LANSING – A bill that has been on hold since last spring to provide favorable reciprocal tax treatment to businesses operating across the Michigan-Ontario border won approval by the House Tax Policy Committee on Wednesday as supporters called it an essential ingredient to help the struggling domestic auto industry.

The legislation would make sure that the Michigan Business Tax gross receipts provisions would not apply to companies that do not have a permanent establishment in the state, mirroring tax-exempt policies on the other side of the border.

Trucking firms continued their opposition, saying Canadian trucks could enjoy a tax advantage, though supporters of SB 1009 said the trucking component is a small piece of what the bill affects.

Mickey Blashfield of Central Transport of Warren said 10 meetings to try to arrive at a compromise to deal with the concern by truckers of unfair competition from Canadian firms produced no significant changes. He said the legislation should try to mimic as much as possible the reciprocal tax treatment that existed in the now-abolished single business tax.

“This should be a comprehensive fix,” he said.

Gerry Fedchun of the Automotive Parts Manufacturers Association of Canada said the bill will help keep healthy the $7.3 billion in cross-border trade and 220,000 Michigan jobs that are related to the trade through Ontario. “We need all the good will we can muster,” he said. “Make no mistake, this bill is not about trucking. It’s about the auto industry.”

Scott Schrager of the Department of Treasury also supported the new language, and said while the issue presents a question that is not easy, the unfair competition argument as it affects truckers is a “narrow sliver” of the business that’s affected. “On balance, there needs to be a move back to reciprocity,” he said.

The tax treatment would apply retroactively to January 1, 2008.

CAR SALES TAX BREAK: Also approved by the committee was a bill giving a sales tax break to car buyers, tied to manufacturers who participate in the Detroit International Auto Show. The sales tax exemption in HB 6764 would apply to sales in January of both new and used cars.

Rep. Tim Melton (D-Auburn Hills) said he was concerned about giving a credit that could be used by both the Big Three and foreign automakers at a time when the domestic companies are in dire financial straits. He suggested one alternative could be an income tax exemption equal to the sales taxes on domestic car sales.

Committee chair Rep. Steve Bieda (D-Warren) said language targeting the Detroit-based companies in the sales tax act could run afoul of the federal Interstate Commerce Clause.

The one-month tax holiday is sharply pared down from the original language, which would have done away with the sales tax on all new and used vehicles, a provision that would have cost the state treasury about $600 million-$750 million a year.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com

a>>