August 22, 2007, Introduced by Rep. Cushingberry and referred to the Committee on Tax Policy.
A bill to provide for the levy, assessment, and collection of
an excise tax on certain services; to provide exemptions; to
appropriate the proceeds; to prescribe certain powers and duties of
certain state departments; and to prescribe penalties.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"service providers excise tax act".
Sec. 3. As used in this act:
(a) "Affiliated group" means 2 or more United States
corporations, 1 of which owns or controls, directly or indirectly,
80% or more of the capital stock or other ownership interest with
voting rights of the other United States corporation or United
States corporations.
(b) "Controlled group" means a controlled group of
corporations as defined by section 1563 of the internal revenue
code, 26 USC 1563.
(c) "Department" means the department of treasury.
(d) "Employee" means an employee as defined in section 3401(c)
of the internal revenue code, 26 USC 3401, in effect on January 1,
2007. A requirement that an employer withhold taxes from a person
for federal income tax purposes is prima facie evidence that the
person is an employee.
(e) "Entities under common control" means entities described
in the United States department of treasury regulation 1.414(c)
relating to 2 or more trades or businesses qualifying for pension,
profit-sharing, and stock bonus plans.
(f) "Gross receipts" means the total amount of consideration,
including cash, credit, property, and services, for which services
are sold, valued in money, whether received in money or otherwise,
without any deduction for the service provider’s cost of the
service sold, the cost of materials used or installed, labor or
service cost, interest, losses, costs of transportation to the
service provider, taxes imposed on the service provider other than
the tax imposed under this act, and any other expense of the
service provider. Gross receipts do not include the following:
(i) Discounts, including cash, term, or coupons that are not
reimbursed by a third party that are allowed by a service provider
and taken by a service provider on a sale of a service.
(ii) Interest, financing, and carrying charges from credit
extended on the sale of services, if the amount is separately
stated on the invoice, bill of sale, or similar document given to
the purchaser.
(iii) Any taxes legally imposed directly on the purchaser that
are separately stated on the invoice, bill of sale, or similar
document given to the purchaser.
(g) "Intermediary" means a person to whom a service is sold
who specifically charges a third person for that service and that
third person is the ultimate recipient of that service.
(h) "Parent cooperative preschool" means a nonprofit,
nondiscriminatory educational institution, maintained as a
community service and administered by parents of children currently
enrolled in the preschool, that provides an educational and
developmental program for children younger than compulsory school
age, that provides an educational program for parents, including
active participation with children in preschool activities, that is
directed by qualified preschool personnel, and that is licensed by
the department of labor and economic growth pursuant to 1973 PA
116, MCL 722.111 to 722.128.
(i) "Person" means an individual, firm, partnership, joint
venture, association, social club, fraternal organization,
municipal or private corporation whether or not organized for
profit, company, limited liability company, estate, trust,
receiver, trustee, syndicate, the United States, this state, any
political subdivision of this state, or any other group or
combination acting as a unit, unless the intention to give a more
limited meaning is indicated by the context.
(j) "Service" means an activity engaged in for another person
for a fee, retainer, commission, or other consideration, including
a professional service, which activity predominantly involves the
performance or delivery of a task or process as distinguished from
the transfer or production of tangible personal property. In
determining whether an activity is a service for purposes of this
act, the intended use, principal objective, or ultimate objective
of contracting parties is not controlling.
(k) "Service provider" means a person performing or delivering
a service. However, if the department determines that it is
necessary for the efficient administration of this act to regard a
person as an agent of a dealer, distributor, supervisor, employer,
or person under whom they operate or on behalf of whom they perform
or deliver a service, irrespective of whether that person is
performing or delivering a service on his or her own behalf or on
behalf of that dealer, distributor, supervisor, employer, or other
person, the department may regard that person as an agent and may
consider the dealer, distributor, supervisor, employer, or person
under whom they operate or on behalf of whom they perform or
deliver a service as performing or delivering a service for the
purposes of this act.
(l) "Taxpayer" means a person subject to the tax levied under
this act.
(m) "United States corporation" means a domestic corporation
as that term is defined in section 7701(a)(3) and (4) of the
internal revenue code, 26 USC 7701.
Sec. 5. (1) There is levied upon and there shall be collected
from every person performing or delivering a service in a
transaction, in which that service is received in this state by the
purchaser or the purchaser's designee, a specific tax on the gross
receipts from the provision of the service at a rate determined by
the legislature.
(2) The department may use the services, information, or
records of any other department or agency of state government in
the performance of its duties under this act, and other departments
or agencies of state government shall furnish those services,
information, or records upon the request of the department.
Sec. 7. Services subject to the tax levied under this act
include only those services specifically identified by the
legislature.
Sec. 9. Services sold to any of the following are exempt from
the tax levied under this act:
(a) A nonprofit school, nonprofit hospital, or nonprofit home
for the care and maintenance of children or aged persons operated
by an entity of government, a regularly organized church,
religious, or fraternal organization, a veterans' organization, or
a corporation incorporated under the laws of this state, if the
income or benefit from the operation does not inure, in whole or in
part, to an individual or private shareholder, directly or
indirectly, and if the activities of the entity or agency are
carried on exclusively for the benefit of the public at large and
are not limited to the advantage, interests, and benefits of its
members or any restricted group.
(b) A parent cooperative preschool.
(c) A regularly organized church or house of religious
worship, except when the service is used or consumed in an activity
that is mainly a commercial enterprise.
(d) Persons engaged in a business enterprise and using or
consuming the service in the tilling, planting, caring for, or
harvesting of the things of the soil; in the breeding, raising, or
caring for livestock, poultry, or horticultural products, including
transfers of livestock, poultry, or horticultural products for
further growth; or in the direct gathering of fish, by net, line,
or otherwise only by an owner-operator of the business enterprise,
but not a charter fishing business enterprise. A service is exempt
under this subdivision only to the extent that that service is used
for the exempt purpose stated.
(e) The holder of a water pollution control facility tax
exemption certificate issued under part 37 of the natural resources
and environmental protection act, 1994 PA 451, MCL 324.3701 to
324.3708, or an air pollution control facility tax exemption
certificate issued under part 59 of the natural resources and
environmental protection act, 1994 PA 451, MCL 324.5901 to
324.5908, if the service is used to install a facility as that term
is defined in section 3701 or 5901 of the natural resources and
environmental protection act, 1994 PA 451, MCL 324.3701 and
324.5901.
(f) The United States, its unincorporated agencies and
instrumentalities, any incorporated agency or instrumentality of
the United States wholly owned by the United States or by a
corporation wholly owned by the United States, the American Red
Cross and its chapters and branches, and this state or its
departments and institutions or any of its political subdivisions.
(g) An organization not operated for profit and exempt from
federal income tax under section 501(c)(3) or 501(c)(4) of the
internal revenue code, 26 USC 501, but only to the extent that the
service is used to carry out the purposes of the organization as
stated in the organization's bylaws or articles of incorporation or
organization. The exemption under this subdivision is limited to
the percentage of exempt use to total use determined by a
reasonable formula or method approved by the department.
(h) A manufacturer, for direct use by the manufacturer in
manufacturing. As used in this subdivision:
(i) "Manufacturer" means a person engaged in manufacturing.
(ii) "Manufacturing" means the activity of transforming,
altering, or modifying tangible personal property by changing the
form, composition, or character of the tangible personal property
for ultimate sale at retail.
(i) An extractor, for direct use by the extractor in an
extractive operation. As used in this section:
(i) "Extractive operation" means the taking or extracting from
land for resale ore, oil, gas, coal, timber, stone, gravel, clay,
minerals, or other natural resource material.
(ii) "Extractor" means a person engaged in an extractive
operation.
(j) The organizing entity of a qualified athletic event, if
that organizing entity is or would be exempt from the tax levied
under the general sales tax act, 1933 PA 167, MCL 205.1 to 205.78,
as provided in section 5b of the general sales tax act, 1933 PA
167, MCL 205.55b, but only for services included in corporate
sponsor contracts for the event.
(k) An intermediary.
(l) A member of an affiliated group, a controlled group, or
entities under common control, when sold to another member of the
same affiliated group, controlled group, or entities under common
control.
Sec. 11. For the purpose of proper administration of this act
and to prevent evasion of the tax levied under this act, evidence
that a service has been received in this state is prima facie
evidence that the service is subject to tax.
Sec. 13. (1) Except as otherwise provided in subsections (2)
and (4), every person performing or delivering a service subject to
the tax levied under this act, on or before the twentieth day of
each calendar month, shall file with the department a return for
the preceding calendar month, in a form prescribed by the
department, showing information the department considers necessary
for the proper administration of this act. At the same time, each
person shall pay to the department the amount of tax imposed by
this act with respect to the services covered by the return.
(2) If considered necessary to ensure payment of the tax
levied under this act or to provide a more efficient
administration, the department may require and prescribe the filing
of returns and payment of the tax for other than monthly periods.
(3) The tax levied under this act shall accrue to this state
on the last day of each calendar month.
(4) If a due date falls on a Saturday, Sunday, state holiday,
or legal banking holiday, the tax levied under this act is due on
the next succeeding business day.
Sec. 15. (1) For purposes of the tax levied under this act, a
taxpayer shall source a transaction for a service as follows:
(a) If the service is received by the purchaser or the
purchaser's designee at a business location of the service
provider, the transaction is sourced to that business location.
(b) If the service is not received by the purchaser or the
purchaser’s designee at a business location of the service
provider, the transaction is sourced to the location where the
service is received by the purchaser or the purchaser’s designee,
if known to the service provider.
(c) If a transaction for a service is not sourced under
subdivision (a) or (b), the transaction is sourced to the location
indicated by the purchaser's address available from the service
provider’s business records maintained in the ordinary course of
the service provider’s business, provided use of the address does
not constitute bad faith.
(d) If a transaction for a service is not sourced under
subdivision (a), (b), or (c), the transaction is sourced to the
location indicated by the purchaser's address obtained at the
completion of the transaction, including the address of the
purchaser’s payment instrument if no other address is available,
provided use of the address does not constitute bad faith.
(e) If a transaction for a service is not sourced under
subdivision (a), (b), (c), or (d) or if the service provider has
insufficient information to source the transaction under
subdivision (a), (b), (c), or (d), the sale shall be sourced to the
location where the service provider performed the service.
(2) As used in this section, "receive" means making first use
of a service.
Sec. 17. (1) A person engaged in the business of performing or
delivering a service shall not advertise or hold out to the public
in any manner, directly or indirectly, that the tax levied under
this act is not considered an element in the price to the purchaser
of the service.
(2) A taxpayer may reimburse himself or herself by adding to
the price of a service any tax levied under this act. A taxpayer
shall separately state the tax levied under this act on any
invoice, bill of sale, or similar document given to the purchaser.
The taxpayer shall compute the tax to the third decimal place and
round up to a whole cent when the third decimal place is greater
than 4 or round down to a whole cent when the third decimal place
is 4 or less.
(3) Any tax collected by the taxpayer from the purchaser under
this act is for the benefit of this state and a person other than
this state shall not derive a benefit from the collection or
payment of the tax levied under this act.
Sec. 19. (1) This act shall be administered by the department
under 1941 PA 122, MCL 205.1 to 205.31, and this act. If the
provisions of 1941 PA 122, MCL 205.1 to 205.31, and this act
conflict, the provisions of this act shall apply.
(2) The department may promulgate rules to implement this act
under the administrative procedures act of 1969, 1969 PA 306, MCL
24.201 to 24.328.
Sec. 21. (1) If a taxpayer refunds or provides a credit for
all or a portion of an amount paid for a service the gross receipts
for which are subject to the tax levied under this act within the
time period stated in that taxpayer's refund policy or 180 days
after the initial billing for the service, whichever is sooner,
that taxpayer shall also refund or provide a credit for the tax
paid under this act on all or that portion of the amount paid for
services that is refunded or credited.
(2) A cause of action against a service provider for
collecting an amount greater than the tax levied under this act
does not accrue until 60 days after a purchaser has provided
written notice of that claim to that service provider. The
purchaser shall provide sufficient information to determine the
validity of the request in the notice provided to the service
provider.
Sec. 23. A taxpayer shall make a final return under this act
within 20 days after the date that taxpayer sells that taxpayer's
business or a stock of goods or quits the business.
Sec. 25. (1) A taxpayer shall keep accurate and complete daily
records of services provided, receipts, invoices, and all pertinent
documents in a form the department requires. These records shall be
retained for a period of 4 years after the tax levied under this
act to which the records apply is due or as otherwise provided by
law.
(2) A taxpayer who is also engaged in a business, occupation,
or profession not subject to the tax levied under this act shall
maintain books and records to show separately the transactions for
services used to determine the amount of the tax levied under this
act. If the taxpayer fails to maintain separate books and records
as required under this subsection, the tax under this act is levied
on the entire gross receipts of all the taxpayer's businesses. The
taxes levied under this act are a personal obligation of the
taxpayer.
(3) If the department considers it necessary, the department
may require a taxpayer, by notice served upon that taxpayer, to
make a return, render under oath certain statements, or maintain
certain records the department considers sufficient to show whether
or not that person is liable for the tax under this act.
(4) A purchaser may provide a blanket exemption certificate in
a form prescribed by the department that covers all exempt
transactions for services between a taxpayer and that purchaser for
not more than 4 years as stated on the blanket exemption
certificate, if that period is agreed to by the taxpayer and the
purchaser.
Sec. 27. (1) If a taxpayer claims an exemption from the tax
levied under this act, the taxpayer shall obtain information
identifying the purchaser and the basis for the claim of exemption
at the time the services are provided or at a later date.
(2) A taxpayer shall maintain a record of all exempt
transactions and shall provide that record to the department upon
request.
Sec. 29. The department shall deposit all money collected
under this act in the state treasury to the credit of the general
fund.
Sec. 31. This act takes effect October 1, 2007.