The tax, expected to bring in $725 million in revenue by applying Michigan's 6 percent sales tax to many services, was added to the budget with no public discussion, The Detroit News reported. Business owners have been lobbying hard to repeal it.

Granholm said she expects discussions soon with the Legislature.

"I am and have been in discussion with the business community about what that could look like," Granholm said. "My criteria for the replacement are that it is revenue-neutral, and bipartisan and it's not temporary."