Michigan Sales Tax Information, Sales Tax Rates, and Deadlines

Michigan Sales Tax

Michigan Sales Tax At a Glance

Michigan Sales Tax State rate: 6%
Maximum combined rate: 6%
Sourcing: Destination
Tax Holidays: None
Governing Body: Michigan Department of Treasury

Michigan sales tax law is similar to most other 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 any local sales taxes. As a result, every citizen of the state pays the same 6% sales tax for goods purchased in the state.

Determining Sales Tax Nexus in Michigan

For those that operate their 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 it from your customers. For those who do not operate solely in Michigan, however, you will first need to determine if you have 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
  • Has “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 who are 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 is expected to most affect 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.

For a more detailed breakdown of the new law and how it affects nexus in Michigan, visit the Michigan Department of Treasury website.

What Is Eligible for Sales Tax in Michigan?

The State of Michigan has a detailed list of what is subject to sales tax collection in the state. The vast majority of physical goods are subject to sales tax collection. 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 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 “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 which for use in real estate, office supplies, public highway vehicles, or preparation of food or beverage 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 specificity of the exemptions, it is recommended you review the full list provided by the State before adjusting any business practices in the state.

Registration

If you are deemed to have sales tax nexus in Michigan, you must register to collect sales tax in the state. The process for registering is made easier thanks to Michigan’s One Stop Website for businesses. To get started, you will need all of 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 and the process is completed and your certificate provided between 7-10 days after registering (if done electronically).

Filing

You will pay Michigan sales and use tax by:

  • For Those in 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.
  • Shipping and Handling – Items that are taxable being shipped by someone who has sales tax nexus in the state are subject to tax on shipping and handling.
  • Filing Your Return – 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.

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

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.

Deadlines

Quarterly: The following deadlines apply to those whose sales tax liability in Michigan is between $750 and $3,600 per year:

PeriodDue Date
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:

PeriodDue Date
JanuaryFebruary 20
FebruaryMarch 20
MarchApril 20
AprilMay 20
MayJune 20
JuneJuly 20
JulyAugust 20
AugustSeptember 20
SeptemberOctober 20
OctoberNovember 20
NovemberDecember 20
DecemberJanuary 20

Annual: For those businesses with liability less than $750 per year, you will file annually and only online.

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 total unpaid tax over the first two months. After those two months have passed, 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.

Resources:

Michigan Sales Tax Software

In 2015, Michigan sales tax became much more complicated, especially if you are an out of state seller. It is recommended that you work with sales tax software like AccurateTax TaxTools to ensure you accurately record, collect, and pay the sales tax due on a regular basis 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 signup for a free trial here to get started.