Michigan Senate Passes Bill
to Amend State Business Tax Bringing Canadian Transborder Carriers One Step
Closer to Reciprocity
(February 6, 2008) -- The Ontario Trucking
Association’s effort to gain reciprocity for Canadian transborder carriers
currently subject to the new Michigan Business Tax (MBT) took a big step forward
yesterday when the State Senate passed a bill that would eliminate the
tax liability for motor carriers from jurisdictions which do not impose
similar taxes on Michigan-based carriers.
The bill must still make it through the Michigan House
of Representatives and ultimately be signed by the Governor. According to OTA
President David Bradley, “we still have a ways to go, but we are confident
that the common-sense approach reflected in the senate’s bill will
prevail. At a time when the mid-continent manufacturing sector is under
significant competitive pressure it makes no sense to add costs to the
transborder supply chain or to invite possible retaliation from jurisdictions
which presently do not impose such taxes on businesses from elsewhere unless
those businesses have a permanent establishment in that jurisdiction.”
Bradley says that OTA’s discussions with members
of the House of Representatives and Michigan Treasury officials have been very
productive so far. “I think there is a genuine desire to resolve this
matter.”
The MBT is a two-part tax which includes a corporate
income tax component and a revenue-based (gross receipts) component. The income
tax is imposed at a rate of about 5% of a taxpayer’s apportioned income
tax base. The gross receipts tax is imposed at a rate of 0.80% and includes all
sales activities in Canada and the United States. Canadian businesses, including
trucking operations that conduct business in the state could be subject to at
least the gross receipts tax even if they do not have a permanent establishment
in Michigan and only operate into, out of or through the state. Ontario and
other Canadian provinces abide by the principles of the Canada-US Tax Treaty and
international tax norms and do not impose corporate income or gross receipts
taxes on out-of-province businesses that do not have a permanent establishment
in their province. While the formula for calculating the tax is very complex and
dependent upon a number of factors, OTA estimates that the tax liability for
Ontario carriers could be in a range around $1,000 per truck per year.
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