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Returns and allowances are subtracted from total sales revenue in computing the seller's initial "gross receipts" figure. The MBT Act defines "gross receipts" as "[t]he entire amount received by the taxpayer from any activity whether in intrastate, interstate, or foreign commerce carried on for direct or indirect gain, benefit, or advantage to the taxpayer or to others." MCL 208.1111(1). Section 111(1) also contains a list of items that are specifically excluded from the definition of "gross receipts." One such exclusion specified in the list is "[r]efunds from returned merchandise." MCL 208.1111(1)(h). Sales returns and allowances are simply post-transaction adjustments in the purchase price of merchandise.
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