Background: Manufacturing, by nature, requires large capital investment but yields relatively low margins. A tax on gross receipts impacts low margin manufacturing activities more than other business sectors, especially since employee costs, purchased services, technology rights and borrowing costs are not allowed as deductions for this tax. This is a bad strategy for a state like Michigan, where the largest sector, by a wide margin, is manufacturing. The existing gross receipts tax adds enormous complexity to the business tax with vagaries like defining “gross receipts” and “purchases of other firms.” Next to personal property tax, the gross receipts tax is the most significant barrier to manufacturing investment in Michigan.

MMA Position: The gross receipts tax must be eliminated to make Michigan manufacturing costs competitive with other states and nations.