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  Michigan Business Tax
C43. Is a staffing company as defined in section 113(6)(d)(ii) eligible for the section 403 compensation credit on wages etc. paid to the personnel it supplies to its customers?
 
Answer:
Yes. A staffing company is an entity primarily engaged in supplying temporary or continuing help on a contract or fee basis. The help supplied is always on the payroll of the supplying establishment, but is under the direct or general supervision of the business to whom the help is furnished.

Regarding a staffing company and the compensation credit, section 403 of the Michigan Business Tax Act (MBTA) does not expressly address this type of entity. The compensation a staffing company pays to the personnel it supplies to its customers is recognized by the MBTA as falling under "purchases from other firms" and thus may be deducted in calculating the staffing company's modified gross receipts tax base.

Section 403 provides in pertinent part that, subject to a capping amount:

[f]or the 2008 tax year a taxpayer may claim a credit against the tax imposed by this act equal to 0.296% of the taxpayer's compensation in this state. For the 2009 tax year and each tax year after 2009, . . . a taxpayer may claim a credit against the tax imposed by this act equal to 0.370% of the taxpayer's compensation in this state . . . .

The MBTA's recognition of the compensation that a staffing company pays to the personnel it supplies to its customers as a "purchases from other firms" does not disqualify the staffing company from claiming that amount as a credit pursuant to the conditions provided in section 403.


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