The Michigan Department of Treasury (Treasury) has considered, for Single Business Tax (SBT) purposes, that a "statutory employee" is subject to the SBT.  Treasury believes the Single Business Tax Act (SBTA) employee exclusion in the definition of "business activity" is not applicable.

It might be expected that Treasury might also treat a “statutory employee” as subject to the MBT. In the definition of “business activity”, Section 105(1) [MCL 208.1105(1)] excludes “services rendered by an employee to his or her employer…” The Section 109(1) definition of “employee” and the Section 109 (2) definition of “employer” are identical to the SBTA definitions of “employee” and “employer”. [MCL 208.1109]

The MBT issue, though similar to the SBT issue, has a few different twists. If indeed, a ‘statutory employee” is subject to the MBT, then the taxpayer risks exposing income from personal investment activities (dividends, interest, royalties and capital gains) if the assets constitute an integral part of the trade or business or if the income is derived from the active conduct of a trade or business. Furthermore, the “unitary business group” provisions can complicate matters even more. If the “statutory employee” is included in a “unitary business group” by virtue of satisfying both the control test and one of the two relationship tests, then the personal portfolio items and the “statutory employee” wages could be included in a combined MBT return, even if less than $350,000.

The MBT issues for a statutory employee may be a significant reach or extension of the statutory provisions. However, it is possible. The “statutory employee” should make an effort now to segregate and separate the personal investment activity and assets from the “statutory employee” activities. Furthermore, the “statutory employee” should now collect documentation that they are indeed an employee.