Weekly BNA Insights: Puerto Rico’s VAT and Michigan’s SBT


From the Weekly State Tax Report:

Puerto Rico Treasury Department Releases Guidance On the VAT While the Legislature Votes to Eliminate It

On April 29, 2016 a bill was presented in the Puerto Rico legislative assembly to eliminate the value added tax (VAT) that is scheduled to be implemented June 1, 2016. The vote in favor of eliminating the VAT was unanimous in both the House and the Senate.

The next step following the approval of the replacement bill is the approval or veto by the Governor of the Commonwealth. According to public statements made by the Governor, he does not agree with repealing the VAT.

Should the Governor proceed to veto the replacement bill, the Constitution of Puerto Rico provides for an override mechanism if two thirds of the members of both chambers vote in favor of a bill. Leadership in Puerto Rico's House and Senate have expressed that such an override is possible if the Governor vetoes the replacement bill.

Pablo Hymovitz Cardona, Steve Patton, and Rosa Rodriguez-Ramos of Ernst & Young Puerto Rico LLC discuss the implications of the bill in their article, available here (subscription required). Or sign up for a free trial to the Weekly State Tax Report.

Editor’s Note: On May 20, Puerto Rico governor Alejandro García Padilla vetoed the bill repealing the VAT and on May 23, the House voted to override the veto. (Both links in Spanish.)

Life After Death: How It Took 40 Years to Discover the Multistate Tax Compact Election Applies to Michigan's Former SBT

The Michigan Single Business Tax (SBT) was the nation's only state-level value added tax. The compact election was never considered relevant to the SBT during its existence because the election applied only to an income tax, and the SBT was widely viewed as a VAT.

It was not until the SBT's successor, the Michigan Business Tax, was enacted that the potential applicability of the compact election to the SBT came to light.

Gregory Nowak, Principal at Miller Canfield, discusses the applicability of the MTC Compact Election to Michigan’s Single Business Tax in his article, available here (subscription required). Or sign up for a free trial to the Weekly State Tax Report.