Taxation

The State of Michigan has made great strides in containing business taxes and other costs in order to make the state a better place in which to do business. Michigan has made 21 tax cuts since 1991. In 1994, reform of Michigan’s Single Business Tax lowered business tax liability by $531 million.

The Single Business Tax (SBT), which is the state’s only general state tax for business, was lowered to 2.30%. This tax was instituted in 1975 to consolidate and streamline the tax system for businesses. It replaced eight different business taxes, eliminating business income taxes, franchise taxes, property taxes on inventory and others. Its tax base is value added during the production process, and is measured by the total compensation, profits, net interest paid and depreciation. The SBT offers exemptions to qualified parties, including an alternative 2.0% tax on adjusted business income for eligible small businesses.

Unemployment Insurance is a type of social insurance. It allows workers time to find a job in the field they are trained for. Unemployment benefits are for employees who have become unemployed through no fault of their own. For more information about Michigan Unemployment Insurance, contact the Michigan Employment Security Agency.

Workers’ Compensation Insurance (WCI) was also positively affected by reforms. Known for its “open competition” policy among insurance carriers in the establishment of rates, Michigan allows employers to shop around for the least expensive insurance carrier. In 1995, Michigan’s rates decreased an average of 5.5%. The WCI rates in Michigan are now below the national average.

A recent reduction in Michigan’s Property Tax rate has helped drop its average rate below that of the other states in the Great Lakes region. The taxable value of property is 50% of the current assessed value. Businesses now generally pay 24 mils in school property tax, and average 30% reduction. The state also allows a 100% tax exemption on all business inventories.

Michigan’s Sales Tax is set at the national average of 6%. No local sales taxes are allowed. The state also grants a sales tax exemption on all machinery, equipment, electricity, energy, pollution control equipment and supplies used in industrial processing. More specific information can be obtained from the Bureau of Revenue in the Michigan Department of Treasury.