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The sales tax is based on the gross proceeds from retail sale of tangible personal property for use or consumption. It also includes certain conditional and installment lease sales; sales to consumers of electricity, gas and steam; and sales to persons in real estate construction and improvement business.
The Sales Tax is actually a combination of two taxes, a 4% tax and a 2% tax. The 4% tax is established by law within the confines of a 4% limitation dictated by Michigan's Constitution. These percentage points are expressed as the maximum rate that may be set by the legislature. In 1994, Michigan voters approved an additional 2% tax.
The Michigan use tax is assessed for the privilege of using, storing and consuming certain tangible personal property, plus the services of telephone, telegraph and other leased wire communications; used auto sales between individuals; and use of transient hotel and motel rooms.
Wease Halloran has extensive litigation and appellate experience with Michigan taxes including the most common state sales and use tax controversies involving:
Corporate Officer Liability
The Department has authority to assess officers, members, managers, and/or partners for the tax liabilities of a corporation, limited liability company, limited liability partnership, limited partnership or a partnership. The Corporate Officer Liability process begins when a corporation fails to file returns and/or pay taxes due to the State of Michigan. Department staff will perform an investigation in order to identify all individuals who may be held personally liable for the corporation's failure to file returns and/or submit payment. The time limits to protest such assessments are severely limited.
Exemptions
Certain sales are exempt from taxation. Exemption from sales tax may depend on the following factors:
- Status of purchaser
- Item purchased
- Transaction type
- Status of seller
- Use of the property or service
Exemptions are strictly construed in favor of the taxing authority and the burden of proving
entitlement to an exemption rests on the taxpayer asserting it. Each Michigan tax has its individual provisions for specific exemptions.
Sale of a Service versus Tangible Personal Property
Distinguishing between the sale of a service and the sale of tangible personal property is based on the "incidental to service test" prescribed by the Michigan Supreme Court.
Statute of Limitations
The Michigan Revenue Act provides the Department with a four year general statute of limitations period in
which to assess a taxpayer. Further, a taxpayer has four years from the filing date of an original
return to request a refund. There are other factors that impact the statute of limitations with respect to conduct of audits and collections.
Successor Liability
If a taxpayer purchases an active or closed business (including stock of goods or even the
transfer of a liquor license), the purchaser may be held liable as a successor for the unpaid taxes.
A purchaser may avoid the possible liability at the time of the purchase by requiring the seller to
provide a Tax Clearance Certificate from the Collection Division stating that no taxes
are due. Otherwise, the purchaser must set aside (escrow) sufficient money to pay the taxes,
interest and penalties owed by the seller. The purchaser’s liability for the seller’s tax debts is
limited to the fair market value of the business or assets less the sale proceeds applied to debts
for which there is a superior secured interest.
Determining whether legal counsel is right for you and your matter can only be done through personal contact. Initial meetings are always in person and always at no charge.
Ideally, the best time to contact us is when you first receive notice from the taxing department. Addressing tax issues early in the audit or administrative appeal process enables us to provide the best analysis and planning to resolve the issue. However, we will consult with you at any point in the appeals or litigation process. Wease Halloran has the depth of experience and focus that is unparalleled in the Michigan legal market.
- Michigan Department of Treasury Audit Defense & Informal Conference
- Michigan Court of Claims Litigation
- Tax Appeals before the Michigan Tax Tribunal
- Appeals to the Michigan Court of Appeals and Michigan Supreme Court
Contact Wease Halloran to schedule an appointment to discuss your particular state and local tax matter. |
