Michigan warehousing service tax delayed

Industry forces now have until Dec. 20 to find an alternative revenue source to balance Michigan's budget.

By Tom Andel, Editor in chief -- Modern Materials Handling, 11/8/2007

Modern recently reported that Joel Anderson, CEO of the International Warehouse Logistics Association, was on a mission to kill a tax bill in Michigan that would raise the cost of adding value in ways such as inventory management services. It would impose a 6% tax on handling, redistribution, or other value-adding logistics activities.

Momentum has been building for repeal.

The Michigan Senate voted last week to delay the effective date for the service tax from Dec. 1 to Dec. 20. The IWLA  is scheduled to testify this week before the Senate Revenue Committee on the issue. However, even if the business forces in Michigan are successful in getting a repeal, the governor will be looking to them for a replacement of this revenue.

“It’s up to the business community, the Michigan Chamber of Commerce, the Detroit Chamber of Commerce, The Grand Rapids Chamber of Commerce, and the Michigan Manufacturers Association to develop a replacement tax that has the least negative competitive impact on Michigan employers,” Anderson told Modern. “The leading idea is a temporary surcharge on the Michigan business tax that would expire in 2011.”

Anderson sees a ray of light coming from this experience: It will make other states think twice before taking a similar approach to industry taxation.

“The real question will be, will the voters hold the legislature accountable for putting a gun to the heads of business people and telling us to come up with the money?,” he says. “But even this victory will be hollow. We’ll end up paying without being actively engaged in the dialog of whether this is an appropriate amount.”