Elimination of inter-company transactions does not occur when directly determining the level of a unitary business group taxpayer's overall gross receipts; however, inter-company transactions will affect a unitary business group taxpayer's gross receipts threshold amount through application of the apportionment formula. When determining the gross receipts filing threshold and the eligibility for the Threshold Credit under MCL 208.1411, the taxpayer's overall gross receipts are first apportioned using the sales factor under MCL 208.1303(2). Because inter-company transactions between unitary business group members are eliminated when determining a unitary business group taxpayer's sales factor, the application of sales factor to a unitary business group taxpayer's overall gross receipts would indirectly eliminate inter-company transactions from the threshold amount.
The MBTA states that a unitary business group is required to file a combined return that includes each U.S. person included in the unitary business group, and that "all transactions between the persons included in the unitary business group shall be eliminated from the business income tax base, modified gross receipts tax base and the apportionment formula under this act." MCL 208.1511. A "unitary business group" is defined in the MBTA in pertinent part as "a group of United States persons?1 of which owns or controls, directly or indirectly, more than 50% of the ownership interest with voting rights or ownership interests that confer comparable rights to voting rights of the United States persons, and that has business activities or operations which result in a flow of value between or among persons included in the unitary business group or has business activities or operations that are integrated with, are dependent upon, or contribute to each other." MCL 208.1117(6).
The MBTA expressly provides that the calculation of a unitary business group's business income tax base is determined as "the sum of the business income of each person included in the unitary business group?less items of income and related deductions arising from transactions including dividends between persons included in the unitary business group." MCL 208.1201(3). Likewise, the MBTA expressly states that for a unitary business group taxpayer, the modified gross receipts tax base (a taxpayer's gross receipts less purchases from other firms) is "the sum modified gross receipts of each person?included in the unitary business group less any modified gross receipts arising from transactions between persons included in the unitary business group." MCL 208.1203(3). Further, the MBTA clearly states that in calculating the sales factor for apportioning the business income and modified gross receipts tax bases for a unitary business group, sales between the unitary business group members are eliminated. MCL 208.1303(2).
In contradistinction, the MBTA's provisions governing taxpayer nexus (MCL 208.1200), the filing threshold (MCL 208.1505) and the Gross Receipts Filing Threshold Credit (MCL 208.1411) do not contain any language providing that for a unitary business group taxpayer the respective gross receipt threshold amounts are determined after eliminating inter-company transactions. The provision regarding taxpayer nexus (MCL 208.1200) states merely that the $350,000 gross receipts amount is that sourced to Michigan, with no prescribed adjustment for inter-company transactions. Similarly, the provisions regarding the threshold amount of gross receipts for filing an MBT return (MCL 208.1505) and the range of gross receipts to qualify for the Gross Receipts Filing Threshold Credit (MCL 208.1411) provide only that the gross receipt amounts are those after allocation and apportionment, with no prescribed adjustment for inter-company transactions.
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