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Home / Growth/Expansion / Key Location Factors / Taxation
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.
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