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Michigan Business Tax
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M16. Should a taxpayer use the cash or accrual method when determining gross receipts under the MBT?
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Answer:
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Similar to the SBT, a taxpayer should compute its gross receipts using the accounting method that it used in the computation of its net income for federal tax purposes.
Under the accrual method, income is "received" and recorded on the books when all the events that establish the "right to receive" the income has occurred. Under the cash method, income is not recorded until payment is actually received, and expenses are not counted until they are actually paid.
A taxpayer that computes its federal taxable income using the accrual method should consistently compute both its Business Income tax base and Modified Gross Receipts tax base using the accrual method. A federal cash basis taxpayer would compute both the MBT Business Income and Modified Gross Receipts tax bases using the cash basis method.
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