Section 206.20. Withholding generally.

(1)   Every  employer,  over   whom  Michigan  has    jurisdiction, required to withhold federal income tax from compensation paid an employee, shall also withhold Michigan income tax from (a) compensation paid to the employee if the employee is a resident of  Michigan,  and   (b)

from that portion of the compensation earned in Michigan if the employee is not a resident of Michigan, unless (i) the compensation  is  paid  to  an employee from whom the employer is prohibited from withholding Michigan income tax because of a federal law, or (ii) the employer is not required to withhold Michigan income tax because of a reciprocal agreement between Michigan and another state or between Michigan and  another  city.  (See employer's tax guide.)

(2) Churches, schools,  governmental   agencies,  and  nonprofit organizations exempt from income tax shall withhold Michigan income tax from compensation paid employees the same as any other employer.

(a)   Example 1. A church has a full-time secretary and withholds federal income tax from her compensation. The church shall also withhold Michigan income tax from her compensation.

(b)   Example 2. A machine shop is located in  Michigan  close  to   the Indiana state line. It employs residents of both Michigan and Indiana and is required to withhold federal income tax from all employees. The firm shall withhold Michigan income tax from Michigan residents, but will not  be required to withhold Michigan income  tax from residents of Indiana who provide the employer with a  certificate  of nonresidency.   Michigan   and Indiana have a reciprocal agreement.

(c)     Example 3. A contractor from Pennsylvania builds a shopping center in Michigan. He employs residents of Michigan from the local labor force  and brings 2 of his permanent employees from Pennsylvania to Michigan  for   3 months to supervise the construction. The  contractor  shall   register  and withhold Michigan income tax from the compensation paid to all employees engaged in the project including the compensation paid to the 2 residents of Pennsylvania for the compensation  paid   for the work  performed   in Michigan. This contractor has the same obligation to  withhold the Michigan tax as a Michigan contractor who performs all of his business in Michigan.

History: 1979 AC.