Michigan Tax Update: Ballot Initiative Good for Tribes
The Michigan legislature has approved a ballot initiative that will be submitted for voter approval in May 2015.
If approved, the initiative will impact Tribes in two important ways:
First, the initiative will eliminate the sales tax on retail sales of motor fuel. Under the Tax Agreement, Resident Tribal Members are not required to pay the sales tax on motor fuel purchases. However, the sales tax is owed on motor fuel sales to Non-Resident Tribal Members. If approved, the ballot initiative will eliminate this tax liability for Non-Resident Tribal Members.
Second, the initiative will increase the sales tax rate from 6% to 7% on taxable purchases. This tax increase will result in additional sales tax revenue for Tribes under the tax sharing provisions of the Tax Agreement.
Finally, it should be noted that any increase in the taxes included within the Tax Agreement, including the sales tax, ultimately increases the value of the benefits afforded under the Tax Agreement.