Telecommunications & ISPs

6% of x? Untangling Michigan’s Service Tax

Half Staff by Apocaplops

UPDATE Oct 25: Carol of writes:

I actually have the entire list of services descriptions covered by the law, on my blog at When the law came out, I cross-referenced the NAICS codes (which are incorporated into the new law specifically by reference) with the section numbers from the bill and the expected new numbers for sections in Michigan Compiled Laws. If you want to see this to determine whether your business services are covered, go to (it’s a big list!)

Political analyst George Weeks writes that in decades of following how Lansing deals with financial crisis, I have never seen enactment of such a bizarre, crazy quilt, irrational, inexplicable, unfair and — most of all, confusing to taxpayers — tax.

Crain’s Detroit Business goes further, calling this The best tax plan lobbyists can buy. Law and accounting services are not taxed, but the broad category of management advice, strategic planning and financial planning and budgeting will be taxed. Hmmm. So a company buying consulting services to help it keep its doors open is making a “discretionary” purchase?

Like many in Michigan, we’re wondering which of the services we provide like online publications (probably not), internet consulting (probably so) or graphic design & marketing (who knows??!!) would be subject to the service tax.

Assuming that movements to repeal or change the tax fail, mLive’s blog gives some idea of what services might be subject to the tax come December 2007. The nebulous “consulting services” is made a whole lot clearer when you click over to see businesses classified under 5416 Management, Scientific, and Technical Consulting Services. It’s surprising to find that in addition the list includes items that are absolutely essential to the development of new businesses in Michigan like site selection, start-up consulting, marketing, and a host of science and technical services.

We invite you to add your thoughts, comments and suggestions for making some sense out of what looks like a fiscal nightmare for Michigan.

Blogs We Dig: Michigan Innovators

Moon Patrol by powerbooktrance

Each post at Michigan Innovators is a video podcast interview with innovators who can or have had an impact on Michigan’s economy. Two professors at the College of Business at Eastern Michigan University, Diana Wong and Bud Gibson, started the site with hopes that it would become a “highly visible repository of stories that showcase the modern, innovate spirit lurking in the Michigan economy” and also to provide material for their classes.

Their features look at the entrepreneurs and companies working in cutting edge technology such as Aaron Crumm’s Adaptive Materials (making fuel cells that provide a 10x improvement over battery power, “technology concierge” Bruce McCully of Dynamic Edge, and Linda Girard, who explains how to Find & Convert Web Customers with her company Pure Visibility.

In addition to searches by industry (web communications to medical research) and by people and place, the blog also allows allows searching by themes like Defining New Markets or Technology & Culture, where you can delve into issues the technological and cultural divide between the US & China.

Shutdown averted … by a service tax

An appeal to reason by Apocaplops

StateGate seems like it might be nearing its conclusion with an 13th hour deal reached at 4 AM when legislators were apparently too tired to fight anymore. The LSJ reports:

“This budget agreement is the right solution for Michigan,” Gov. Jennifer Granholm said in a news release after the vote. “We prevented massive cuts to public education, health care and public safety while also making extensive government reforms and passing new revenue. With the state back on solid financial footing, we can turn our focus to the critical task of jumpstarting our economy and creating new jobs.”

Leaving aside the question (for now) of how much harder it will be to create jobs with a reputation as a state that is financially unstable, let’s take a look at what was added to an income tax hike – the “sales tax expansion”, a 6% tax on services. The Detroit News lists some of the services that might be taxed in New levy to tax 23 services.

The list appears to make little sense, with ski resorts subject to the tax but not golf course, janitorial service providers but not plumbers, tanning but not haircuts and financial & business consulting but not legal and accounting services. What do you bet that TV ads won’t be subject … and also that we’ll be hearing a lot more like this from every industry affected?

“Any service tax should be across the board on all services and not single out specific areas of the economy,” Stephen Kircher, president of Boyne USA Resorts’ eastern operations, said in a statement.

Lansing Area Capital Gains: Volume 1, Issue 1

Summer Night in Old Town by sabatoa

The Model D empire continues its inexorable march to talk about what’s going right in Michigan cities with Lansing Area Capital Gains. The first issue includes a feature by managing editor Brad Garmon on the resurgence of Michigan’s Capital City that begins:

It doesn’t take an urban planner or a census taker to tell you that Lansing has turned some subtle but significant corner on its transformative journey to thriving cityhood. All it takes is a Thursday visit to the corner of Michigan Avenue and Larch Street on a hot summer night when the Lansing Lugnuts are in town…

As with other Model D productions, they blend well written articles with excellent photography and neighborhood profiles (Old Town is their first feature) to deliver a two-fisted uppercut to the jaw to the Michigan’s moaning mainstream media.

The New Ford Simplexity at the Chicago Auto Show

Sync by pinksage

Paddock Talk (a NASCAR racing site) has a transcript of the remarks of Ford President of the Americas Mark Fields at the Chicago Auto Show. He talks about “simplexity” – the state that exists when something is both simple and complex at the same time – and how it relates to the business of designing and selling cars.

While the payoff of Fields’ speech is the fairly mundane news that the Ford Five Hundred will become the Taurus (and Freestyle the Taurus X and Montego, the Sable), I found the deeper implications about the business of making and marketing cars fascinating. When you think about the massive investment a car represents, the idea that it might become a digital/entertainment hub not so silly when you consider that it may be the most significant piece of “real” property an under-30 person owns.

I was sorely tempted to use the photo Ford And Microsoft Birth N’Sync: The End Of The World Is Nigh At Hand from Jalopnik. Although I had never really heard of the concept, apparently simplexity is fairly well established.

Vol I, No. 1: Introduce Your Michigan Business or Organization!

This is a page where we asked folks to say hello. Lots of them did!

The current version of Introduce Your Michigan Business or Organization is right there.

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Tax on services being considered in Lansing

Country Schoolhouse by nomm de photo

The Detroit News reports that some Democrats, Republicans and public policy experts are saying Michigan needs to take a look at extending the sales tax to cover more services and (perhaps) lowering the sales tax overall by a penny (6 ¢ to 5 ¢) to help offset a projected half billion dollar budget deficit. While a tax on all services would generate close to $9 billion, business-to-business services (engineering, legal services, accounting) would likely be exempt due to the adverse impact that could have on economic development. Likewise, medical services would probably be off limits as well reducing the overall revenue to just under $3 billion.

Michigan taxes 26 of 168 services (ranking 39th in the US) and increasing taxes on services is opposed by most business groups including the Michigan Chamber of Commerce who say it’s a “very bad idea” and that a service tax could lead to reduced competitiveness with neighboring states. Thomas Clay of the Citizens Research Council of Michigan says:

Our tax structure is archaic, obsolete. All that economic activity in the service area is not connected to the tax system. If you had a tax on personal services, you could reduce the rate and have sales tax revenue that would grow in the future.

Read Michigan may tax services in the Detroit News and tell us what you think about such a measure in the comments.

Ann Arbor & Washtenaw County a High Tech Beacon

First National Bank Building by Allan M

Today’s Freep has a nice feature on Ann Arbor’s exploding high-tech job scene that says Google is not the only company planning to bring jobs to the city and Washtenaw County. Google, Toyota, Hyundai and others have committed to creating 2,500 jobs in the region over the next five years. That doesn’t include a couple dozen start-ups that expect to add more jobs.

The secret? “You really have to be aggressive in selling the assets of your region,” said Michael Finney, CEO of Ann Arbor SPARK. SPARK was launched by university, business and civic leaders to attract so-called knowledge-based sectors, such as alternative energy and biotechnology. (also check out the Ann Arbor SPARK blog for some great links to entrepreneur resources in the region!)

Ann Arbor SPARK

Michigan Books: Michigan’s Economic Future by Charles Ballard

Jack Lessenberry interviews MSU Economics professor Charles Ballard about his new book Michigan’s Economic Future. Ballard says that manufacturing is destined to be a smaller part of Michigan’s economy and says that the state needs to focus more on cutting edge industrial research. Click for more info on Michigan's Economic FutureJack asks “If Dick DeVos or Jennifer Granholm asks you what the driving force of Michigan’s education policy should be, what would you tell them? Ballard responds “I’d tell them ‘Education, education, education’. He goes on to say that if increasing education spending (and likely taxes) is political suicide, then we’re dead already.

In his accompanying essay, Jack writes:

…Most of all, the economist says, “we need a new set of attitudes — creative, highly skilled, flexible and entrepreneurial.” The situation is far from hopeless. We have a vibrant higher-tech manufacturing sector. We have an industrial work force, much of which is capable of being retrained and retolled.

Professor Ballard feels strongly that, “If we can make the transition to a new mindset, we really can achieve a vibrant economic future for Michigan.” But if that is to happen, it‚Äôs clear that we do need to think outside the box. Charles Ballard‚Äôs eminently sensible suggestions violate the dogmas of both our fossilized political parties.

Democrats are not going to like some of his suggestions about public employee pensions and health benefits. Republicans will be shocked by his suggestions about taxes. But it all makes sense.

Click for more on Michigan’s Economic Future by Charles Ballard and published by MSU Press.

Also see Spartan Podcast’s interview with Charles Ballard.

We do love our cars: Southeast Michigan

TheStrip by Hemicuda82
We do love our cars in Michigan, as this photo of the Summer Classic Car Show in Flint demonstrates. For a century the automobile has defined Michigan and now the demise of the auto industry is redefining us. At Absolute Michigan, we’re trying very hard to fight past the “we lost a ton of jobs” and the bickering about who did what to who that is the media’s ongoing saga and get to the “what do we do now?” place. If you’re interested in going there too, check out Build Michigan and all the tons of businesses (6000+) on Absolute Michigan. You are also encouraged to add a link to your Michigan web site (for free!!)