TORONTO — It was a long, hard fight, but Ontario trucking companies will not have to pony up extra funds to cover the punitive Michigan Business Tax (MBT).

Michigan Governor Jennifer Granholm today signed into law a bill exempting Canadian trans-border trucking companies and auto parts manufacturers that do not have a permanent establishment in the state from having to pay the punitive Michigan Business Tax (MBT).

The bill was approved by both the Michigan Senate and the House of Representatives in a pre-Christmas marathon, make or break session.

According to the Ontario Trucking Association, the MBT, which is a gross receipts tax, could have cost Ontario trucking companies who operate into, out of or through the state around US$1,000 per truck per year had the bill not passed.

The OTA estimates that Ontario trucking companies would have been on the hook for at least US$40 million per year. About three-quarters of Ontario-US trade (by value) moves by truck.

The essence of the argument put forward by OTA was that the MBT is inconsistent with international tax norms, defies the spirit of the Canada-US tax treaty and runs counter to the way Canadian provinces tax Michigan business.

According to OTA president, David Bradley: “We wanted to preserve reciprocal treatment for carriers operating between Canada and the US.”

Ontario and Canada do not tax Michigan businesses that operate across the border. Only companies that have a permanent establishment in a province are subject to corporate income taxation and no Canadian jurisdiction has a gross receipts tax.

“We just wanted to be treated fairly,” added Bradley. “It makes little economic sense in these difficult times for the economies of both Michigan and Ontario – which are so dependent upon the automotive manufacturing industry – for the two jurisdictions to be working against and not with each other.”

OTA began its lobby campaign to amend the MBT legislation (which came into force on January 1, 2008) in the fall of 2007. After passing relatively smoothly through the Senate in January 2008, the bill to exempt Canadian truckers ran into opposition the following month when it went before the House of Representatives Tax Policy Committee.

After months of wrangling, the bill finally made it back to the House tax committee on Dec. 10, where it was passed. On Dec. 19 the bill was passed by both chambers of the Michigan legislature in an all-night session before the holiday break.