LANSING – The Michigan House Tax Policy Committee is likely to act next week on legislation that would exclude collection of tobacco taxes from the gross receipts portion of the Michigan Business Tax. But while officials from two business groups said they support the concept of HB 6010 , they also urged the panel to act on the issue comprehensively and address pass through tax collections conducted by other industries that are taxed under the MBT.

Tobacco wholesalers told the committee their MBT liability has increased significantly compared to the old business tax and much of that is because of the way it treats pass through tax collections. They said without a change they are likely to go out of business. The National Federation of Independent Businesses Michigan chapter, Michigan Grocers Association and Spartan Stores support the legislation.

The change will reduce MBT revenues by $16.5 million, but Department of Treasury Legislative Liaison Scott Schrager said with a slight alteration in the bill, the cost could be halved. He said retailers can deduct the cost of their inventory that includes the tobacco tax, so the bill as written would give them a double deduction.

Schrager said tobacco distributors make a “compelling case” for the change because the level of tax is different between a carton tax and the sales tax. While he said Treasury is not adverse to other changes of this matter in terms of public policy, administration officials want to see “a more balanced approach.”

While Treasury wants to work through the issues and find a way to pay for them at the same time, Mr. Schrager said it appears the Senate wants to fix mistakes made in the MBT and use their “black diamond American Express card to charge for the costs of these.”

Chair Rep. Steve Bieda (D-Warren) said a workgroup that has been looking at these issues have found places in the gross receipts portion of the MBT where the problem is “egregious” like in the area the bill addresses, but that the committee will be taking significant public policy approaches and attention to the matter.

He said the committee has a couple of options for vehicle bills, including SB 1038 , which took a broader approach to the tax pass through issue but is part of a package of bills opponents say will cost the budget hundreds of millions of dollars. But Bieda also pointed out that he wants to pass bills out of committee that will be signed into law otherwise any other action “would be an empty gesture.”

Brad Williams, government relations director for the Detroit Regional Chamber, said the group is neutral on the bill, but supports its concept. He said the chamber believes all pass through taxes should be removed because they effect several industries – from gas stations to telecommunication providers.

Tricia Kinley, director of tax policy and economic development for the Michigan Chamber of Commerce, said if the tobacco bill is reported out of committee unanimously that would be seen as a commitment to address other tax pass through issues facing other industries.

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

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