Sales and Use Tax FAQs

FAQs for Sales and Use Tax

Sales Tax

Individuals or businesses that sell tangible personal property to the final consumer are required to remit a 6% sales tax on the total price (including shipping and handling charges) of their taxable retail sales to the State of Michigan. Sales of electricity, natural or artificial gas and home heating fuels for residential use are taxed at a 4% rate. Michigan does not allow city or local units to impose sales tax.

Use Tax

Use tax is a companion tax to sales tax. Use tax of 6% must be paid to the State of Michigan on the total price (including shipping and handling charges) of all taxable items brought into Michigan or purchases through the internet, by mail or by phone from out-of-state retailers that do not collect and remit sales or use tax from their customers. Credit is given for tax paid to another state. Use tax is also applied to certain services such as telecommunications and hotel/motel accommodations. Michigan does not allow city or local units to impose use tax.

General FAQs for Sales and Use Tax

Do I need to register for sales tax?

A person that performs any of these activities must register for sales tax. See the table above for a general description of the difference between sales and use tax.

You may also consult the Sales Tax Act.

Do I need to register for use tax?

A person that performs any of these activities must register for use tax. See the table above for a general description of the difference between sales and use tax.

You may also consult the Use Tax Act.

What is the difference between Use Tax on Sales and Rentals and Use Tax on Purchases?

Almost every business has a use tax liability.

You must register and pay use tax on sales and rentals if you:

  • Are doing business in Michigan but do not have a retail location in Michigan;

  • Voluntarily collect use tax from your customers;

  • Sell telecommunication services;

  • Rent hotel and motel rooms or other accommodations; or

  • Lease tangible personal property to Michigan customers from a Michigan or an out-of-state location.

You must pay use tax on your purchases if you:

  • Buy goods from out-of-state, unlicensed vendors, unless a valid exemption can be claimed;
  • Buy inventory exempt from tax for resale on which no tax is due, then, remove items from that inventory for business or personal (including gifts) use.

Are delivery, shipping or handling charges taxable?

Delivery or shipping charges incurred prior to transfer of ownership of tangible personal property are subject to tax. Handling charges are a part of gross proceeds and, therefore, subject to tax. When a customer is billed for delivery or shipping and handling as a combined total, the total amount is taxable.

Can I get a refund of my sales tax when I return an item to the retailer?

Yes, when items are returned for a refund or credit (for all or a portion of the purchase price) within the seller's refund policy period or 180 days after the initial sale (whichever is sooner), a refund or credit of the sales tax paid is warranted.

The retailer may request proof of Michigan sales tax paid, such as your receipt.

Can a customer instruct a seller not to charge sales or use tax because they will pay it directly to Michigan?

Yes, if the customer provides to the seller:

  • A copy of their direct pay letter of authority from the Michigan Department of Treasury, and
  • Completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption, with the following notation in Section 3: “Authorized to pay sales or use taxes on purchases of tangible personal property directly to the State of Michigan under account number “xx-xxxxxxx”.

Will I need to update my direct pay authority letter with a new tax license number? Will the new system impact current direct pay authority or require new exemption certificates to be used?

Your current Sales tax license is valid from January through December of the current calendar year and a copy of your license can be accessed within your MTO business profile. The implementation of the new MTO services and the expiration of the current sales tax license does not eliminate or in any way diminish your current direct pay authorization. As a result, you do not need to update your direct pay authority letter with the State of Michigan.

If my direct pay letter has an obsolete ME number on it rather than my FEIN, will I need to obtain a new direct pay letter from Treasury? How long will it take to obtain the new direct pay letter?

The existing direct pay letter referencing the ME# is still valid and there is no need to obtain a new direct pay letter from Treasury. Treasury is able to tie ME#’s to the associated FEIN.

I paid tax to another state/country on items purchased there. Is tax still owed to Michigan?

Maybe. Michigan allows a credit of up to 6% on sales or use tax properly paid to another state or local unit of that state. If the other state or local unit of state charged you less than 6%, you would owe the difference to the State of Michigan in the form of use tax.

Michigan does not have a provision for credit of purchases delivered or brought into Michigan from foreign countries or U.S. Territories. Therefore, 6% Michigan use tax would be due on the purchase price (including delivery charges).

Why do some out-of-state businesses collect sales and use tax when other businesses do not?

Michigan can require a business to remit sales or use tax if the business has a physical presence in this state. Examples of physical presence:

  • Store
  • Warehouse
  • Employees/representatives of the business.

Also, an out-of-state business may volunteer to remit use tax for sales in Michigan. For transactions occurring on or after October 1, 2015, an out-of-state seller may be required to remit sales or use tax on sales into Michigan. See Notice of New Sales and Use Tax Requirements for Out-of-State Sellers.

Why is use tax sometimes referred to as remote sales tax?

Use tax is generally applied to purchases from an out-of-state remote seller of merchandise made through catalogs, telephone orders or the Internet.

NOTE: Some entities doing business in multiple states may be interested in Streamlined Sales Tax (SST). The purpose of the SST Agreement is to simplify the burden of tax compliance.

What are the historical prepaid sales tax fuel rates?

Effective Date Gasoline monthly prepaid sales tax rates (in cents) Diesel fuel monthly prepaid sales tax rates (in cents)
Table 1: HISTORICAL PREPAID FUEL RATES
10/01/2016 12.0 12.6
09/01/2016 11.9 12.7
08/01/2016 13.5 12.9
07/01/2016 12.2 12.2
06/01/2016 10.9 11.2
05/01/2016 10.0 10.9
04/01/2016 8.1 10.4
03/01/2016 9.0 11.4
02/01/2016 9.5 12.9
01/01/2016 11.0 14.6
12/01/2015 12.5 14.9
11/01/2015 12.3 13.8
10/01/2015 14.2 14.3
09/01/2015 14.6 15.1
08/01/2015 15.0 15.4
07/01/2015 13.8 15.2
06/01/2015 12.6 14.9
05/01/2015 12.4 15.5
04/01/2015 11.8 15.3
03/01/2015 10.0 16.2
02/01/2015 12.6 19.6
01/01/2015 15.6 21.5
12/01/2014 16.8 20.3
11/01/2014 18.7 20.8
10/01/2014 18.8 21.1
09/01/2014 19.6 21.5
08/01/2014 21.0 21.7
07/01/2014 20.2 22.0
06/01/2014 20.2 22.4
05/01/2014 19.9 23.0
04/01/2014 18.4 23.0
03/01/2014 17.7 21.4
02/01/2014 17.2 21.4
01/01/2014 17.4 21.4
12/01/2013 18.2 21.6
11/01/2013 19.2 22.0
10/01/2013 19.3 21.5
09/01/2013 19.9 21.5
08/01/2013 21.1 22.0
07/01/2013 20.8 22.2
06/01/2013 20.5 21.9
05/01/2013 20.0 22.5
04/01/2013 20.4 22.7
03/01/2013 18.1 NA
06/01/2012 20.5 NA
03/01/2012 17.9 NA
09/01/2011 21.3 NA
06/01/2011 17.6 NA

How do I get a tax exempt number?

The Michigan Department of Treasury does not issue "tax exempt numbers".

To claim exemption for purchases, the buyer must present the seller with a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption.  For more information on exemptions see Revenue Administrative Bulletin 2002-15.

A customer is providing me with their tax exempt number as proof that they do not have to pay sales tax on their purchase; is this correct/valid?

The Department of Treasury does not issue or accept tax exempt numbers. Sellers should not accept a tax exempt number as evidence of exemption from sales and use tax.

To claim exemption for purchases, the buyer must present the seller with a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption. The seller will retain the certificate in their records.

How do I claim an exemption from Sales or Use Tax?

Form 3372, Michigan Sales and Use Tax Certificate of Exemption, is used to claim exemption from Michigan sales and use tax. For further information on exemptions, requirements and the procedure to claim an exemption, refer to Revenue Administrative Bulletin 2002-15.

I am a retailer, how do I claim a resale exemption with my supplier?

To claim exemption, a retailer must provide the supplier with a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption, indicating that the purchase is for “Resale at Retail”. Their sales tax license number must be included in the space provided.

NOTE:  a seller should not accept a FEIN as evidence of exemption from sales and use taxes when presented without completed Form 3372.

Is manufacturing equipment tax exempt?

Michigan provides an exemption from sales or use tax on machinery or equipment used in industrial processing and in their repair and maintenance. The exemption does not include tangible personal property affixed to and becoming a structural part of real estate.

For further information on exemptions refer to Revenue Administrative Bulletin 2000-4.

Are purchases made for agricultural production tax exempt?

Michigan provides an exemption from sales or use tax on tangible personal property used in tilling, planting, caring for or harvesting things of the soil, in the breeding, raising or caring of livestock poultry or horticultural products for further growth. The exemption does not include tangible personal property affixed to and becoming a structural part of real estate.

Is my purchase of a truck or trailer considered “rolling stock” and exempt from tax?

In order to be exempt from Michigan sales or use tax certain criteria must be met. Exemption is allowed in Michigan on the sale of rolling stock purchased by an interstate motor carrier or for the rental or lease of rolling stock to an interstate motor carrier and used in interstate commerce.

According to MCL 205.54r,

  • Rolling stock means a qualified truck, a trailer designed to be drawn behind a qualified truck, and parts affixed to either a qualified truck or a trailer designed to be drawn behind a qualified truck. 
  • Interstate motor carrier means a person engaged in the business of carrying persons or property, other than themselves, their employees, or their own property, for hire across state lines, whose fleet mileage was driven at least 10% outside of this state in the immediately preceding tax year. 
  • Qualified truck means a commercial motor vehicle power unit that has 2 axles and a gross vehicle weight rating in excess of 10,000 pounds or a commercial motor vehicle power unit that has 3 or more axles.

Motor carriers who qualify may claim exemption from sales or use tax by providing the seller or lessor with the prescribed Form 3372, Michigan Sales and Use Tax Certificate of Exemption. The buyer or lessee would check the box "Rolling Stock purchased by an Interstate Motor Carrier".

NOTE: Your first tractor/trailer lease/purchase IS NOT EXEMPT from Michigan sales or use tax.

Do I pay sales tax on the transfer of a vehicle?

I sold/purchased a vehicle from a relative. Is tax due on this transaction?

An exemption from use tax may be claimed when registering your vehicle in Michigan if the “buyer” and “seller” have a qualifying relationship. The ONLY qualifying relationships are:

  • Spouse,
  • Parent (natural or adoptive),
  • Brother or Sister,
  • Child (natural or adopted),
  • Grandparent or Grandchild,
  • Step Relationship,
  • Legal Ward or Legally Appointed Guardian, and
  • In-laws. 

For further information, refer to Form 248, Transferring a Vehicle Title to a Relative.

Is a vehicle purchased by a church tax exempt?

ONLY vans or buses may be purchased exempt if the manufacturer's rated seating capacity is 10 or more and it is used primarily for transportation of persons for religious purposes.

I am a 501(c )(3)/501(c )(4) Organization, how do I claim exemption from Michigan Sales and Use Tax?

Organizations exempted by statute, organizations granted exemption from federal income tax under Internal Revenue Code Section 501(c)(3) or 501(c)(4), or organizations that had received an exemption letter from the Michigan Department of Treasury prior to June 1994 are entitled to sales and use tax exemption in the State of Michigan.

Please refer to Revenue Administrative Bulletin (RAB) 1995-3 for more information on the exemption from Michigan sales and use tax as it relates to nonprofit entities. 

In order to claim exemption, the nonprofit organization must provide the seller with both:

  • A completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption
  • Evidence of nonprofit eligibility:
    • Either the letter issued by the Department of Treasury (prior to June 1994),or
    • Your federal determination as a 501(c)(3) or 501(c)(4) organization

FAQs for Construction

Are materials purchased for the construction of a tax-exempt entity’s building subject to tax?

The sales and use tax statues only provide an exemption for contractors purchasing material when those materials are to be affixed and made a structural part of:

Real estate for a nonprofit hospital. To qualify, the hospital must:

  • Be a separately organized institution or establishment;
  • Have, as its primary purpose, the provision of acute or intensive healthcare and nursing,
  • And, provide these services to persons requiring them; 
  • Not be operated for profit and no benefit from the real estate enriches individual or private shareholders.

A Nonprofit Housing Entity qualified as exempt under the Sales and Use Tax Acts. Only private, qualified, nonprofit housing that has received an exemption certificate from the Michigan Housing Development Authority (MSHDA) qualifies for this exemption.

A Church Sanctuary.

  • The building must be owned, occupied, and used by a religious organization qualified under section 501(c)(3) of the internal revenue code of 1986.
  • The exemption is limited to building portions that are predominantly (50%) and regularly used for worship service.
  • Total material purchases for multiple use areas (such as roofs and foundations) and where a single piece of equipment (such as a furnace) is supplying qualified sanctuary areas as well as other non-exempt areas, an apportionment formula is used to derive a taxable percentage:

Sanctuary Square Footage divided by the Total Building Square Footage

Air or Water Pollution Facility for which a tax exemption certificate has been issued by the State Tax Commission.
Required Documentation:

  • A completed Form 3520, Michigan Sales and Use Tax Contractor Eligibility Statement, must be obtained by the contactor from the qualified entity.
  • Form 3520, and Form 3372, Michigan Sales and Use Tax Certificate of Exemption, are required for the contractor to make tax exempt purchases.

For further information, refer to Revenue Administrative Bulletin (RAB) 1999-2.

FAQs for Internet Purchases

Is my mail order or internet purchase subject to tax?

Yes, unless a valid exemption exists. Every state that has sales tax has a companion tax for purchases made outside that state by catalog, telephone, or Internet. In Michigan, this tax is called "use tax". Use tax is required to be remitted by law when the purchase of a taxable item occurred out-of-state and the retailer hasn't charged sales tax in their jurisdiction.

In addition, for transactions occurring on or after October 1, 2015, an out-of-state seller may be required to remit sales or use tax on sales into Michigan. See Notice of New Sales and Use Tax Requirements for Out-of-State Sellers.

Businesses
  • If you only have one or two taxable out-of-state purchases per year, you may complete Form 5087, Purchaser’s Use Tax Return, or if you prefer, you may apply for a use tax license. 
  • If you have more than two taxable out-of-state purchases per year, you must have a use tax license.
  • For more information on obtaining a use tax license, refer to the FAQ for Michigan Treasury Online (MTO) and the section titled Filing Changes Effective January 1, 2015 within this FAQ.
Individuals
  • The Michigan Department of Treasury provides a use tax line on the Michigan Individual Income Tax Return to report and pay use tax.
  • Report and pay the use tax using Form 5087, Purchaser’s Use Tax Return, or the use tax line on the MI-1040 – NOT BOTH.
  • For more information on remitting use tax for individuals.
     

FAQs for Filing Requirements and Filing Deadlines

Filing Frequency Due Date for Return and Payment
Table 2: FILING FREQUENCIES AND DUE DATES
Monthly On or before the 20th day of the following month
Quarterly On or before the 20th day of the month following the quarter end.
Annual Due February 28th of the year following the tax year reported.
Sales/Use Accelerated Electronic Funds Transfer (EFT)

Effective January 1, 2014, Public Act 458 of 2012

Taxpayers who average $720,000 of sales or use tax annually are required to remit both taxes on an accelerated schedule. Taxpayers are notified in writing of a change to/from accelerated filing. Accelerated filers are required to remit electronically.

A prepayment transmission of 75 percent of the taxpayer's tax liability from the current year, immediately preceding month or the same period, last year (whichever is less) is due on or before the 20th day of the current month.

A reconciliation payment, equal to the difference between the actual tax liability and the prepayment amount is due on or before the 20th day of the subsequent month.

For example – hypothetical January 2016 tax period: 

December 2015’s total tax liability equaled $1,000,000. January 2015’s total tax liability equaled $1,500,000. The taxpayer elects to base the January 2016 prepayment on December 2015’s total tax liability because it is the lesser amount.

Therefore, a $750,000 prepayment (75% of $1,000,000) is due on January 20, 2016. After month end the business determines that January 2016’s actual total tax liability equals $1,225,000. Thus, a reconciliation payment of $475,000 is due by February 20, 2016 ($1,225,000 minus $750,000 prepayment).

  Accelerated EFT Filing Requirements

Questions and Answers About Paying your Sales & Use Tax on an Accelerated Basis
2014 & Prior Tax Years 2015 & Beyond Tax Years Form Title Additional Information
Table 3: TAX RETURN FORM NUMBER BY TAX YEAR

160

5080

Sales, Use and Withholding Taxes Monthly/Quarterly Return

 

N/A

5092

Sales, Use and Withholding Taxes Amended Monthly/Quarterly Return

 

165

5081

Sales, Use and Withholding Taxes Annual Return

 

N/A

5082

Sales, Use and Withholding Amended Annual Return

 

429

5083

Fuel Supplier and Wholesaler Prepaid Sales Tax Schedule

This is now a schedule to be e-filed in connection with your 5080 or 5092 through MTO.
Note: Prepaid Sales Tax on gasoline or diesel fuel are no longer allowable deductions from gross sales. When completed, this schedule reduces sales tax due by the prepaid amount.

430

5084

Fuel Advance Credit Repayment

 

2189

5085

Fuel Retailer Supplemental Schedule

This is now a schedule to be e-filed in connection with your 5080 or 5092 through MTO.
Note: Prepaid Sales Tax on gasoline or diesel fuel are no longer allowable deductions from gross sales. When completed, this schedule reduces sales tax due by the prepaid amount.

92

5086

Vehicle Dealer Supplemental Schedule

This is now a schedule to be e-filed in connection with your 5080 or 5092 through MTO.
Note: Prepaid Sales Tax to the Secretary of State is no longer an allowable deductions from gross sales. When completed, this schedule reduces sales tax due by the prepaid amount.

48

5087

Purchasers Use Tax Return

Keep a copy for your records.

388

5088

Seller’s Use Tax Return

Keep a copy for your records.

2271

5089

Concessionaire’s Sales Tax Return and Payment

 

4601

5091

Sales, Use and Withholding Taxes 4% and 6% Annual Return

This form must be submitted electronically through MTO.

N/A

5093

Sales, Use and Withholding Taxes Amended 4% and 6% Annual Return

This form must be submitted electronically through MTO.

N/A

5094

Sales, Use and Withholding Taxes Payment Voucher

This form is used to remit a payment separate from a return. This form does not replace a return.

3862

5095

Sales, Use and Withholding Monthly/Quarterly and Amended Monthly/Quarterly Worksheet

This form is not sent to the Department of Treasury; it is designed as a tool to assist in preparing returns.

151

151

Authorized Representative Declaration (Power of Attorney)

 This form can be electronically submitted through MTO.

163

163

Notice of Change or Discontinuance

This form can be electronically submitted through MTO.

Do I have to file a return? What if I do not owe any tax?

If you are registered to pay a tax, you must file a return within your established filing frequency, even if no tax is due.

What is the definition of a “tax year”?

A tax year for sales & use tax is defined as a calendar year: January 1st – December 31st.

How often do I need to file a tax return for sales, use and withholding taxes?

Initially, your filing frequency is determined by the estimated monthly payment for each tax liability that you requested for on your registration application:

  • If your monthly tax due is up to $65, you would file annually.
  • If your monthly tax due is up to $300, you would file quarterly.
  • If your monthly tax due is over $300, you would file monthly.

Subsequently, your filing frequency is determined by your previous year’s total tax liability:

  • If your annual tax due is less than $750, you would file annually.
  • If your annual tax due for the year is between $750 and $3,600, you would file quarterly.
  • If your annual tax due for the year is over $3,600, you would file monthly.

NOTE:

  • It is your responsibility to notify Treasury if your total tax liability exceeds your current filing frequency threshold so it can be adjusted accordingly.
  • Treasury determines your filing frequency. You can request filing frequency changes on Michigan Treasury Online and if changes are subsequently made, the Department will notify you in writing. You cannot unilaterally change your filing frequency.

For more information, See Table 2: Filing Frequencies & Due Dates.
For more information, See Table 3: Tax Return Form Number by Tax Year.

I did not file my monthly/quarterly returns. Can I just file the annual return? 

No, the purpose of the annual return is to reconcile, balance, and close the tax year – it does not replace monthly/quarterly returns.

For more information, See Table 2: Filing Frequencies & Due Dates.
For more information, See Table 3: Tax Return Form Number by Tax Year.

When filing my monthly/quarterly return, it is asking me for “gross sales”. IS this correct? Does this mean only taxable sales or all sales?

Gross sales is required to be reported on monthly/quarterly returns for the 2015 tax year and beyond. Gross sales is defined as all sales. To obtain your taxable sales figure, subtract any allowable deductions from gross sales. Allowable deductions and calculation of tax due from taxable sales are not delineated on the monthly/quarterly return.

Please refer to Form 5095, Sales, Use and Withholding Monthly/Quarterly and Amended Monthly/Quarterly Worksheet, for assistance in completing the monthly/quarterly return.

I need to amend my sales, use and withholding tax return. What is the process?

Monthly/Quarterly Return

For 2014 and prior tax years, complete a new Form 160, Combined Return for Michigan Taxes, with the correct figures. Handwrite the word “AMENDED” clearly on the form. This form can only be mailed.

For 2015 and beyond tax years, complete Form 5092, SUW Taxes Monthly/Quarterly Amended Return with the correct figures. This form can be electronically submitted through MTO or mailed.

Annual Return

For 2014 and prior tax years, complete a new Form 165, Annual Return for Sales, Use and Withholding Taxes, with the correct figures. Check the “amended” box at the top of the first page and enter the date of amendment. Fill out the explanation section on page two indicating the reason for the amendment. This form can only be mailed.

For 2015 and beyond tax years, complete Form 5082, SUW Taxes Amended Annual Return, with the correct figures. This form can be electronically submitted through MTO or mailed.

I requested a credit forward on my Annual Return for Sales, Use and Withholding. When am I able to use that credit in the next tax year?

Treasury will notify taxpayers in writing when their annual returns are processed and a determination has been made regarding requested credit forwards. Taxpayers should not use credits until they have received this written correspondence from Treasury.

FAQs for Sales Tax Licenses

Is there a fee for a sales tax license?

No, there is not a fee for a sales tax license.

Who needs a sales tax license?

Individuals or businesses that sell tangible personal property to the final consumer.

Who needs a sales tax license.

May I start selling products even though I have not yet submitted a Registration Application (Form 518) or haven’t received my sales tax license?

You do not need to wait for a sales tax license to begin selling items at retail; you may start to collect taxes at any time; however, you are required to submit taxes collected to the State of Michigan.

When should I pay my sales tax with a Concessionaires Form (5089) and when should I register for sales tax with a Registration Form (518)?

If you make retail sales at only one or two events in Michigan per year, you may complete Form 5089, Concessionaire’s Sales Tax Return and Payment, or, if you prefer, you may apply for a sales tax license.

If you make retail sales at more than two events in Michigan per year, you must have a sales tax license.

I am a wholesaler. Do I need a sales tax license?

No, Michigan does not issue sale tax licenses to wholesalers. In order to claim an exemption, a wholesaler must provide the seller with a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption, and indicate that the purchase is for “Resale at Wholesale”.

How do I obtain a sales tax license?

You must register for sales tax and/or use tax on sales and rentals.

To register for Michigan business taxes, you may either complete the online eRegistration process through MTO or mail Form 518, Registration for Michigan Taxes. Business registration cannot be done over the phone. eRegistration is authenticated within 10-15 minutes of application submission. If mailing Form 518, allow 4-6 weeks for processing.

Additional registration information for the application process can be found by visiting the Michigan Registration Web page.

Treasury has discontinued sending SUW tax booklets; how will I get my sales tax license?

Sales tax licenses are available on MTO under the “Letters and Licenses” tab for users with “Registration” access. 2016 Sales tax licenses were mailed in September 2015. Sales tax licenses are now valid January – December of the tax year listed on the license.

What is the expiration date for my current Sales tax license?

2016 Sales Tax licenses are valid until December 31, 2016. Sales tax licenses are now valid January – December of the tax year listed on the license.

How can I request a copy of my sales tax license?

2016 Sales tax licenses were mailed in September 2015. Taxpayers can print a copy of their sales tax license from MTO under the “Letters and Licenses” section.

Alternatively, taxpayers can use the “request a copy of sales tax license” by calling the Registration Unit at 517-636-6925.