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An Industry-Specific VAT in Michigan - Objective Valuation in the Retail Gasoline Trade

13 Pages Posted: 5 Oct 2011  

Richard Thompson Ainsworth

NYU - Graduate Tax Program; Boston University - School of Law

Date Written: October 5, 2011


New York adopted an industry-specific value added tax (VAT) to solve problems with virtual intermediaries (room remarketers) under its hotel accommodations tax. The New York VAT resembles the VAT used in the European Union (EU). It is a credit-invoice VAT that subjectively values supplies.

Michigan has also adopted an industry-specific credit-invoice VAT, however the targeted industry is the retail gasoline trade. The valuation method is objective, rather than subjective. In valuing supplies objectively rather than subjectively, the Michigan VAT resembles the exception provisions that are found in most VATs around the globe. Objective valuations are used in VATs when dealing with inherently problematical transaction types.

The central point is that Michigan, like New York, has departed from the traditional American approach of taxing consumption in a single stage (directly from the consumer through a retail sales tax). Michigan is doing this because it wants to capture the administrative benefits of utilizing a multi-stage levy. What New York and Michigan are interested in securing is: a larger and more stable and revenue flow through the VAT’s fractioned payment mechanism, and a more easily audited tax regime through a leveraging of the VAT’s self-enforcement mechanisms.

Keywords: VAT, Retail Sales Tax, Retailer's Occupancy Tax, ROT, Michigan sales tax, Zapper, Illinois, Lisa Madigan, Gasoline tax fraud, Objective valuation, Subjective valuation, SDC, BMC Inc

JEL Classification: K00, K34, K42

Suggested Citation

Ainsworth, Richard Thompson, An Industry-Specific VAT in Michigan - Objective Valuation in the Retail Gasoline Trade (October 5, 2011). Boston Univ. School of Law, Law and Economics Research Paper No. 11-47. Available at SSRN: or

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

Bobst Library, E-resource Acquisitions
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New York, NY 10003-711
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Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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