Michigan enacted changes to its sales tax that expands it to cover 23 additional services starting 12/1/07 (HB 5198 signed 10/2/07). The services now subject to sales tax include:

• landscaping
• bail bonding
• balloon-o-grams
• astrology, palm reading, fortune-telling and numerology
• coin-operated blood pressure testing machines
• party planning
• house sitting
• shoe shining
• wedding planning
• packaging and labeling
• skiing
• travel and reservation
• courier and messenger
• personal care except hair care
• personal fitness trainer
• personal shopper

Thus, the state is better recognizing that the sales tax is a consumption tax and services are a type of consumption (not only tangible personal property can be consumed). They are also recognizing that as consumer spending on tangible goods decreases while consumption of services an intangibles (including digital downloads) increases, changes are needed to preserve the sales tax base. For more information on modernizing state sales tax, see my report and recent op eds - here.

Hopefully Michigan will provide technical and financial assistance to the businesses that must start collecting, reporting and remitting sales tax as it can be a bit complicated, require new software systems and assistance of tax professionals. Many of the businesses that will need to start collecting sales tax are probably calendar year businesses. One thing that would have made the new task a bit easier is for it to start on January 1 rather than December 1. That's not much time to get ready in either case though (causing headaches for both businesses and the Michigan Department of Treasury).

Michigan also raised its income tax from 3.9% to 4.35%. These changes were made to address a budget deficit. (more from Traverse City Record Eagle)

What do you think?

This post was originally published at http://21stcenturytaxation.blogspot.com.