Under the MBTA, a taxpayer (other than a financial institution or an insurance company) is subject to both a business income tax and a modified gross receipts tax, which together comprise the taxpayer's MBT liability. Proceeds collected by a factoring company from accounts receivable purchased from other businesses must be included when determining the factoring company's business income tax base and its modified gross receipts tax base. There is no language in the MBTA which would exclude such proceeds from the calculation of either of these taxes.

For purposes of calculating the business income tax component of the MBT, "business income" means "that part of federal taxable income derived from business activity." MCL 208.1105(2). "Business activity" is broadly defined as "a transfer of legal or equitable title to or rental of property, whether real, personal, or mixed, tangible or intangible, or the performance of services, or a combination thereof, made or engaged in, or caused to be made or engaged in, whether in intrastate, interstate, or foreign commerce, with the object of gain, benefit, or advantage, whether direct or indirect, to the taxpayer or to others ?." MCL 208.1105(1). The services provided by a factoring company, including purchasing receivables in exchange for cash and then collecting from the underlying account debtors, clearly constitute "business activity"; thus, all income received from such endeavors, to the extent that it is part of the factoring company's federal taxable income, constitutes taxable "business income" under the MBTA. There is no language in the MBTA that would exclude from the calculation of the business income tax base the proceeds collected by a factoring company from accounts receivable purchased from other businesses.

Similarly, a taxpayer calculates its modified gross receipts tax base by determining its gross receipts less "purchases from other firms," as defined in MCL 208.1113(6), before apportionment. MCL 208.1203(3). Section 111(1) specifies certain items that are excluded from the definition of "gross receipts." One such exclusion is "[p]roceeds from the taxpayer's transfer of an account receivable if the sale that generated the account receivable was included in gross receipts for federal income tax purposes." The exclusion does not apply to a taxpayer that both buys and sells receivables during the tax year. MCL 208.1111(1)(f). While this exclusion will generally apply to the invoice seller (the factoring company's customer), it does not apply to the factoring company itself, since the factoring company had nothing to do with the sale that generated the transferred account receivable and it therefore will not have included that sale in gross receipts for federal income tax purposes.

"Purchases from other firms" generally includes purchases of inventory, depreciable assets, and materials and supplies used in the taxpayer's business. MCL 208.1113(6). Such "purchases from other firms" are subtracted from the taxpayer's gross receipts when determining its modified gross receipts tax base. A factoring company's purchase from another business of intangibles such as accounts receivable does not fall within the statutory definition of "purchases from other firms." Accordingly, amounts paid by a factoring company to invoice sellers for accounts receivable are not deducted from the factoring company's gross receipts when determining its modified gross receipts tax base under the MBTA.