State & Local Tax Blog

What’s Going on in Michigan?

On October 2, 2007, the Governor signed a bill imposing a sales tax on 23 new services to be effective December 1, 2007. These services are:

— business service center services;
— consulting services;
— investment advice services;
— janitorial and landscaping services;
— warehousing and storage services;
— packaging and labeling services;
— document preparation services; and
— many personal services, such as concierge and psychic services.

Now they’re getting cold feet. That’s good.

So then on November 1, the Michigan Senate has passed a bill (S.B. 845) to postpone the imposition of the new 6% use tax on services from December 1, 2007, to December 20, 2007.

According to CCH, the goal of this new bill is to provide the Legislature additional time to find an alternative to the new tax.

Then the Michigan Senate has passed S.B. 838, a bill to repeal the imposition of the new 6% use tax on selected services immediately when the tax takes effect on December 1, 2007. S.B. 845, a bill to postpone the imposition of the new tax from December 1, 2007, to December 20, 2007, can only take effect if S.B. 838 is enacted.

Sounds to me like it’s back to the drawing board for MI, if the Governor signs this bill.

The Detroit Free Press even editorialized on the new tax law, saying it is “capricious, complicated and potentially burdensome to businesses big and small. It taxes an odd mix of services and exempts others, based, evidently, on legislative perceptions of what sort of spending for services is discretionary as opposed to necessary — and on who had the loudest lobbyists when the tax plan was being duct-taped together.”

Ouch.

They’re saying it’s “time to bring serious proposals out into public view, with plenty of time for everyone to dissect them, discuss them, and, if needed, present them to voters next August or November.”

Let’s see how things develop there.

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