M76. To calculate the modified gross receipts tax base, may contractors deduct from gross receipts all amounts paid to subcontractors as purchases from other firms?

Under the MBT, persons included in SIC codes 15, 16, and 17 that do not qualify for the small business alternate credit under MCL 208.1417 may deduct "payments to subcontractors for a construction project under a contract specific to that project." MCL 208.1113(6)(e). Persons included in SIC codes 15, 16, and 17 include general contractors (of residential buildings including single-family homes; industrial, commercial, and institutional buildings; bridges, roads, and infrastructure; etc.), operative builders, trade contractors (such as electricians, plumbers, painters, masons, etc.). See http://www.osha.gov/pls/imis/sic_manual.html for a more complete list.

In other words, purchases from other firms includes all payments to subcontractors for construction projects so long as such payments are made pursuant to a contract specific to that project. For example, payments made to an independent contractor to provide general labor services to the contractor not specific to a particular contract do not constitute purchases from other firms. However, payments made to a subcontractor for services and materials provided under a contract specific to a particular construction project (such as the construction of commercial property at 111 Main Street) do constitute purchases from other firms.