SENATE BILL No. 877

November 29, 2001, Introduced by Senators HAMMERSTROM, BENNETT, SHUGARS and SCHUETTE and referred to the Committee on Finance.

A bill to amend 1975 PA 228, entitled

"Single business tax act,"

by amending section 7 (MCL 208.7), as amended by 2000 PA 477.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 7. (1) As used in this act:

2 (a) "Sale" or "sales" means the amounts received by the tax-

3 payer as consideration from the following:

4 (i) The transfer of title to, or possession of, property

5 that is stock in trade or other property of a kind which would

6 properly be included in the inventory of the taxpayer if on hand

7 at the close of the tax period or property held by the taxpayer

8 primarily for sale to customers in the ordinary course of its

9 trade or business.

10 (ii) The performance of services, which constitute business

11 activities other than those included in subparagraph (i), or from

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1 any combination of business activities described in this

2 subparagraph and subparagraph (i).

3 (iii) The rental, lease, licensing, or use of tangible or

4 intangible property which constitutes business activity.

5 (b) "Sale" or "sales" does not include dividends, interest,

6 and royalties received by the taxpayer to the extent deducted

7 from the taxpayer's tax base under section 9(7) BUT DOES INCLUDE

8 ROYALTIES NOT DEDUCTED FROM TAX BASE UNDER SECTION 9(7) EXCEPT

9 THOSE ROYALTIES PAID TO A FRANCHISOR AS CONSIDERATION FOR THE USE

10 OF TRADE NAMES, TRADEMARKS, AND SIMILAR INTANGIBLE PROPERTY.

11 (2) "State" means any state of the United States, the

12 District of Columbia, the Commonwealth of Puerto Rico, any terri-

13 tory or possession of the United States, and any foreign country,

14 or political subdivision of any of the foregoing.

15 (3) "Gross receipts" means the entire amount received by the

16 taxpayer from any activity whether in intrastate, interstate, or

17 foreign commerce carried on for direct or indirect gain, benefit,

18 or advantage to the taxpayer or to others except for the

19 following:

20 (a) Proceeds from sales by a principal that the taxpayer

21 collects in an agency capacity solely on behalf of the principal

22 and delivers to the principal.

23 (b) Amounts received by the taxpayer as an agent solely on

24 behalf of the principal that are expended by the taxpayer for any

25 of the following:

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1 (i) The performance of a service by a third party for the

2 benefit of the principal that is required by law to be performed

3 by a licensed person.

4 (ii) The performance of a service by a third party for the

5 benefit of the principal that the taxpayer has not undertaken a

6 contractual duty to perform.

7 (iii) Principal and interest under a mortgage loan or land

8 contract, lease or rental payments, or taxes, utilities, or

9 insurance premiums relating to real or personal property owned or

10 leased by the principal.

11 (iv) A capital asset of a type that is, or under the inter-

12 nal revenue code will become, eligible for depreciation, amorti-

13 zation, or accelerated cost recovery by the principal for federal

14 income tax purposes, or for real property owned or leased by the

15 principal.

16 (v) Property not described under subparagraph (iv) purchased

17 by the taxpayer on behalf of the principal and that the taxpayer

18 does not take title to or use in the course of performing its

19 contractual business activities.

20 (vi) Fees, taxes, assessments, levies, fines, penalties, or

21 other payments established by law that are paid to a governmental

22 entity and that are the legal obligation of the principal.

23 (c) Amounts that are excluded from gross income of a foreign

24 corporation engaged in the international operation of aircraft

25 under section 883(a) of the internal revenue code.

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1 (d) Amounts received by an advertising agency used to

2 acquire advertising media time, space, production, or talent on

3 behalf of another person.

4 (e) Notwithstanding any other provision of this section,

5 amounts received by a taxpayer that manages real property owned

6 by the taxpayer's client that are deposited into a separate

7 account kept in the name of the taxpayer's client and that are

8 not reimbursements to the taxpayer and are not indirect payments

9 for management services that the taxpayer provides to that

10 client.

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