Background :
We are a small Corporation in State of California and have no other
offices through out united state except the one in California .
In year 1999, 2000 and 2001, we deliver technology installation
projects and services to a Client of us that its main office is in
State of Michigan.
We basically installed Cash registers, Modems, wires and computers in
their stores in all 50 states for this company.( Only about three to
four of their stores are in State of Michigan ).
We know our client internally charged the project cost to each of its
store as a fix cost.
We received invoices from our own suppliers and subcontractors that
had taxes on them and we paid their Invoices fully.
We sent our bills to our Client in Michigan and they paid for it.
Our billing had our time + its mark up and actual cost of our material
and sub contractors as a lump sum with no details since, we had
negotaited a unit price per store.
Issue:
We have learned that State of Michigan has a tax called "services
tax". We do not have this tax in state of California and its concept
and applicablity is unknown to us
Question:
#1- Are we liable to state of Michigan Service Tax for the above
services in all 50 states since we send all our billings to the
Headquarter of our client and not to individual stores , Please be
advised that We have not been charged for Michigan Service tax, is
there any statue of limitation and what is percentage is this
service tax ? We nned to know rather than be worry
Thanks |
Clarification of Question by
popol-ga
on
23 Jun 2005 17:37 PDT
I belive I should of refer to "use tax rather" than "service tax".
We also had programer , programin for this clinet 2000 and 2001. This
programer were contrcators and they received 1099.
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Clarification of Question by
popol-ga
on
23 Jun 2005 17:38 PDT
I believe I should of referred to "use tax rather" than "service tax".
We also had programmer , programming for this client 2000 and 2001.
This programmer were contractors and they received 1099.
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Request for Question Clarification by
cynthia-ga
on
24 Jun 2005 12:51 PDT
Hi popol,
I located the "remote Sales Tax" (USE TAX) information at the State OF
Michigan web site. It appears to me as if there a good possibility
there IS a tax liability or reporting requirement. However,
considering the many variables, such as goods being shipped states
other than Michigan, the only way to be sure is to call the Michigan
STate Treasury Dept. I have not done that yet...
First, read below...
Michigan's Use Tax (Remote Sales Tax)
http://www.michigan.gov/treasury/0,1607,7-121-1748_1904_1989-5781--,00.html
..."The remote sales tax (use tax) applies to purchases when Michigan
sales tax is not charged. Use tax of 6 percent is due on the total
price (including shipping and handling charges) of all taxable items
brought into Michigan, purchases by mail from out-of-state retailers,
and purchases made on the Internet. It applies to purchases made in
foreign countries as well as other states. Use tax can be paid on the
Michigan Income Tax Return..."
Voluntary Disclosure - Multi-Year
Apportionment Schedule for Single Business Tax
http://www.michigan.gov/documents/4132_123850_7.pdf
This is relevant..
Michigan Sales and Use Tax Certificate of Exemption
TO BE RETAINED IN THE SELLER?S RECORDS - DO NOT SEND TO TREASURY.
http://www.michigan.gov/documents/3372_web_fill_102204_106877_7.pdf
Use Tax
http://www.michigan.gov/treasury/0,1607,7-121-1750_2143_2153-15482--,00.html
Common Sales and Use Tax Exemptions and Requirements
http://www.michigan.gov/treasury/0,1607,7-121-1750_2143_2153-15487--,00.html
Exemption Qualifications for Instate and Outstate Purchases, Leases or Rentals
http://www.michigan.gov/treasury/0,1607,7-121-1750_2143_2153-15494--,00.html
I don't think this applies to you..
**************************************************************************
The only way to get a difinitive answer is to call the phone number
below, explain the situation, and ask specific questions based on your
posting here. Obviously, based on the information you provided, 6% is
a sizable amount. I assume you'd like to discover if you had a
responsibility to collect and pay the use tax, before deciding what to
do.
About Discovery and Tax Enforcement
(517) 636-4120
This is the fraud division, they will have all the answers. There is
also a division that is called Voluntary Reporting, read that.
...You have left no identifying information here., would you like me
to call them for you? It may be better to have a third party call.
After all, I don't know the name of your company, or theirs.
I am busy this afternoon (Friday), and they will be closed over the
weekend. Let me know by Monday morning what you'd like me to do.
~~Cynthia
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Clarification of Question by
popol-ga
on
25 Jun 2005 11:59 PDT
Dear Cynthia, thank you for your comment and research. Being a Google
addict, I accessed all these sites and got the same info. I also have
called The ?fraud division? , I already feel guilty ? Fraud ?wooo
I have contacted them and the first thing they asked , was my First
name, last name , social security , phone number , address , name of
the first born and bank account number?.. before they even answer any
question.
Unfortunately all of the Michigan State wants is to collect as much as
possible. Specially from out of State Small business. That has no
money to fight them?
The story dose not end her.
Then also try to establish whether one have Nexus in State of
Michigan . Nexus is a method to re classify an out of State Business
to be fully taxable in State of Michigan.
I read the questioner that determine who has nexus in Michigan and
they have covered every one passing through Michigan.
We do not mined to pay the 6% for programming services that we
delivered in State of Michigan to our client but we do not believe
we should do the same for services we delivered out of State . Our
Subcontractor paid their own states taxes and they charged us for it .
Then paying two different state Taxs for the same service is too much.
Also all use tax definition is based on ?all taxable items brought
into Michigan, purchases by mail from out-of-state retailers, and
purchases made on the Internet ?
Our installation services was not in State of Michigan and were not
brought into Michigan ?
Regarding you calling them. I appreciate your assistance.
Question is simple.
Is an out of State Company liable for Michigan use tax when it
delivers its services to 49 states but gets paid by a Michigan based
Corporation ?
Please let me , know and thank you for your time.
I leave a very high recommendation for you in Google not because , we
have the answer , but because you cared.
Thanks
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Request for Question Clarification by
cynthia-ga
on
27 Jun 2005 18:25 PDT
Hi again popol,
I got the same response as you, they do not want to give information
until they know who they are talking to, and why you want to know... I
didn't want to direct them to this page for obvious reasons. I'm
trying to think of an alternative method of discovering the
information, perhaps a different department, posing as an out-of-state
business --CONSIDERING doing business with a Michigan Company, wanting
to know how to comply with the Use Tax laws.
What do you think?
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Clarification of Question by
popol-ga
on
28 Jun 2005 09:20 PDT
Dear Cynthia
Thank you very much for assisting me.
Then , you see what I have been dealing with.
In their questioner they have questions that are not clear and
answering wrong will cause a lot of trouble.
Why they can not be clear ? I do not know.... I know , they like to collect
I agree with you , posing as an out-of-state business --CONSIDERING
doing business with Michigan Company, wanting to know how to comply
with the Use Tax laws.
I believe the questions are simple.
#1 ? You are an electrician (Contractor) and want to sub contract
another electrician ( Contractor ) in state of Michigan, should you
pay Michigan use taxes (on top of the taxes Michigan Subcontractors
pays to state ) , when you bill your customer in state of Michigan.
#2- You are an electrician (Contractor) and want to sub contract
another electrician (Contractor ) in other state , should you pay
Michigan use taxes (on top of the taxes Michigan Subcontractors pays
to state ) , when you bill your customer in state of Michigan.
#3- Does Any of the above create Nexus (appearance of having business
in state of Michigan) . This is when you do both of the above
activities. Could #1 effects #2 or visa versa.
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Hi popol,
That was a bit easier. I spoke with a woman named Kathy in the
Technical Services Dept. Technical as in the technical aspects of
Michigan Tax Law.
Here are the answers to the questions as you posed them:
Question 1) Tax (sales or use) is only paid once. If a subcontractor
buys material in Michigan and sales tax is paid at the time materials
are purchased --that's it. Done, no more tax.
Question 2) No. Additionally, if a subcontractor pays tax twice (once
in another state, and again in Michigan) and can demonstrate this,
Michigan will happily refund any overpaid tax.
Question 3) Possibly, it depends. I was having such good luck, I
didn't press, except:
I also asked Kathy for references on State Of Michigan website --so my
boss can read for himself.
Although I have linked to the page where you can find the links my
computer is not liking PDF files the last couple days, so I can't link
you directly to the files... Here's how you get to them from the front
page in the future:
START HERE: http://www.michigan.gov/treasury
On the right, under "Treasury Quick Links" select "Revenue
Administrative Bulletins"
From there, scroll and click on specific years to read these specific Bulletins:
1999-1 - Use Tax Nexus Standards
1999-2 - Sales and Use Taxation in the Construction Industry
http://www.michigan.gov/treasury/0,1607,7-121-1748_1904_2027-7211--,00.html
Note there are other Titles that may apply.
1998-1 - Single Business Tax Nexus Standards
http://www.michigan.gov/treasury/0,1607,7-121-1748_1904_2027-7232--,00.html
You *could* call the number below, ask for the Technical Services
Dept, and get Kathy on the phone, she was very friendly and helpful.
This was an adventure! ...*PHEW*...
I hope this helps, it sounds like good news to me. If I can be of
further assistance in regards to Michigan's Remote/Use tax and out of
state subcontractors, please don't hesitate to ask via a
clarification, before rating this answer, and I'll be happy to assist
further...
~~Cynthia
Search strategy (final):
I went to the Contact page and selected:
Sales, Use and Withholding Taxes
Phone: (517) 636-4730
Fax: (517) 636-4491 |
Clarification of Answer by
cynthia-ga
on
28 Jun 2005 11:02 PDT
Whoops! I forgot to mention, I told Kathy I worked for an Electrical
Contractor --in Seattle, you are preparing a bid/proposal, and the bid
is for a retail store/s with stores out of state (Wisconsin)... (in
case you call)...
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Request for Answer Clarification by
popol-ga
on
29 Jun 2005 10:24 PDT
What Can I say?
Thank you. You have done grate.
We leave the highest rating possible.
I will contact them and now and we can be just the bit more detail.
Clearly, we did not buy any material in state of Michigan. Our sub
purchased them from their local suppliers nationwide and paid their
own taxes.
Thank you aging and I hope we work again
Google is grate
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Clarification of Answer by
cynthia-ga
on
29 Jun 2005 14:45 PDT
Thanks popol, see my Comment below..
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