SALES & USE TAX PREPAYMENTS S.B. 428 (S-1) & H.B. 4346 (S-1): FLOOR SUMMARY
[Please see the PDF version of this analysis, if available, to view this image.]






Senate Bill 428 (Substitute S-1 as reported)
House Bill 4346 (Substitute S-1 as reported)
Sponsor: Senator Dave Hildenbrand (S.B. 428) Representative John Walsh (H.B. 4346)
Senate Committee: Finance
House Committee: Tax Policy (H.B. 4346)

CONTENT
Senate Bill 428 (S-1) would amend the General Sales Tax Act and House Bill 4346 (S-1) would amend the Use Tax Act to revise the accelerated payment requirements for taxpayers whose sales or use liability in the previous year was $720,000 or more; the bills would require such a taxpayer to pay, by the 20th day of each month, 75% of its liability in the previous month plus a reconciliation payment.


The Acts typically require taxpayers, by the 20th day of each month, to file with the Department of Treasury a tax return and remit the amount due. A taxpayer is subject to an accelerated payment schedule, however, if the taxpayer's total sales or use tax liability in the previous year was $720,000 or more, after subtracting certain amounts. By the 20th day of the month and by the last day of the month, the taxpayer must remit an amount equal to 50% of its liability for the same month in the prior year or 50% of the actual liability for the month being reported, whichever is less. Also, by the 20th day of the month, the taxpayer must make a reconciliation payment equal to the difference between the tax liability determined for the preceding month and the amount of tax previously paid for that month.


Under the bills, these accelerated payment requirements would apply through June 30, 2013. Beginning July 1, 2013, a taxpayer that had a total sales or use tax liability in the previous year of $720,000 or more (after the same subtractions) would have to remit, by the 20th day of the month, an amount equal to 75% of the taxpayer's sales or use tax liability in the preceding month, plus a reconciliation payment equal to the difference between the tax liability determined for that month minus the amount previously paid for that month. A taxpayer could make a single payment for the tax due under both Acts.


As currently required, the monthly payments would have to be made by an electronic funds transfer method approved by the Department.


MCL 205.56 (S.B. 428) Legislative Analyst: Suzanne Lowe 205.96 (H.B. 4346)

FISCAL IMPACT

The bills would alter the timing of sales and use tax receipts. The bills would require taxpayers with an annual sales or use tax liability, after subtracting sales and use taxes on motor vehicles, of $720,000 or more, to remit their monthly tax payments according to a
different formula. Currently, such taxpayers are required to remit 50% of either the liability in the same month one year ago, or the liability for the current month, plus a reconciliation amount for the prior month's liability by the 20th of each month; with the remaining 50% of either the liability in the same month one year ago, or the liability for the current month, due at the end of the month. The bills would require taxpayers to remit 75% of the prior month's liability, plus a reconciliation payment for the prior month, by the 20th of the month. The bills would eliminate the subsequent payment due at the end of the month.


While the bills would not affect the total liability, they would affect the timing of payments. Approximately 25% of collections from affected taxpayers would be received 10 days earlier, while the remaining portion would be received 20 days later. The State earns interests on its cash balances and the bills would increase the interest earnings on the accelerated portion, and reduce interest earnings on the reconciliation portion. The net impact would roughly equate to 10 days' interest on 25% of collections from affected taxpayers in the initial month the bills were effective. (If all taxpayers were affected, 25% of sales tax collections would total approximately $125.0 million to $140.0 million per month, and 25% of use tax collections would total approximately $25.0 million per month.) The impact is unknown, but given current interest rates, would likely be minimal or negligible.


Date Completed: 2-23-12 Fiscal Analyst: David Zin

Analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. sb428&hb4346/1112