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.
