United States

Michigan: Department of Treasury Newsletter Provides Guidance on Several State Tax Issues

Nov 02, 2015
From KPMG TaxWatch

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Recently, the Michigan Department of Treasury published a newsletter addressing certain Michigan tax issues. The document, published by the Tax Policy Division of the Department, gives taxpayers a brief synopsis of hot button topics in the state, where the Department stands on these issues, and special notes and links to help taxpayers navigate new tax and administrative procedures.

First, the Department discussed its new Offer-in-Compromise (OIC) program. The OIC program, introduced January 1, 2015, enables delinquent taxpayers to settle tax debts for less than the amount owed. To enter into an OIC, a taxpayer must (1) have received an accepted federal OIC from the Internal Revenue Service, (2) demonstrate that there is a doubt as to the collectability of the tax debt, or (3) demonstrate that there is a doubt as to the taxpayer’s liability for the tax debt even though the taxpayer’s appeal rights have lapsed. Taxpayers seeking an OIC must complete and file the applicable forms along with a remittance of $100 or 20 percent of the offer amount, whichever is greater. More information on the OIC program can be found on the Department of Treasury’s website.

Next, the Department addressed its stance on the taxability of virtual currency. Per the newsletter, digital convertible currency, such as Bitcoin, does not fall under the definition of tangible personal property for the purpose of the General Sales Tax Act or the Use Tax Act. Therefore, a purchase of virtual currency is not subject to sales and use tax. The newsletter clarifies that taxpayers receiving virtual currency in exchange for tangible personal property must convert the value of the virtual currency into U.S. dollars at the time of the transaction and maintain documentation with this information. Next, the Department addressed the contentious area of cloud computing, including the pending Auto-Owners Insurance Company case addressing whether a taxpayer owed use tax on its purchases of access to remotely-housed software. The newsletter states that, “to date, there have not been any precedential decisions on this issue.” That statement is no longer accurate in light of the recent appeals court decision in Auto-Owners that has been certified for publication.

The Department’s newsletter also features updates on when a remote seller will be presumed to have Michigan nexus under new rules effective October 1, 2015, the aftermath of the IBM v Treasury decision, and administrative and procedural changes to field audits and the tax appeals process. For more information on the Department of Treasury’s tax policy newsletter, please contact Jill Nielsen at 312-665-2794.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.