditions on purchase orders used to document an exemption.
For more details on Michigan’s process for claiming sales tax exemptions, please refer to Revenue Administrative Bulletin 2024-11.
If you have questions about whether your business is eligible to claim Sales Tax Exemptions, please reach out to a member of the Withum SALT Team.
March 19, 2024
Michigan Grants Disaster Relief to Affected Taxpayers
Authored by: Breea Boylan, CPA and Katie Nguyen, CPA
President Biden declared nine Michigan counties qualified for Federal disaster relief. In response, the Michigan Department of Treasury is providing an opportunity for disaster survivors to obtain state tax relief. Individual and business taxpayers who reside in areas that were affected by severe storms, tornadoes, and flooding from Aug. 24-26, 2023, can request additional time to file state tax returns and pay state tax bills, with penalties and interest waived. The counties affected include Eaton, Ingham, Ionia, Kent, Livingston, Macomb, Monroe, Oakland, and Wayne.
For additional information, please refer to the Michigan Department of Treasury press release.
If you have questions about Michigan’s disaster relief provisions, please reach out to a member of the Withum SALT Team.
December 15, 2023
Michigan Provides Guidance for Tiered Pass-Through Entities
Authored by: Katie Nguyen, CPA and Kiana McGowan, CPA, MBA
In its November 2023 newsletter, the Michigan Department of Treasury Tax Policy Division provided additional guidance for Flow-Through entity (FTE) tax reporting. With the recent retroactive enactment of the Michigan FTE tax in December 2021, taxpayers are still learning the compliance process, which is more difficult in tiered structures. As such, the Department published two uniform Excel templates to use as a guide for both direct member reporting and indirect member reporting, which can also be attached as a PDF to e-filed returns. The Department also issued an update on the rules to the Schedule for Reporting Member Information for a Flow-Through Entity(Form 5774). Previously, the form instructions only allowed direct members to be listed. Form 5774 has now been updated to include reporting of indirect members in lieu of the FTE direct member. For more information on the reporting and payment of Michigan FTE tax, please refer to the Department’s detailed instructions and templates here.
If you have questions regarding PTETs, please reach out to a member of the Withum SALT Team.
November 3, 2023
Michigan 2023 Business Tax Credits
Authored by: Katie Szymanski Nguyen, CPA and Jessie Racioppi
On October 27, 2023, the Michigan Department of Treasury (“DOT”) announced the community foundations that are certified for the Michigan Business Tax (“MBT”) credit. Every year, the DOT announces which community and educational foundations are certified for the credit. A taxpayer that contributesto a certified community or educational foundation may claim a nonrefundable credit against its MBT liability equal to 50 percent of the taxpayer’s contribution, up to $5,000.00 or 5 percent of the taxpayer’s MBT liability, whichever is less.
The DOT has determined that there are no certified education foundations for 2023.
The list of certified community foundations has been released in Michigan Revenue Administrative Bulletin No. 2023-20, 10/27/2023.
If you have questions about state tax credits and incentives, please reach out to a member of the Withum SALT Team.
September 5, 2023
Michigan – Impact of COVID-19 on Statute of Limitations
Authored by: Breea Boylan, CPA and Bonnie Susmano, JD, MBA
On August 23, 2023, the Michigan Department of Revenue released Administrative Bulletin 2023-14. This Bulletin explains the impact of COVID-19 extensions, penalty waivers, and interest waivers on the statute of limitations for individual income tax, corporate income tax, and sales, use, and withholding taxes. As the Treasury issued multiple extensions on the filing deadlines and/or waived penalty and interest for late filing and/or remittance of tax, the four-year statute of limitations period is applied to the modified 2019 and 2020 due dates for purposes of determining the deadlines for requesting refunds and issuing assessments for 2019 and 2020 individual income tax returns and for 2019 for corporate income tax returns.
If you have questions about how the statute of limitations affects you or your business, please reach out to a member of the Withum SALT Team.
January 31, 2022
Michigan Releases Guidance on Tax Treatment of Retirement and Pension Benefits
On January 1, 2022, Michigan released information on the tax treatment of retirement and pension benefits, such as defined benefit pensions, IRA distributions, and certain payments from defined contributions plans. Michigan allows a deduction on their state return for qualifying distributions from retirement plans, provided that certain criteria are met. Taxpayers should follow the instruction codes on Form 1099-R to determine whether their retirement benefits are exempt from Michigan state tax.
December 31, 2021
Michigan Issues Guidance on Electing and Paying the Flow-Through Entity Tax
On December 20, 2021, Governor Whitmer signed PA 135 of 2021 amending the Income Tax Act to create a flow-through entity tax (aka pass-through entity tax or PTE Tax) in Michigan. The state has released instructions on how to elect and pay the flow-through entity tax.
- All payments for the flow-through entity tax must be paid and submitted through Michigan’s Treasury Online website, at https://mto.treasury.michigan.gov/. A valid payment made through the website will qualify as a valid election for the tax year specified on the payment.
- Qualifying pass-through entities who wish to make an election for this elective tax may do so simultaneously through an electronic payment on Michigan’s website. Please note, other payments made by pass-through entities (e.g., composite payments, estimated payments) cannot be applied toward the flow-through entity tax and do not constitute a flow-through entity tax election.
Additional guidance is expected to be released early January 2022 and will be posted on the state’s website.
October 21, 2021
Michigan House Approves of State Pass-Through Entity (“PTE”) Tax Bill
The Michigan House of Representatives has passed legislation that would enact Michigan’s own version of the Pass-Through Entity (“PTE”) Tax. H.B. 5376 would allow passthrough entities, such as S corporations and partnerships, to annually elect to pay their state income taxes at the entity level. The bill would tax electing passthrough entities at 4.25 percent. Passthrough owners could then claim a refundable credit against the state individual or corporate income tax, equal to their share of the entity level tax. A provision in H.B. 5376 states that the election is binding for two subsequent years, after which an entity would need to make the election again. It was approved by the House and now moves on to the Senate for consideration.
April 28, 2021
Michigan Will Not Tax PPP Loans That Are Forgiven
The Michigan Department of Treasury has confirmed that Taxpayers who accepted federal Paycheck Protection Program (“PPP”) loans will not be taxed on loans forgiven through that program. Michigan will fully conform to the federal tax treatment for forgiven PPP loans when calculating the state’s individual and corporate income taxes. Forgiven loans will remain excluded from income reported on the Michigan tax return, and expenses paid from loan proceeds will similarly remain fully deductible on the Michigan tax return. Because this matches the treatment on the federal return, additional documentation substantiating the PPP loan is not required when filing a Michigan return.
March 23, 2021
Michigan Update on Extension of Filing Deadline
The Michigan Department of Treasury has announced that it will conform with Internal Revenue Service Notice 2021-59, and extend individual and composite State income tax returns and payments of 2020 taxes due on April 15, 2021 to May 17, 2021. Because the extension is limited to the 2020 taxes, first quarter estimates for tax year 2021 remain due on April 15, 2021. The extension is limited to the state individual and composite income tax annual return and does not apply to fiduciary returns or corporate income tax returns. This notice does not apply to city income taxes. City income tax taxpayers should contact their respective tax administrators for information regarding that city’s potential conformity with IRS Notice 2021-59. Because the extensions in conformity with IRS Notice 2021-59 are generally applicable to individual and composite 2020 returns and any payment of 2020 taxes due on April 15, 2021, the following provisions have been modified: (1) The due date for the filing of the return and payment of tax based on the due date of the annual return has been automatically extended. For individual and composite taxpayers that file state returns otherwise due on April 15, 2021, the due date for the filing of the return and payment of tax has been automatically extended to May 17, 2021. (2) The due date for any application and payment of tax related to an extension of time to file the annual return has also been extended. A taxpayer requesting an extension of time to file an annual return must therefore file an application and pay any tax with that extension request by May 17, 2021. The due date of the extended annual return, however, will not be modified by this notice. Accordingly, an individual or composite taxpayer requesting a 6-month extension of time to file a state individual income tax return must submit that request and pay the appropriate amount of tax by May 17, 2021, but the extended annual return remains due on October 15, 2021. (3) Penalty and interest will not accrue for the extension period that is automatically effective. Penalty and interest for late filing of the return and payment of 2020 tax will therefore not begin to accrue for most individuals until May 18, 2021. However, the suspension of penalty and interest is limited to the automatic extensions authorized under this notice; penalty and interest will continue to accrue as appropriate for taxes otherwise owed by any taxpayer. The extensions provided throughout this notice are automatic. There is no need for taxpayers to include any additional information upon the filing of the return or otherwise contact the Department in advance to request an extension. ( Notice: Automatic Extension for Individual and Composite State Income Tax Returns Due on April, 15, 2021, Mich. Dept. Treas., 03/19/2021 .)
March 21, 2020
MI Waives P&I for sales, use and withholding payments and returns
Michigan declared a State of Emergency due to the spread of the novel coronavirus (COVID-19). Ongoing efforts to prevent the spread of COVID-19 have disrupted the normal business operations of many sales, use, and withholding taxpayers required to file returns and remit tax by the 20th day of each month. The Department of Treasury is waiving penalty and interest for the late payment of tax or the late filing of the return due on March 20, 2020. The waiver will be effective for a period of 30 days. Any return or payment currently due on March 20, 2020, may be submitted to the Michigan Department of Revenue without penalty or interest through April 20, 2020. The waiver is limited to sales, use, and withholding payments and returns due March 20, 2020. Any payment or return otherwise due after that date will not be eligible for the current waiver. The waiver is not available for accelerated sales, use, or withholding tax filers. Those taxpayers should continue to file returns and remit any tax due as of the original due dates. Learn more here.
March 13, 2020
Marketplace Facilitators Required to Collect and Remit Sales Tax for Remote Online Sellers
Michigan enacted marketplace facilitator laws that now require marketplace facilitators to collect and remit sales tax on behalf of remote online sellers. Effective January 1, 2020, Michigan’s marketplace facilitator law went into effect and required all marketplace facilitators who generate $100,000 or more in sales, or generate sales in 200 or more separate transactions, to collect and remit sales tax on behalf of third-party sellers on sales made through that marketplace. Moreover, an online seller that only makes sales through a marketplace facilitator is not required to register for sales or use tax and is not required to file a return in Michigan because the marketplace facilitator reports those sales.
The law effectively makes the marketplace facilitator rather than the online seller responsible for the collection and remittance of the sales tax on a transaction. However, the online seller must provide the marketplace facilitator with all the necessary information about the underlying transactions to allow the marketplace facilitator to remit the tax accurately. For example, online sales platforms, like Etsy and Amazon, are considered marketplace facilitators under Michigan law. These platforms will collect and remit sales tax on behalf of those online sellers that make sales through its platforms. In addition, the Michigan Department of Revenue is waiving, upon request, the penalties for the failure to file or the deficiencies for tax on sales facilitated by a marketplace facilitator for those tax returns due by April 20, 2020.
Disclaimer: Please note this is the information that is readily available at this time, it is subject to change so please consult your Withum tax advisor.
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The State and Local Tax (SALT) laws vary from state to state and are constantly changing. Reach out to Withum’s SALT Team for guidance on how to navigate your state’s local tax laws.
