The information provided below is only a summary of the most current information available. The Marshall Area Economic Development Alliance nor their affiliates assume any liability for its use in legal, tax, accounting or other professional matters. Please consult a tax specialist when considering all business ventures.
The Michigan Corporate Income Tax (CIT) was signed into law by Governor Rick Snyder on May 25, 2011. The CIT imposes a 6% corporate income tax on C corporations and taxpayers taxed as corporations federally. The CIT has one credit, the small business alternative credit, which offers an alternate tax rate of 1.8% of adjusted business income. There are no other credits, except those under the MBT election (addressed below). Insurance companies and financial institutions pay alternative taxes. The CIT replaces the Michigan Business Tax (MBT) for most taxpayers, effective January 1, 2012. Taxpayers with less than $350,000 in allocated or apportioned gross receipts and/or less than or equal to $100 in annual liability are not required to file or pay the CIT. The gross receipts threshold does not apply to financial institutions or insurance companies.
Additionally, on May 25, 2011, the Governor signed into law the MBT election which enables certain MBT taxpayers with certificated or awarded credits to continue using those credits once the CIT is in place. Such taxpayers may elect to continue filing and paying under the MBT until the expiration of the previously-awarded certificated credits.
Source: Michigan Department of Treasury
In the State of Michigan, there is no inventory tax, no matter where you locate. All inventory is exempt from state and local taxes.
Michigan’s property tax system includes competitive, cost-effective exemptions and abatement programs. Firms receive automatic 24-mill reduction on industrial personal property and automatic 12-mill reduction on commercial personal property. In addition, firms may still apply for tax abatements and property rehabilitation incentives.
Full property tax exemptions apply to inventory, special tooling and pollution control equipment.
Homesteads are defined as primary residences that are officially occupied by May 1 of the recorded year. All other residences, including secondary residences, are considered non-homestead.
Property taxes are a function of a property’s taxable value and the applicable millage rate. The millage rate is the amount of tax paid per every $1,000 of taxable value. That value is roughly equal to 50% of the fair market value of the property. These taxes are levied on two types of property in the State of Michigan, “real property” (land and buildings) and “personal property” (machines, equipment, fixtures and signs used by businesses). Each year, the City Assessor’s office estimates the value of all property in the city — both real and personal — as of December 31, otherwise known as “tax day.” The valuation and condition of the owner’s property on this date is used to determine its value. A “Notice of Assessment, Taxable Valuation and Property Classification” is then sent to all property owners about March 1. The notice indicates three values for each property:
Property taxes are calculated using the following formula: Taxable Value ÷ $1,000 x Millage Rate = Tax Levy (amount of taxes to be paid).
Also of note, annual property assessment increases are limited by the State Constitution to the lesser of 5% or the rate of inflation.
As a benefit to businesses, property tax exemptions are available for:
In an ongoing effort to make the state a more attractive place for businesses to invest and grow, Michigan is phasing out its Personal Property Tax (PPT) for most businesses beginning in 2014. This reform will substantially reduce compliance and administrative costs for businesses and will be especially attractive to manufacturers who rely on expensive capital investments in tools and other equipment.
School Tax in Michigan is figured into Property Tax and is part of the millage rates indicated above.
0% as Michigan allows no local sales tax.
6% is the state sales tax on sales of tangible goods. No local sales taxes are allowed. Purchases of manufacturing equipment, pollution control equipment, and energy used in the industrial process are fully exempt from sales taxes.
If the value of the real estate transferred is $100.00 or more, a one-time payment of the state and county transfer tax is required.
Our team will work with the appropriate Michigan state agencies, including the Department of Environmental Quality Assistance and the Department of Energy, Labor & Economic Growth, to ensure that the company obtains the necessary state licenses to do business.
Michigan’s personal income tax rate is one of the lowest in the nation – a flat 4.25%.
To protect workers who lose their jobs through no fault of their own, Michigan businesses pay unemployment insurance on the first $9,000 of wages paid to each worker in a calendar year. Established employers may pay as little as 0.06%.
Michigan has a competitive workers’ compensation (WC) insurance system. Michigan’s “open competition” system allows market forces to set the WC insurance rates, thus enabling companies to shop among nearly 300 insurance carriers for the best, lowest-cost options. Self-insurance, group self-insurance, deductible plans and other options are available, as well.