Mich. Admin. Code R 206.20 — Withholding generally

Rule 20. (1) Every employer, over whom Michigan has jurisdiction, required
to withhold federal income tax from co mpensation 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 withhol ding 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 be tween 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 al so 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. Th e firm shall withhold Michigan income tax
from Michigan residents, but will not be required to withhold Michigan income tax
from residents of Indiana who provi de the employer with a certificate of
nonresidency. Michigan and Indiana have a reciprocal agreement.

(c) Example 3. A contractor from Pe nnsylvania 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 re gister and withhold Michigan income tax
from the compensation paid to all em ployees engaged in the project including the
compensation paid to the 2 residents of Pennsyl vania 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.