If anyone is curious, here’s the link for the Michigan Fair Tax movement:
http://www.fairtaxmi.org/

“Bishop asked Granholm today to order the Department of Treasury not to
implement the service tax if the Legislature can reach a deal by the end of the day. But state Treasurer Bob KLEINE told MIRS, “We can’t do that.”"

House Speaker Andy DILLON (D-Redford Twp.) met with business leaders this morning and Senate Majority Leader Mike BISHOP (R-Rochester) asked Gov. Jennifer GRANHOLM today to ask the Department of Treasury to suspend the implementation of the use tax expansion to services before it goes into effect midnight Saturday, MIRS has learned.

In the mad scramble to find a way to stop the state’s six-cent sales tax from being spread to a variety of allegedly non-essential services in roughly 12 hours, lawmakers and the executive office are exploring several possibilities this morning, including the House reversing course and calling a special session for 6 p.m.

Asked about the seriousness of lawmakers and Granholm to find an alternative to the service tax before midnight that all sides agree to, Bishop said, “We wouldn’t be here with a snowstorm coming if we’re not making progress.”

Thanks for suggesting that I bill today, Carol.

I have posted an article on my blog with general tips applicable in the event that the tax goes into effect, with comments specifically applicable to computer-related businesses. (Of course, none of the information constitutes legal advice; businesses will still need to consult an attorney, CPA or tax advisor to determine what steps to take. I’m required to say that, folks.)

It’s unfortunate and sad, but yes, I am *this* pessimistic about the Legislature’s inability to see beyond its own partisan game-playing to the damage that it is doing to its own core constituencies.

http://arborlaw.com/blog/2007/11/30/michigan-services-tax-goes-into-effect-tomorrow/

Carol Shepherd, Attorney
Arborlaw PLC

We might as well hang a huge red sign saying “GO AWAY — MICHIGAN IS A BAD PLACE TO DO BUSINESS” right on the border.

Here’s one thing I think we can all agree on: Democrat or Republican, it’s time to throw the bums out.

Carol Shepherd, Attorney
Arborlaw PLC

This alone will bring back talks of us in the Upper Peninsula, breaking away forming our own state.

The House Tax Policy Committee will consider a bill Thursday. According to Chairman Rep. Steve Bieda, D-Warren:

“The bill will have a surcharge on the Michigan Business Tax (to go into effect Jan. 1) and it also will repeal and replace the service tax,” Bieda said.

Bieda said there’s a chance the full House may act on the bill Thursday. But his committee also passed legislation delaying implementation of the services tax, which businesses call a job-killer, until Dec. 20 as a precautionary measure.

He said it’s likely the surcharge would be in the neighborhood of 20-25 percent on gross receipts, mitigated by credits. No business would have to pay more than $2 million. It’s uncertain whether the surcharge would be temporary.

For business owners who are individuals (I estimate this will be 75% of businesses covered by the new tax), the registration process is extremely misleading and could cause thousands of businesses to apply unnecessarily for a federal employer ID number (FEIN). Further, the online registration process will not allow registration without an FEIN, even though that does not apply to businesses without employees.

I have posted information about this on my blog:
http://arborlaw.com/blog/2007/11/01/registering-for-the-new-michigan-services-tax/

I recommend that all individuals registering for the services tax read this article to avoid making mistakes that may result in unwanted tax and legal consequences.

Chuck Hadden, chief lobbyist for the Michigan Manufacturers’ Association, said his group is looking at a possible surcharge on the new Michigan Business Tax that takes effect Jan. 1, because it’s the fastest and fairest way to go. He said the business tax could easily be altered by the Legislature and out-of-state companies would pick up part of the bill.

Then we move on to the SE Michigan CEOs:

Detroit Renaissance, an influential group of corporate CEOs from southeast Michigan whose members include the Big Three automakers, this week sent a letter to the governor and legislative leaders saying the new tax “will hurt Michigan’s economic competitiveness and add excessive administrative and compliance burdens on businesses and government alike.”

CEO Doug Rothwell said Wednesday that Detroit Renaissance hasn’t decided whether a replacement tax should be temporary or permanent. But he said the service levy needs to be repealed because “for business it’s very important to have predictability of tax liability.”

He said the service sales tax slated to take effect next month “is counterintuitive because it places a business tax increase on a sector that is growing and providing some jobs.

A suggestion toward the end of the article that Republicans might not want to work toward a replacement tax so they could use it in the 2008 elections about made me want to throw up – sooner or later folks on both sides of the aisle need to grow up and realize that they might be fighting over the ruins of our state.

Yes, I’m sure that 99% of the business owners out there impacted by this laundry list have no idea that they are on there.

You’re not the only one who can figure out if web development and programming are taxable. Straight programming, probably no. “Consulting” with a client on SEO or public relations aspects of websites, probably yes.

Note that the NAICS codes do not operate as exclusive boxes. The State could decide your services fall into several of these ‘boxes’.

Then what do you do, collect taxes on “consulting” aspects but not on programming? That’s interesting, because right now, under the sales tax (ie the one in effect prior to this change in law), the Treasury regulations specify that mixed taxable/untaxable items on the same invoice, will subject the entire invoice to the application of the tax.

I assume that this will be extended by analogy to the services tax categories — which will result in many more services being taxed, than what they are admitting to in the official coverage.

That’s why they ain’t sayin’.

Carol Shepherd, Attorney
Arborlaw PLC, Ann Arbor, MI

I still can’t figure out if web development/programming is taxable or not though…

Thanks a bunch for adding this!

The problem with these NAICS codes is that they are merely standard industry classification codes used by the Census Bureau. They are not mutually exclusive, there is a lot of overlap. So if you feel your business belongs in a NAICS code which is NOT on the list, but some of your services COULD fall under another NAICS code description, you have no confidence that the Treasury Department won’t decide to nevertheless apply the tax to you. If your services are “consulting,” woe unto you.

We are counting down with just over 30 days to go until this tax takes effect. Meanwhile, the Treasury has issued no official guidance or regulations which will help businesses, lawyers and tax professionals to determine who is and who is not covered, and therefore responsible for collecting and paying the tax.

It’s a sad state of affairs.

Carol Shepherd, Attorney
Arborlaw PLC, Ann Arbor, MI