Michigan Enacts Tax Increases


Michigan Individual Income Tax

The Michigan individual income tax rate is increased from 3.9% to 4.35% effective October 1, 2007. The 4.35% tax rate will remain in place through September 30, 2011. The rate will then be reduced 0.1% on each October 1 for years 2011 through 2014. The rate returns to 3.9% on October 1, 2015. The Michigan Department of Treasury has released updated withholding tables for the remainder of 2007 that reflect the new tax rate. 

Michigan Use Tax on Services

The Michigan use tax is expanded to include a number of services effective December 1, 2007. Many, but not all, taxable services are determined by reference to the 2002 NAICS codes. A list of taxable services is provided below.

The determination of a taxable service is controlled by the service provided, not the NAICS classification of the enterprise providing the service. In many cases, to make a determination of taxability, the NAICS code definitions for the taxable services listed below and the NAICS code definitions of exempt services will need to be reviewed to determine the best description and classification of the service provided.

Taxable services are as follows:

• Carpet and upholstery cleaning services, as described in NAICS industry code 56174.
• Business service center services, as described in NAICS industry code 56143.
• Consulting services, as described in NAICS subsector code 5416.
• Investigation, guard and armored car services, as described in NAICS industry code 56161.
• Investment advice services, as described in NAICS industry code 52393.
• Janitorial services, as described in NAICS industry code 56172.
• Landscaping services, as described in NAICS industry code 56173.
• Office administration services, as described in NAICS subsector code 5611.
•  All of the following personal services:
  • Astrology services.
  • Baby shoe bronzing services.
  • Bail bonding services.
  • Balloon-o-gram services.
  • Coin-operated blood pressure testing machine services.
  • Bondsperson services.
  • Check room services.
  • Coin-operated personal service machine services.
  • Comfort station operation services.
  • Concierge services.
  • Consumer buying services.
  • Credit card notification services.
  • Dating services.
  • Discount buying services.
  • Social escort services.
  • Fortune-telling services.
  • Genealogical investigation services.
  • House sitting services.
  • Social introduction services.
  • Coin-operated rental locker services.
  • Numerology services.
  • Palm reading services.
  • Party planning services.
  • Pay telephone services.
  • Personal fitness trainer services.
  • Personal shopping services.
  • Coin-operated photographic machine services.
  • Phrenology services.
  • Porter services.
  • Psychic services.
  • Rest room operation services.
  • Shoeshine services.
  • Singing telegram services.
  • Wedding chapel services, but not churches.
  • Wedding planning services.
• Other travel and reservation services, as described in NAICS industry code 56159.
• Scenic transportation services, as described in NAICS subsector code 487.
• Skiing services, as described in NAICS industry code 71392.
• Tour operator services, as described in NAICS industry code 56152.
• Warehousing and storage services, as described in NAICS subsector code 4931.
• Packaging and labeling services, as described in NAICS industry code 56191.
• Specialized design services, as described in NAICS industry group code 5414.
• Transit and ground passenger transport services, as described in NAICS industry group code 4853.
• Courier and messenger services, as described in NAICS subsector code 492.
• Personal care services, as described in NAICS industry group code 8121, except hair care services.
• Service contract services in which the seller, in exchange for the buyer's single payment, agrees to provide repair, maintenance, or replacement of one or more items of tangible personal property during a specific period of time, which services the buyer is not required to buy in connection with the purchase of tangible personal property.
• Security system services, as described in NAICS industry code 56162.
• Document preparation services, as described in NAICS industry code 56141.
• Miniwarehouse services and self-storage unit services, as described in NAICS industry code 53113.