Taxing process closer to favoring Canadians

TORONTO — The Ontario Trucking Association’s effort to gain reciprocity for Canadian cross-border carriers currently subject to the new Michigan Business Tax (MBT) took a big step forward.

Recently the state’s Senate passed a bill that would eliminate the tax liability for motor carriers from jurisdictions which do not impose similar taxes on Michigan-based carriers.

However, the bill must still make it through the Michigan House of Representatives and ultimately be signed by the Governor.

“We still have a ways to go, but we are confident that the common-sense approach reflected in the senate’s bill will prevail,” said David Bradley, president of the OTA. “At a time when the mid-continent manufacturing sector is under significant competitive pressure it makes no sense to add costs to the trans-border supply chain or to invite possible retaliation from jurisdictions which presently do not impose such taxes on businesses from elsewhere unless those businesses have a permanent establishment in that jurisdiction.”

Bradley also said OTA’s discussions with members of the House of Representatives and Michigan Treasury officials have been very productive so far.

The MBT is a two-part tax which includes a corporate income tax component and a revenue-based (gross receipts) component. The income tax is imposed at a rate of about 5% of a taxpayer’s apportioned income tax base. The gross receipts tax is imposed at a rate of 0.80% and includes all sales activities in Canada and the U.S.

Canadian businesses, including trucking operations that conduct business in the state could be subject to at least the gross receipts tax even if they do not have a permanent establishment in Michigan and only operate into, out of or through the state.

Ontario and other Canadian provinces abide by the principles of the Canada-US Tax Treaty and international tax norms and do not impose corporate income or gross receipts taxes on out-of-province businesses that do not have a permanent establishment in
their province.

While the formula for calculating the tax is very complex and dependent upon a number of factors, OTA estimates that the tax liability for Ontario carriers could be in a range around $1,000 per truck per year.

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