The Michigan House of Representatives approved the Senate substitute of House Bill 5408 during an emergency session Saturday afternoon by a vote of 66-42 that put an end to the 6 percent sales tax on certain services.
“The Michigan sales tax is repealed upon signature by the governor,” said Rep. Michael Sak, D-Grand Rapids, who chaired the session.
The service tax will be replaced by a 21.99 percent surcharge on the taxes they’ll already pay under the new Michigan Business Tax (MBT), effective Jan. 1, but the surcharge will sunset in 2017. It could also end as early as 2014 if certain positive economic conditions are met. The surcharge is expected to replace the entire $600 million in revenue the service tax would have raised.
Earlier in the morning, just after 5 a.m., the Senate voted 33-4 to approve the then tentative agreement that repealed the tax They missed the 12:01 a.m. Saturday deadline despite convening an hour before the deadline, but the bill grants legal protection to those affected businesses if they fail to collect the service tax until the effective date of the new law that replaces it.
The negotiations between Gov. Jennifer Granholm, Lt. Governor John Cherry, House Speaker Andy Dillon, Senate Majority Leader Mike Bishop and Senate Minority Leader Mark Schauer concluded around 1 a.m. Saturday, but it took another few hours to get the bill in the senators’ hands and up for a vote.
The sales tax — enacted in the wee hours of Oct. 1 to help erase the $1.8 billon state budget deficit — was supposed to go into effect on Dec. 1, but it came under immediate fire from some business groups and small businesses affected by the tax.
On Wednesday, the House had approved HB 5408 with a higher surcharge after working with various business groups and negotiations had broken down with Senate Republicans. Senate leaders then called the Senate into session Friday and began serous negotiations.