Boston University School of Law

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

Richard Thompson Ainsworth

Boston University School of Law Working Paper 11-47
(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 and Phrases: VAT, Retail Sales Tax, Retailers' Occupancy Tax, ROT, Michigan sales tax, Zapper, Illinois, Lisa Madigan, Gasoline tax fraud, Objective valuation, Subjective valuation, SDC, BMC Inc.

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Richard Thompson Ainsworth Contact Information
LL.M. Tax Program
Boston University School of Law
765 Commonwealth Ave
Boston, MA 02215

Phone: (781) 773-1052

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