ACCELERATED SALES AND USE TAX PAYMENTS

House Bills 4920 & 4921 (reported without amendments)

Sponsor:  Rep. John Walsh

Committee:  Tax Policy

Complete to 11-1-13

A SUMMARY OF HOUSE BILLS 4920 & 4921 AS REPORTED FROM COMMITTEE

The bills would amend the Sales and Use Tax acts to delay by one year the implementation of the revised accelerated payment provisions that were put into statute in 2012 by Public Acts 117 and 118.

 

House Bill 4920 would amend the General Sales Tax Act (MCL 205.56) and House Bill 4921 would amend the Use Tax Act (MCL 205.96).   

Under current law, beginning January 1, 2014, taxpayers who had a total tax liability under either act of at least $720,000 (after certain subtractions) in the immediately preceding calendar year must remit monthly sales or use  tax payments to the Department of Treasury on the 20th of each month in an amount equal to:

(1) 75% of the taxpayer's sales or use tax liability in the immediately preceding month, or

 

(2) 75% of the taxpayer's sale or use tax liability in the same month in the immediately preceding year, plus a reconciliation payment for the prior month.

The bills would move the effective date of this requirement to January 1, 2015. 

As a result, the bills would extend the current accelerated payment provisions by one year, through December 31, 2014.  Under these provisions, taxpayers who had a total tax liability under each act of at least $720,000 (after certain subtractions) in the immediately preceding year must make the following payments to the Department of Treasury:

·                    On the 20th of each month – 50% of the taxpayer's liability for the same month in the immediately preceding calendar year or 50% of the taxpayer's liability for the month being reported, whichever is less;

·                    On the 20th of each month – a reconciliation payment for the prior month equal to the difference between the actual liability and the amount previously paid. 

·                    On the last day of each month – 50% of the taxpayer's liability for the same month in the immediately preceding calendar year or 50% of the taxpayer's liability for the month being reported, whichever is less.

 

Under the current provisions, then, taxpayers are required to remit three separate payments each for the sales tax, the use tax on purchases, and the use tax on sales and rentals, thus requiring nine separate payments each month.[1] 

FISCAL IMPACT:

When enacted last year, the bills were not expected to significantly alter state revenue, with the only impact occurring due to the potential for some foregone interest earnings. Delaying the implementation would simply eliminate one year’s worth of foregone interest.

BACKGROUND INFORMATION:

During committee testimony, the Department of Treasury testified that it is in the process of revising the IT system it uses in the administration of several taxes.  The new system employed to administer sales and use taxes will "go live" and accept remittances beginning January 1, 2015, which is after the effective date of the revised accelerated payment provisions.  These bills would delay the implementation by one year in order to accommodate this systems change.  Otherwise the department would incur considerable programming expenses for the current system, which is over 30 years old, while the department also transitions to a new system next year.   

POSITIONS:

The Department of Treasury supports the bill.  (10-23-13)

The Michigan Chamber of Commerce supports the bill. (10-23-13)

                                                                                           Legislative Analyst:   Mark Wolf

                                                                                                  Fiscal Analyst:   Jim Stansell   

■ This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.

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