Taxes

Michigan lawmakers approved significant corporate tax reform that went into effect at the beginning of 2012. They sanctioned a significant package of corporate tax changes. Most importantly, they eliminated the GRT, implemented a flat 6% net income tax, and broadened the tax base by eliminating tax preferences.

State Tax Climate
Significant policy changes have been behind Michigan’s economic recovery. Since elected to office in 2000, Governor Rick Snyder has enacted key legislation to encourage investment and job creation in the state. Key measures include:
  • Right-to-work legislation for Michigan’s private and public sectors went into effect on March 28, 2013
  • Significant tax reforms which went into effect in early 2012
    • Eliminated the Gross Receipts Tax
    • Implemented a flat 6% net income tax
    • Broadened the tax base by eliminating tax preferences
  • Phase out of Personal Property Tax
For more information on the tax reforms, visit www.taxfoundation.org/blog/michigan-implements-positive-corporate-tax-reform According to the Tax Foundation, Michigan’s total tax burden is nearly identical to the U.S. average.
Michigan Tax Rate U.S. Average
Tax Burden 9.84% 9.90%
Source: Tax Foundation “Tax burden” is computed by totaling the amount of state and local taxes paid by state residents to both their own and other governments and then divide these totals by each state’s total income. 
State Tax Rates
Michigan has moved to a flat 6% sales tax, effective in January 2012.
Michigan Corporate Income Tax (Effective January 1, 2012) State Local
Corporate Income Tax - applies to C Corporations only Pass-through entities like S corps, LLCs, partnerships and sole proprietors pay tax on business income under the personal income tax. 6% 0%
Tax Base Federal Taxable Income (Apportioned) 0%
Formula (e.g. Sales, Property & Payroll)/ Apportionment 100% Sales 0%
Federal Taxes Deductible No
Accelerated Depreciation Permitted (Yes or No) Yes
Personal Income Tax
Personal Income Tax State Local
Rate (Range) 4.35% 0%
Earned Income 4.35% 0%
Unearned Income (e.g. Dividend) 4.35% 0%
Local Occupation Tax (Paid by Employee) 0% 0%
City Residents 0%
Non-City Residents 0%
Local Wage Tax (Paid by Employer) 0% 0%
City Residents 0%
Non-City Residents 0%
Sales and Use Tax
Sales/Use Tax
State 6%
Local 0%
Total 6%
Sales Tax Rate by Utility:
Electric Power *Exempt
Natural Gas *Exempt
Oil Fuel *Exempt
Water 0%
Sewer 0%
Hazardous Waste Disposal Contact SEDP
*Exempt if used directly in manufacturing Source: Michigan Economic Development Corporation
Machinery and Equipment Exemptions
Machinery & Equipment Subject to Sales/Use Tax
Production Exempt
Non-Production Taxable
Pollution Control Exempt
Office Furniture/Fixtures/Equipment Taxable
               Sales/Use Tax (Yes or No) on
Office Building Construction Materials Taxable
Industrial Building Construction Materials Taxable
Manufacturers' Raw Materials Exempt
Standard Software Taxable
Custom Software Exempt
Intangible Property
Describe What is Subject to Tax Rate (e.g. Accounts Exempt
Receivable, Capital Stock) Exempt
Basis & Rate Exempt
Stock Bond Transaction Fee (Yes or No & its Yes Rate) Exempt
Source: Michigan Economic Development Corporation
Additional Real Property Taxes and Exemptions
State Property Tax Effective Rate per $100
Real Property 6 Mills
Personal Property (Non-Industrial) 6 Mills
Personal Property (Industrial) Exempt
Subject to Personal Property Tax
Production Machinery & Equipment Reduced Rate
Non Production Machinery & Equipment Taxable
Pollution Control Exempt
Inventory Exempt
Raw Materials Exempt
Work in Progress Exempt
Finished Goods Exempt
Freeport Legislation N/A
Applicable to Warehousing N/A
Applicable to Manufacturing N/A
Goods Stored in a Public Warehouse N/A
Office Furniture-Fixtures Reduced Rate
Computer Equipment Reduced Rate
Workstations Reduced Rate
Telephones Reduced Rate
Furniture Reduced Rate
Company Vehicles Exempt
Standard Software Taxable
Custom Software Exempt
* Industrial personal property is exempt from 24 mills and commercial personal property is exempt from 12 mills.