Bill Text: MI SB0656 | 2011-2012 | 96th Legislature | Introduced
Bill Title: Income tax; income; sourcing of receipts from certain sales; clarify. Amends sec. 665 of 1967 PA 281 (MCL 206.665).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2011-11-08 - Referred To Committee On Finance [SB0656 Detail]
Download: Michigan-2011-SB0656-Introduced.html
SENATE BILL No. 656
September 15, 2011, Introduced by Senator BRANDENBURG and referred to the Committee on Finance.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending section 665 (MCL 206.665), as added by 2011 PA 38.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 665. (1) Sales of the taxpayer in this state are
determined as follows:
(a) Sales of tangible personal property are in this state if
the property is shipped or delivered, or, in the case of
electricity and gas, the contract requires the property to be
shipped or delivered, to any purchaser within this state based on
the
ultimate destination at the point that the property comes to
rest regardless of the free on board point or other conditions of
the sales.
(b) Receipts from the sale, lease, rental, or licensing of
real property are in this state if that property is located in this
state.
(c) Receipts from the lease or rental of tangible personal
property are sales in this state to the extent that the property is
utilized
used in this state. The extent of utilization of tangible
personal property in this state is determined by multiplying the
receipts by a fraction, the numerator of which is the number of
days of physical location of the property in this state during the
lease or rental period in the tax year and the denominator of which
is the number of days of physical location of the property
everywhere during all lease or rental periods in the tax year. For
apportionment purposes only, prewritten computer software is used
in this state when the computer hardware accessing the software is
physically located in this state. If the physical location of the
property during the lease or rental period is unknown or cannot be
determined,
the tangible personal property is utilized used in
the
state in which the property was located at the time the lease or
rental payer obtained possession.
(d) Receipts from the lease or rental of mobile transportation
property owned by the taxpayer are in this state to the extent that
the property is used in this state. The extent to which an aircraft
will be deemed to be used in this state and the amount of receipts
that is to be included in the numerator of this state's sales
factor are determined by multiplying all the receipts from the
lease or rental of the aircraft by a fraction, the numerator of
which is the number of landings of the aircraft in this state and
the denominator of which is the total number of landings of the
aircraft. If the extent of the use of any transportation property
within this state cannot be determined, then the receipts are in
this state if the property has its principal base of operations in
this state.
(e) Royalties and other income received for the use of or for
the privilege of using intangible property, including patents,
know-how, formulas, designs, processes, patterns, copyrights, trade
names, service names, franchises, licenses, contracts, customer
lists, custom computer software, or similar items, are attributed
to the state in which the property is used by the purchaser. If the
property is used in more than 1 state, the royalties or other
income shall be apportioned to this state pro rata according to the
portion of use in this state. If the portion of use in this state
cannot be determined, the royalties or other income shall be
excluded from both the numerator and the denominator. Intangible
property is used in this state if the purchaser uses the intangible
property or the rights to the intangible property in the regular
course of its business operations in this state, regardless of the
location of the purchaser's customers.
(2) Sales from the performance of services are in this state
and attributable to this state as follows:
(a) Except as otherwise provided in this section, all receipts
from the performance of services are included in the numerator of
the apportionment factor if the recipient of the services receives
all of the benefit of the services in this state. If the recipient
of the services receives some of the benefit of the services in
this state, the receipts are included in the numerator of the
apportionment factor in proportion to the extent that the recipient
receives benefit of the services in this state.
(b) Sales derived from securities brokerage services
attributable to this state are determined by multiplying the total
dollar amount of receipts from securities brokerage services by a
fraction, the numerator of which is the sales of securities
brokerage services to customers within this state, and the
denominator of which is the sales of securities brokerage services
to all customers. Receipts from securities brokerage services
include commissions on transactions, the spread earned on principal
transactions in which the broker buys or sells from its account,
total margin interest paid on behalf of brokerage accounts owned by
the broker's customers, and fees and receipts of all kinds from the
underwriting of securities. If receipts from brokerage services can
be associated with a particular customer, but it is impractical to
associate the receipts with the address of the customer, then the
address of the customer shall be presumed to be the address of the
branch office that generates the transactions for the customer.
(c) Sales of services that are derived directly or indirectly
from the sale of management, distribution, administration, or
securities brokerage services to, or on behalf of, a regulated
investment company or its beneficial owners, including receipts
derived directly or indirectly from trustees, sponsors, or
participants of employee benefit plans that have accounts in a
regulated investment company, shall be attributable to this state
to the extent that the shareholders of the regulated investment
company are domiciled within this state. For purposes of this
subdivision, "domicile" means the shareholder's mailing address on
the records of the regulated investment company. If the regulated
investment company or the person providing management services to
the regulated investment company has actual knowledge that the
shareholder's primary residence or principal place of business is
different than the shareholder's mailing address, then the
shareholder's primary residence or principal place of business is
the shareholder's domicile. A separate computation shall be made
with respect to the receipts derived from each regulated investment
company. The total amount of sales attributable to this state shall
be equal to the total receipts received by each regulated
investment company multiplied by a fraction determined as follows:
(i) The numerator of the fraction is the average of the sum of
the beginning-of-year and end-of-year number of shares owned by the
regulated investment company shareholders who have their domicile
in this state.
(ii) The denominator of the fraction is the average of the sum
of the beginning-of-year and end-of-year number of shares owned by
all shareholders.
(iii) For purposes of the fraction, the year shall be the tax
year of the regulated investment company that ends with or within
the tax year of the taxpayer.
(3) Receipts from the origination of a loan or gains from the
sale of a loan secured by residential real property are deemed a
sale in this state only if 1 or more of the following apply:
(a) The real property is located in this state.
(b) The real property is located both within this state and 1
or more other states and more than 50% of the fair market value of
the real property is located within this state.
(c) More than 50% of the real property is not located in any 1
state and the borrower is located in this state.
(4) Interest from loans secured by real property is in this
state if the property is located within this state, if the property
is located both within this state and 1 or more other states and if
more than 50% of the fair market value of the real property is
located within this state, or if more than 50% of the fair market
value of the real property is not located within any 1 state but
the borrower is located in this state. The determination of whether
the real property securing a loan is located within this state
shall be made as of the time the original agreement was made and
any and all subsequent substitutions of collateral shall be
disregarded.
(5) Interest from a loan not secured by real property is in
this state if the borrower is located in this state.
(6) Gains from the sale of a loan not secured by real
property, including income recorded under the coupon stripping
rules of section 1286 of the internal revenue code, are in this
state if the borrower is in this state.
(7) Receipts from credit card receivables, including interest,
fees, and penalties from credit card receivables and receipts from
fees charged to cardholders, such as annual fees, are in this state
if the billing address of the cardholder is in this state.
(8) Receipts from the sale of credit card or other receivables
are in this state if the billing address of the customer is in this
state. Credit card issuer's reimbursements fees are in this state
if the billing address of the cardholder is in this state. Receipts
from merchant discounts, computed net of any cardholder
chargebacks, but not reduced by any interchange transaction fees or
by any issuer's reimbursement fees paid to another for charges made
by its cardholders, are in this state if the commercial domicile of
the merchant is in this state.
(9) Loan servicing fees derived from loans of another secured
by real property are in this state if the real property is located
in this state, if the real property is located both within and
outside of this state and 1 or more states if more than 50% of the
fair market value of the real property is located in this state, or
if more than 50% of the fair market value of the real property is
not located in any 1 state but the borrower is located in this
state. Loan servicing fees derived from loans of another not
secured by real property are in this state if the borrower is
located in this state. If the location of the security cannot be
determined, then loan servicing fees for servicing either the
secured or the unsecured loans of another are in this state if the
lender to whom the loan servicing service is provided is located in
this state.
(10) Receipts from the sale of securities and other assets
from investment and trading activities, including, but not limited
to, interest, dividends, and gains are in this state in either of
the following circumstances:
(a) The person's customer is in this state.
(b) If the location of the person's customer cannot be
determined, both of the following apply:
(i) Interest, dividends, and other income from investment
assets and activities and from trading assets and activities,
including, but not limited to, investment securities; trading
account assets; federal funds; securities purchased and sold under
agreements to resell or repurchase; options; futures contracts;
forward contracts; notional principal contracts such as swaps;
equities; and foreign currency transactions are in this state if
the average value of the assets is assigned to a regular place of
business of the taxpayer within this state. Interest from federal
funds sold and purchased and from securities purchased under resale
agreements and securities sold under repurchase agreements is in
this state if the average value of the assets is assigned to a
regular place of business of the taxpayer within this state. The
amount of receipts and other income from investment assets and
activities is in this state if assets are assigned to a regular
place of business of the taxpayer within this state.
(ii) The amount of receipts from trading assets and activities,
including, but not limited to, assets and activities in the matched
book, in the arbitrage book, and foreign currency transactions, but
excluding amounts otherwise sourced in this section, is in this
state if the assets are assigned to a regular place of business of
the taxpayer within this state.
(11) Receipts from transportation services rendered by a
person subject to tax in another state are in this state and shall
be attributable to this state as follows:
(a) Except as otherwise provided in subdivisions (b) through
(e), receipts shall be proportioned based on the ratio of revenue
miles of the person in this state to the revenue miles of the
person everywhere.
(b) Receipts from maritime transportation services shall be
attributable to this state as follows:
(i) 50% of those receipts that either originate or terminate in
this state.
(ii) 100% of those receipts that both originate and terminate
in this state.
(c) Receipts attributable to this state of a person whose
business activity consists of the transportation both of property
and of individuals shall be proportioned based on the total
receipts for passenger miles and ton mile fractions, separately
computed and individually weighted by the ratio of receipts from
passenger transportation to total receipts from all transportation,
and by the ratio of receipts from freight transportation to total
receipts from all transportation, respectively.
(d) Receipts attributable to this state of a person whose
business activity consists of the transportation of oil by pipeline
shall be proportioned based on the ratio of the receipts for the
barrel miles transported in this state to the receipts for the
barrel miles transported by the person everywhere.
(e) Receipts attributable to this state of a person whose
business activities consist of the transportation of gas by
pipeline shall be proportioned based on the ratio of the receipts
for the 1,000 cubic feet miles transported in this state to the
receipts for the 1,000 cubic feet miles transported by the person
everywhere.
(12) For purposes of subsection (11), if a taxpayer can show
that revenue mile information is not available or cannot be
obtained without unreasonable expense to the taxpayer, receipts
attributable to this state shall be that portion of the revenue
derived from transportation services performed everywhere that the
miles of transportation services performed in this state bear to
the miles of transportation services performed everywhere. If the
department determines that the information required for the
calculations under subsection (11) are not available or cannot be
obtained without unreasonable expense to the taxpayer, the
department may use other available information that in the opinion
of the department will result in an equitable allocation of the
taxpayer's receipts to this state.
(13) Except as provided in subsections (14) through (19),
receipts from the sale of telecommunications service or mobile
telecommunications service are in this state if the customer's
place of primary use of the service is in this state. As used in
this subsection, "place of primary use" means the customer's
residential street address or primary business street address where
the customer's use of the telecommunications service primarily
occurs. For mobile telecommunications service, the customer's
residential street address or primary business street address is
the place of primary use only if it is within the licensed service
area of the customer's home service provider.
(14) Receipts from the sale of telecommunications service sold
on an individual call-by-call basis are in this state if either of
the following applies:
(a) The call both originates and terminates in this state.
(b) The call either originates or terminates in this state and
the service address is located in this state.
(15) Receipts from the sale of postpaid telecommunications
service are in this state if the origination point of the
telecommunication signal, as first identified by the service
provider's telecommunication system or as identified by information
received by the seller from its service provider if the system used
to transport telecommunication signals is not the seller's, is
located in this state.
(16) Receipts from the sale of prepaid telecommunications
service or prepaid mobile telecommunications service are in this
state if the purchaser obtains the prepaid card or similar means of
conveyance at a location in this state. Receipts from recharging a
prepaid telecommunications service or mobile telecommunications
service are in this state if the purchaser's billing information
indicates a location in this state.
(17) Receipts from the sale of private communication services
are in this state as follows:
(a) 100% of the receipts from the sale of each channel
termination point within this state.
(b) 100% of the receipts from the sale of the total channel
mileage between each termination point within this state.
(c) 50% of the receipts from the sale of service segments for
a channel between 2 customer channel termination points, 1 of which
is located in this state and the other is located outside of this
state, which segments are separately charged.
(d) The receipts from the sale of service for segments with a
channel termination point located in this state and in 2 or more
other states or equivalent jurisdictions, and which segments are
not separately billed, are in this state based on a percentage
determined by dividing the number of customer channel termination
points in this state by the total number of customer channel
termination points.
(18) Receipts from the sale of billing services and ancillary
services for telecommunications service are in this state based on
the location of the purchaser's customers. If the location of the
purchaser's customers is not known or cannot be determined, the
sale of billing services and ancillary services for
telecommunications service is in this state based on the location
of the purchaser.
(19) Receipts to access a carrier's network or from the sale
of telecommunications services for resale are in this state as
follows:
(a) 100% of the receipts from access fees attributable to
intrastate telecommunications service that both originates and
terminates in this state.
(b) 50% of the receipts from access fees attributable to
interstate telecommunications service if the interstate call either
originates or terminates in this state.
(c) 100% of the receipts from interstate end user access line
charges, if the customer's service address is in this state. As
used in this subdivision, "interstate end user access line charges"
includes, but is not limited to, the surcharge approved by the
federal communications commission and levied pursuant to 47 CFR 69.
(d) Gross receipts from sales of telecommunications services
to other telecommunication service providers for resale shall be
sourced to this state using the apportionment concepts used for
non-resale receipts of telecommunications services if the
information is readily available to make that determination. If the
information is not readily available, then the taxpayer may use any
other reasonable and consistent method.
(20) Except as otherwise provided under this subsection, for a
taxpayer whose business activities include live radio or television
programming as described in subsector code 7922 of industry group
792 under the standard industrial classification code as compiled
by the United States department of labor or are included in
industry
groups group 483, 484, 781, or 782 under the standard
industrial classification code as compiled by the United States
department of labor, or any combination of the business activities
included in those groups, media receipts are in this state and
attributable to this state only if the commercial domicile of the
customer is in this state and the customer has a direct connection
or relationship with the taxpayer pursuant to a contract under
which the media receipts are derived. For media receipts from the
sale of advertising, if the customer of that advertising is
commercially domiciled in this state and receives some of the
benefit of the sale of that advertising in this state, the media
receipts from the advertising to that customer are included in the
numerator of the apportionment factor in proportion to the extent
that the customer receives the benefit of the advertising in this
state. For purposes of this subsection, if the taxpayer is a
broadcaster and if the customer receives some of the benefit of the
advertising in this state, the media receipts for that sale of
advertising from that customer shall be proportioned based on the
ratio that the broadcaster's viewing or listening audience in this
state bears to its total viewing or listening audience everywhere.
As used in this subsection:
(a) "Media property" means motion pictures, television
programs, internet programs and websites, other audiovisual works,
and any other similar property embodying words, ideas, concepts,
images, or sound without regard to the means or methods of
distribution or the medium in which the property is embodied.
(b) "Media receipts" means receipts from the sale, license,
broadcast, transmission, distribution, exhibition, or other use of
media property and receipts from the sale of media services. Media
receipts do not include receipts from the sale of media property
that is a consumer product that is ultimately sold at retail.
(c) "Media services" means services in which the use of the
media property is integral to the performance of those services.
(21) Terms used in subsections (13) through (20) have the same
meaning as those terms defined in the streamlined sales and use tax
agreement administered under the streamlined sales and use tax
administration act, 2004 PA 174, MCL 205.801 to 205.833.
(22) For purposes of this section, a borrower is considered
located in this state if the borrower's billing address is in this
state.
Enacting section 1. This amendatory act takes effect January
1, 2012.
