Michigan Sales Tax
Michigan Sales Tax At a Glance
State rate: 6%
Maximum combined rate: 6%
Tax Holidays: None
Governing Body: Michigan Department of Treasury
Michigan sales tax law is similar to most other states in the United States, but it has a few exceptions, specifically related to which tangible goods can be taxed and how sales tax nexus is established. In the following guide, we will discuss to whom Michigan’s sales tax rates apply, when a merchant is required to collect the tax, and what exceptions may apply for certain types of goods and services.
Michigan Sales Tax Rates
Unlike many other states, Michigan does not have county or local sales taxes. As a result, every citizen of the state pays the same 6% sales tax for goods purchased in the state.
Because there is a flat tax rate in Michigan and there are no local taxes, there is no difference if you are an in-state or out-of-state seller. Any transactions to which sales tax applies should have a 6% sales tax collected against them.
Determining Sales Tax Nexus in Michigan
For those that operate their small business solely in Michigan, determining whether you should collect sales tax is relatively simple. If the goods you sell are subject to sales tax, you will need to collect them from your customers. However, for those who do not operate solely in Michigan, you will first need to determine if you have state sales tax nexus.
The State of Michigan considers you to have sales tax nexus in the state if you meet any of the following:
- Physical location or office in the state for more than one day
- Have “ownership or beneficial interest in a flow-through entity” that also has nexus in the state.
- Have goods stored in a warehouse in the state
Michigan’s sales tax nexus laws were updated on October 1, 2015 and were expanded to clarify what constitutes nexus, with some relation to online sales. The new rules make it so essentially anyone who has a physical presence or makes sales in Michigan physically will be required to collect sales tax. In addition, those attempting to “establish and maintain a market in this state for the seller’s sales of tangible personal property to purchases in this state” will be subject to sales tax collection.
This includes those soliciting sales, making repairs, providing maintenance, collecting on accounts payable, delivering property sold to customers, installing products after shipment, training employees, contractors, brokers, agents or others on an out-of-state entity’s behalf, providing technical assistance, or providing any form of consulting services.
This affects large companies online like Amazon, eBay, Overstock, and others that do significant business in the state. For retailers who use FBA via Amazon, this may affect you.
In addition to the physical nexus updates passed by Michigan in 2015, an updated economic nexus law was passed in September, 2018 following the Supreme Court’s Wayfair decision. Remote sellers who make 200 or more transactions or $100,000 or more in sales to Michigan residents are now required to collect and remit sales tax. For marketplace sellers, nexus can now be established via physical presence, click-through presence, or economic presence. A comprehensive FAQ is available on the Michigan Department of Revenue’s website.
What Is Eligible for Sales Tax in Michigan?
The State of Michigan has a detailed list of what is subject to state sales tax collection in the state. For the vast majority of tangible personal property tax is collected. There are, however, exceptions, which include:
- Services – Most services are exempt from sales tax, but those that involve creating a product, manufacturing goods, or consulting on the development of a physical good may require sales tax collection.
- Wholesale – Sales at wholesale are not generally subject to sales and use tax in Michigan. Anything purchased for “resale” is not considered a “retail sale” and therefore is not taxed.
- Industrial Processing – If something is consumed in transformation, alteration, modification, or change of form, it is not subject to sales tax under many conditions. This does not apply to property for use in real estate, office supplies, public highway vehicles, or food or beverage preparation for retail sale. There are several specific exemptions here you can review more on Michigan’s 3372 Sales and Use Tax Certificate of Exemption.
- Specific Organizations – Sales to churches, hospitals, schools, and government are exempt from sales tax.
Because of the complexity of the Michigan sales tax rules and the specificity of the exemptions, it is recommended you review the full list provided by the State before adjusting any business practices in the state.
As of April 26, 2023, shipping charges are no longer taxable within the state of Michigan. Regardless of whether you are an in-state or out-of-state seller, you should not include shipping charges in your sales tax calculation.
Michigan Sales Tax Registration
If you are deemed to have sales tax nexus in Michigan, you must register to collect sales tax in the state to ensure sales tax compliance. The registration process for a sales tax license is easier thanks to Michigan’s One Stop Website for businesses. To get started, you will need all your personal and business identification materials, a list of locations of your offices, and a specific rundown of the major business activity you perform in the state.
There is no fee to register for sales and use tax collection in Michigan. The process is completed, and your certificate is provided 7-10 days after registering (if done electronically)
Filing Sales Tax in Michigan
A filing frequency will be assigned to you depending on your total liability and the type of business you do in Michigan. The date on which you must pay your sales tax due will depend on this frequency and will vary from year to year. It is possible for your payments to become more frequent (or less so) depending on the total liability you report in a given period. The following frequencies apply:
- Annual – Less than $750 due per year
- Quarterly – Between $750-$3600 per year
- Monthly – More than $3600 per year
To file your sales tax return with the State of Michigan, you can use the Michigan Department of Treasury website or you can use the paper form, Form 5080. However, if you are an annual filer, you must file online.
Michigan offers a discount to those who pay their collected sales tax early or on time on a regular basis. The discount varies depending on what is owed and on your filing frequency. Because one third of the 6% sales tax rate cannot be discounted, it is recommended you use the calculator available on the Michigan Department of Treasury website to calculate this number.
Michigan Sales Tax Deadlines
Quarterly: The following deadlines apply to those whose sales tax liability in Michigan is between $750 and $3,600 per year:
|January – March (Q1)||April 20|
|April – June (Q2)||July 20|
|July – September (Q3)||October 20|
|October – December (Q4)||January 20|
Monthly: The following deadlines apply to those whose sales tax liability in Michigan is greater than $3,600 per year:
Annual: For those businesses with liability less than $750 per year, you will file annually and only online. Payments are due on February 28th if you file annually.
Penalties and Interest for Late Payments
If you fail to pay your sales tax due on time, you will be subject to a penalty. This penalty will be 5% of the unpaid tax over the first two months. After those two months, the number increases monthly with a maximum penalty of 25% of the total tax owed. There are other more extreme charges if it is deemed that fraud is being committed or if sales tax is regularly underpaid or paid late. Michigan requires even zero returns to be paid on time each filing period.
Michigan Tax Resources
- Michigan Department of Treasury Online
- List of Common Sales Tax Exemptions
- Michigan Streamlined Sales and Use tax Information
- Registration Forms and Online Registration
Michigan Sales Tax Software
In recent years Michigan sales tax has become much more complicated, especially if you are an out of state seller. It is recommended that you work with sales tax calculator software like AccurateTax TaxTools to ensure you accurately record, collect, and pay the sales tax due regularly to the state. Our tool offers detailed data review and sorting tools to help you ensure you pay the right sales tax rates everywhere you do business. It can work with existing e-commerce website tools all from a single interface. To learn more about TaxTools, contact us today. You can also sign up for a free trial to get started.
Last updated May 2023