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" Michigan deems a taxpayer to have "nexus" in the state if they are physically present in the state for more than one day, actively solicit sales in Michigan and thus have more than $350,000 in sales and have ownership in a flow-through entity that has presence in Michigan. Amstel easily qualifies on all three accounts and this means that there must be a calculation of apportionment for the sales done because not all of the sales would be taxable in Michigan, just those done in Michigan.
As for how Amstel can or should apportion their operations and sales, one can look at the prevailing corporate income tax rates for the relevant states. Michigan has a flat six percent on corporate income as of the first of 2013. Indiana is a bit higher at eight percent. Wisconsin is at 7.9%. Finally, Illinois is the highest at 9.5%. All four states have flat income tax rates but Michigan is actually the lowest. As such, it would make sense to keep operations as completely and fully in Michigan as possible except as is necessary to facilitate and support sales in the other three states as there is a nearly four percent variance between the four...
However, as noted above, Indiana and Michigan have been subject to selective FUTA rate spikes in the recent past so that should be considered as well while bearing in mind that the same can be true of SUI rates but it depends on the states assigned rate every year. Also, taxes paid on wages (employer and employee taxes) are based on where the employee works whereas corporate income tax is based on where the sales receipts or other income is actually generated.
What the above means is that Amstel can realize a clear benefit in terms of paying lesser sales taxes and corporate income taxes based on how we apportion our operations and sales but we have to be careful of the burdens that we will incur with each new state of operation and the proportions that are applicable for where and when we operate in a given tax year and this applies to both employees' tax implications as well as that of Amstel. In conclusion, Amstel can absolutely expand its horizons by operating in new states and markets but we also need to be careful to comply with all required filings and regulations.
The reason this is relevant is the idea of "nexus and apportionment." Michigan deems a taxpayer to have "nexus" in the state if they are physically present in the state for more than one day, actively solicit sales in Michigan and thus have more than $350,000 in sales and have ownership in a flow-through entity that has presence in Michigan. Amstel easily qualifies on all three accounts and this means that there must be a calculation of apportionment for the sales done because not all of the sales would be taxable in Michigan, just those done in Michigan.
As for how Amstel can or should apportion their operations and sales, one can look at the prevailing corporate income tax rates for the relevant states. Michigan has a flat six percent on corporate income as of the first of 2013. Indiana is a bit higher at eight percent. Wisconsin is at 7.9%. Finally, Illinois is the highest at 9.5%. All four states have flat income tax rates but Michigan is actually the lowest. As such, it would make sense to keep operations as completely and fully in Michigan as possible except as is necessary to facilitate and support sales in the other three states as there is a nearly four percent variance between the four states by a margin of 1.9% to nearly four percent. However, as noted above, Indiana and Michigan have been subject to selective FUTA rate spikes in the recent past so that should be considered as well while bearing in mind that the same can be true of SUI rates but it depends on the states assigned rate every year. Also, taxes paid on wages (employer and employee taxes) are based on where the employee works whereas corporate income tax is based on where the sales receipts or other income is actually generated.
What the above means is that Amstel can realize a clear benefit in terms of paying lesser sales taxes and corporate income taxes based on how we apportion our operations and sales but we have to be careful of the burdens that we will incur with each new state of operation and the proportions that are applicable for where and when we operate in a given tax year and this applies to both employees' tax implications as well as that of Amstel. In conclusion, Amstel can absolutely expand its horizons by operating in new states and markets but we also need to be careful to comply with all required filings and regulations.
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