With the coming of the new year we see the end of the Single Business Tax (SBT) and the start of the Michigan Business Tax (MBT).

The Single Business Tax Is Gone

The SBT is statutorily repealed for all business activity after December 31, 2007.  Final SBT returns are due on April 30, 2008 for all calendar year ending December 31, 2007 taxpayers.  Fiscal year taxpayers with tax years starting in 2008 must file a short period return for the tax period starting in 2007 and ending on December 31, 2007.  The short period returns of fiscal year filers will also be due on April 30, 2008.  The Michigan Department of Treasury (Treasury) has stated that they will grant extensions to fiscal year filers who will be required to file a short period return on April 30, 2008.

The SBT has been the main source of business tax revenue for 32 years.  The main benefits of the SBT are that it provided a consistent stream of revenue to Treasury that grew as the Michigan economy grew.  The SBT provided built in tax incentives for economic growth and expansion.  The downfall of the SBT was its extreme complexity.  As the Michigan economy declined after 2001, it became a burden on Michigan businesses that were loosing money and Treasury saw the stream of revenue declining as the Michigan economy contracted.  The end of the SBT came in 2006 effective for tax years starting after 2007.

The SBT was somewhat of a modern miracle that it survived for 32 years.  It has been a very controversial tax since before its inception.  The broad based SBT was imposed on all forms of business activity irrespective of the legal form of entity.  It replaced a tax structure that taxed almost exclusively corporations.  The SBT was enacted in the summer of 1975 and immediately repeal efforts started.  The repeal efforts did not stop until the final repeal in 2006. 

The Michigan Business Tax Is Here

The MBT is effective starting on January 1, 2008.  Unlike the SBT, there is little opposition to the MBT.  There are not the calls for repeal that accompanied the inception of the SBT.  The MBT, like the SBT, is a broad based tax that cuts across the entire Michigan business economy.  It is predicted that the MBT, which was designed to expand the reach of the tax to more multistate and multinational businesses, will result in tax increases to only about 30% of Michigan based taxpayers.  That figure should increase when taxpayers will first starting paying the tax in 2008.

Like the SBT, the MBT is extremely complicated.  The year 2008 will be a learning year for the MBT.  How long will the MBT last?  No one knows.