M67. What are purchases from other firms?
"Purchases from other firms" are deducted from a taxpayer's gross receipts to
calculate the modified gross receipts tax base. In general, purchases from other
- Inventory acquired during the tax year. Inventory - defined at MCL
208.1111 - means the stock of goods, including electricity and natural gas,
held for resale in the ordinary course of a retail or wholesale business, and
finished goods and good in process of a manufacturer, including raw materials
purchased from another person. Inventory also includes floor plan interest for
licensed new car dealers and shipping and engineering charges so long as such
charges are included in the original contract price for the associated
inventory. Finally, inventory includes the cost of certain securities and
commodities for securities traders, brokers, and dealers as defined under the
- Depreciable assets acquired during the tax year. Deductible
depreciable assets are those that are or will become eligible for
depreciation, amortization, or accelerated capital cost recovery under the
IRC. The cost of depreciable assets includes costs of fabrication and
- Materials and supplies. Materials and supplies means tangible
personal property acquired during the tax year to be used or consumed in - and
directly connected to - the production or management of inventory or the
operation or maintenance of depreciable assets as described above. "Materials
and supplies" includes repair parts and fuel.
- Staffing company compensation. Wages, benefits, and certain payroll
taxes paid to personnel provided to the clients of staffing companies as
defined under the MBT.
- Payments to subcontractors and purchases by contractors. For
persons included in SIC codes 15, 16, and 17 - such as general contractors,
operative builders, and trade contractors - that fail to qualify for the Small
Business Alternative Credit: (i) payments to subcontractors for construction
projects so long as such payments are made pursuant to a contract specific to
that project, and (ii) to the extent not deducted as inventory or materials
and supplies, materials deducted as purchases in determining the cost of goods
sold on the taxpayer's federal return. For a more complete list of those
persons within SIC codes 15, 16, and 17, see
- Select payments by theater owners. Film rental or royalty payments
paid by a theater owner to a film distributor, film producer, or a film
distributor and producer.
- Select payments by real estate brokers and appraisers. For persons
licensed under articles 25 or 26 of the Occupational Code (real estate
brokers, salespersons, and appraisers), payments to independent contractors
licensed under those same articles. For a more complete list of those persons
licensed under articles 25 and 26 of the Occupational Code, see MCL 339.2501 -
.2518, 339.2601 - .2637.
The more specific statutory definition of "purchases from other firms" is
found at MCL 208.1113(6).