Sales and Use Tax FAQs
FAQs for Sales and Use 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 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?
Performance of any of these activities listed under the sales tax description requires a sales tax registration.
You may also consult the Sales Tax Act.
Do I need to register for use tax?
Performance any of these activities listed under the sales tax description requires a use tax registration.
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 is authorized by Treasury and has a “direct pay permit” that covers the property purchased or leased. The customer must provide to the seller a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption, or the required information in another acceptable format. See Revenue Administrative Bulletin (RAB) 2016-14. When stating its basis for claiming an exemption, the customer should state, “Authorized to pay sales or use taxes on purchases of tangible personal property directly to the State of Michigan” and must include its account number.
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:
- 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)|
How do I obtain a tax exempt number to claim an exemption from Sales or Use Tax?
The Michigan Department of Treasury does not issue "tax exempt numbers".
Form 3372, Michigan Sales and Use Tax Certificate of Exemption, is used to claim exemption from Michigan Sales and Use Tax. The buyer must present the seller with a completed form at the time of purchase. For more information on exemption requirements and the procedures to claim an exemption 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.
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 without 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?
In general, the transfer of a vehicle title is subject to sales tax.
I sold/purchased a vehicle from a relative. Do I owe tax?
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:
- Parent (natural or adoptive),
- Brother or Sister,
- Child (natural or adopted),
- Grandparent or Grandchild,
- Step Relationship,
- Legal Ward or Legally Appointed Guardian, and
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.
- 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.
- 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.
- 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.
FAQs for Filing Requirements and Filing Deadlines
|Filing Frequency||Due Date for Return and Payment|
|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|
Sales, Use and Withholding Taxes Monthly/Quarterly Return
Sales, Use and Withholding Taxes Amended Monthly/Quarterly Return
Sales, Use and Withholding Taxes Annual Return
Sales, Use and Withholding Amended Annual Return
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.
Fuel Advance Credit Repayment
Fuel Retailer Supplemental Schedule
This is now a schedule to be e-filed in connection with your 5080 or 5092 through MTO.
Vehicle Dealer Supplemental Schedule
This is now a schedule to be e-filed in connection with your 5080 or 5092 through MTO.
Purchasers Use Tax Return
Keep a copy for your records.
Seller’s Use Tax Return
Keep a copy for your records.
Concessionaire’s Sales Tax Return and Payment
Sales, Use and Withholding Taxes 4% and 6% Annual Return
This form must be submitted electronically through MTO.
Sales, Use and Withholding Taxes Amended 4% and 6% Annual Return
This form must be submitted electronically through MTO.
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.
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.
Authorized Representative Declaration (Power of Attorney)
This form can be electronically submitted through MTO.
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?
Treasury determines your filing frequency. You may contact the Registration Division to request a filing frequency change. If granted, the Department will notify you in writing.
Initially, your filing frequency is determined by the estimated monthly payment for each tax liability that you requested on your registration application:
- If your monthly tax due is up to $62, you would file annually.
- If your monthly tax due is up to $1,000, you would file quarterly.
- If your monthly tax due is over $1,000, you would file monthly.
Subsequently, your filing frequency is determined by your previous year’s total tax liability:
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.
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?
For 2015 and beyond tax years, complete Form 5092, SUW Taxes Monthly/Quarterly Amended Return. If completing the amended return on MTO, only select the registered SUW taxes that need to be corrected. If mailing the amended return, all SUW taxes that the business is registered for must be reported on the form even if no changes are made to all figures.
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 5082, SUW Taxes Amended Annual Return. If completing the amended return on MTO, only select the registered SUW taxes that need to be corrected. If mailing the amended return, all SUW taxes that the business is registered for must be reported on the form even if no changes are made to all figures.
Be sure to enter a reason for the amendment.
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.
I requested a credit forward on my Annual Return for Sales, Use and Withholding. When am I able to use that credit?
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.
What is a remote seller?
A remote seller is a business that sells its products to customers in a state, using the Internet, mail order, or telephone, without having a physical presence in that state.
What gives a remote seller nexus with Michigan that requires it to register and report and pay sales or use tax to Michigan?
A remote seller has nexus with Michigan and is required to report and pay sales or use tax if, in the previous calendar year, the remote seller made over $100,000 of sales to, or more than 200 transactions with, Michigan customers. This threshold is referred to as the “remote seller threshold” or “economic nexus threshold.”
Which sales are subject to sales or use tax in Michigan?
Tangible personal property sold by persons engaged in the business of making sales at retail, transferred for consideration (whether received in money or another form) is subject to tax. Often, tangible personal property sold by remote sellers includes clothes, furniture and décor, books, magazines or other periodicals sold in tangible form, and prewritten computer software. Leased tangible personal property may also be subject to tax.
Are delivery, shipping or handling charges taxable?
Delivery or shipping charges incurred (or to be incurred) by a seller prior to the transfer of ownership of taxable tangible personal property are subject to tax. Handling charges are a part of gross proceeds and subject to tax. When a seller bills for delivery or shipping and handling combined with the price of the taxable product, the total amount is taxable. See RAB 2015-17 for more information.
How do I apply for a Michigan sales tax license?
An easy way to register in Michigan is through Michigan Treasury Online (MTO). To register by mail, visit Treasury’s page for registration forms. After your application is processed, Treasury will issue you a Michigan sales tax license with additional instructions on how to file and pay the tax online. If you need to register in multiple states, please see the next question.
I make remote sales into multiple states. Is there an easy way for me to register for a sales tax permit in multiple states?
Yes, by submitting a single application through Streamlined Sales Tax (SST), you can obtain a sales tax account with multiple states. A Streamlined Sales Tax ID (SSTID) is issued and you may use your SSTID for communications with Streamlined and all member states. Select the “Registration” tab on SST’s website to complete an application.
To view a listing of the member states, visit the SST’s website and select the “State Info” tab.
I am a Michigan business and a remote seller. Do I need to register for a sales tax license in other states?
Each state’s remote seller laws are different. In order to determine which laws may apply to your business, go to the Streamlined Sales Tax website for collection requirements in all Streamlined Sales Tax states. If a state is not a member of Streamlined Sales Tax, we recommend you contact that state.
If I am not currently paying Michigan sales tax, when do I have to begin paying the tax?
The State Treasurer recognizes the impact the Wayfair ruling may have on remote sellers. In order to ensure a smooth transition for retailers whose only obligation to collect Michigan sales tax comes from these new standards, a remote seller must register and pay the Michigan tax beginning with transactions occurring on or after October 1, 2018, or the calendar year after the threshold of over $100,000 in Michigan sales or 200 transactions with Michigan customers is met, whichever is later.
I am a remote seller who sells through a marketplace. Do I have to pay Michigan sales tax?
Unless the marketplace is paying Michigan sales tax on sales made by you into Michigan, you are required to register and pay the tax if you exceed the thresholds. We recommend contacting your marketplace for more information.
Do I need to apply for a permit (sales tax license) each year?
Once you register and obtain a sales tax license, the license will automatically be renewed each year unless you request a cancellation.
Is there a fee to apply for a sales and use tax permit?
No, neither Michigan nor Streamlined Sales Tax charge an application fee.
How often will I need to file sales and use tax returns and make payments?
- Registered Under Streamlined: Taxpayers registered under Streamlined Sales Tax (SST) file monthly Simplified Electronic Returns (SERs) and remit monthly payments. No annual reconciliation return is required for Streamlined/SER filers.
- Registered Directly with Michigan: A filing frequency will be assigned based upon a taxpayer’s estimated level of activity. After the first tax year of filing, frequency is determined by a taxpayer’s previous tax year’s tax liability. The following monthly amounts of taxable sales will determine filing frequency.
Monthly Taxable Sales
$0 - $1,041
$1,042 - $16,675
More than $16,675
February 28th of the year following the tax year reported
On or before the 20th day of the month following the quarter end
On or before the 20th day of the following month
How does a remote seller file sales tax returns and make sales tax payments?
Methods of filing and paying depend on the way a remote seller is registered.
Registered Under Streamlined: If returns will be filed in multiple states, a remote seller should consider registering through Streamlined Sales Tax (SST). Once registered, a Streamlined taxpayer will file Simplified Electronic Returns (SERs), which are available online through an on-line portal here. After January 10, 2019, SERs will be available through Michigan Treasury Online (MTO).
Registered Directly with Michigan: Electronic returns may be filed through Michigan Treasury Online (MTO) or by using an approved tax preparation software vendor. Visit www.MIfastfile.org for more information about filing using approved software. Returns may also be filed on paper and mailed to Treasury. Those forms are available to download here.
Will I be required to pay penalty and interest if I cannot timely file and pay my first installments?
Treasury will waive failure to file and failure to pay penalties for sales and use tax returns and payments due prior to December 31, 2018, so long as the taxpayer incurring those penalties has nexus solely due to RAB 2018-16 and Wayfair. A taxpayer assessed these penalties who seeks a waiver must submit a request in writing, specify that they are a remote seller, and send the request to the address below. Interest will not be waived.
Michigan Department of Treasury
Business Tax Division
P.O. Box 30427
Lansing, MI 48909
I exceeded the remote seller (“economic nexus”) threshold in 2017. Do I have to pay tax on 2018 sales made before October 1, 2018?
No. Only sales at retail made October 1, 2018, or later are subject to tax for a remote seller that had more than $100,000 in sales to, or more than 200 transactions with, Michigan purchasers in calendar year 2017.
I exceeded the remote seller (“economic nexus”) threshold in 2018, before October 1, 2018. When do I need to start paying sales tax?
Sales tax must be paid beginning with sales at retail made January 1, 2019, for a remote seller that had more than $100,000 in sales to, or more than 200 transactions with, Michigan purchasers in calendar year 2018.
Why are there three Revenue Administrative Bulletins (RABs) about nexus for sales and use tax nexus?
Nexus can be established in several different ways. First, a seller can have physical presence in Michigan as described in RAB 1999-1. Second, a seller can have representational, attributional, or “click-through” presence under MCL 205.52b and MCL 205.95a and as described in RAB 2015-22; in general, these are variations of physical presence. Finally, a seller can have economic presence as discussed in South Dakota v. Wayfair and RAB 2018-16. The economic nexus standards described in RAB 2018-16 have no effect on a seller that has nexus due to its physical, representational, attributional, or click-through presence in Michigan; those sellers must continue to report and pay tax as described in RAB 1999-1 and RAB 2015-22.
Treasury plans to consolidate these three RABs and issue a single comprehensive RAB on sales and use tax nexus. Until then, all three RABs should be considered when determining if a seller has nexus with Michigan.
When I lose nexus, should I stay registered? For how long?
Once a remote seller has nexus due to its economic presence, the seller is subject to Michigan sales and use tax until a calendar year passes in which it does not meet either component of the economic nexus threshold. For example, if a remote seller meets the threshold in 2018 and its sales fall under the threshold in 2019, that seller must pay tax on its 2019 sales, but is not required to pay tax on its 2020 sales. Because an entire calendar year (2019) passed in which the seller did not meet the economic nexus threshold, the seller may cease paying and reporting sales tax beginning January 1, 2020. However, that seller may voluntarily report and pay use tax on its 2020 retail sales in lieu of its Michigan customers paying use tax. Regardless which choice that seller makes, if any tax is collected during this period, it must be reported and paid to the State of Michigan or returned to the customer.
What constitutes a sale for purposes of the economic nexus threshold when multiple payments are received before ownership transfers? For example, a seller takes an order and its customer pays a deposit in 2018. Final payment is made in 2019 and the customer takes ownership of the product in 2020. In which year or years should the sale be counted?
In this example and for purposes of determining economic nexus, the seller should count one sale and the entire price of the product (the deposit plus all payments, excluding interest if separately stated) when ownership transferred in 2020.
What constitutes a sale for purposes of the economic nexus threshold when payment is made in installments after ownership transfers? For example, a customer takes ownership in 2018 of property it purchased from a remote seller. Payments are made monthly, beginning January 2019 and ending June 2020. In which year or years should the sale be counted?
In this example and for purposes of determining economic nexus, the seller should count one sale and the entire price of the product (all payments, excluding interest if separately stated) when ownership transferred in 2018.
I am a remote seller that sells property to a Michigan resident. The Michigan resident has me ship that property to a different person in a different state (for example, she is purchasing a gift for a friend). Does that sale count toward my sales into Michigan for remote seller threshold purposes?
No. The transaction described is not a sale into Michigan. Because the location where the product is received by the purchaser's designee is not in Michigan, and the product is not subsequently brought into Michigan, the sale is not sourced to Michigan. Therefore, such a sale should not be counted when determining whether a remote seller has economic nexus with Michigan. However, the remote seller may need consider whether it has nexus with the state in which property was received (the buyer’s friend’s state) and should contact that state if necessary.
For purposes of the remote seller threshold, which sales should I count, gross sales (including taxable, nontaxable, and exempt), sales subject to tax (including exempt), or taxable sales only (excluding exempt)?
Gross sales are used for purposes of the remote seller threshold. That is, a remote seller has nexus with Michigan if it has gross sales exceeding $100,000, or more than 200 transactions (whether attributable to taxable, nontaxable, or exempt sales), into Michigan in the prior calendar year.
My company is a remote seller and a wholesaler. All my sales to customers in Michigan—which exceed the economic presence threshold in the previous calendar year—are for resale. Do I have nexus, and do I need to register with Michigan?
Yes, a wholesaler with $100,000 in sales, or 200 separate transactions, into Michigan has nexus. However, under these circumstances, the wholesaler does not need to register with Michigan to pay sales or use tax since none of its sales are subject to sales or use tax. The wholesaler must keep records, including resale exemption claims from Michigan customers, in accordance with requirements under Michigan’s sales and use tax acts, and is subject to audit.
I am a foreign (non-U.S.) seller and my sales into Michigan exceed $100,000 or 200 separate transactions. Do I have nexus and am I required to pay sales tax?
Yes. A foreign (non-U.S.) seller that meets the remote seller threshold in the previous calendar year is required to be registered and report and pay sales or use tax to Michigan.
Under what circumstances should a remote seller pay use tax instead of sales tax?
If a sale is made into Michigan and the property’s ownership transfers in Michigan, the seller should pay sales tax. Conversely, if a sale is made and delivered to a Michigan customer but the property’s ownership transfers outside Michigan, the seller should pay use tax. Most often, ownership will transfer in Michigan and sales tax will be due. In addition, a seller that does not have nexus but voluntarily pays tax on sales into Michigan should pay use tax.
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.
May I start selling products if I have submitted my Registration Application (Form 518) but have not received my sales tax license?
You are not required to wait for your sales tax license to arrive to begin selling items at retail. However, as soon as you begin selling items at retail, you are required to remit sales tax to the State of Michigan.
Once your application is processed, your sales tax license is available on MTO immediately with registration access.
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 with Registration access. Sales tax licenses are issued yearly and are valid January – December of the tax year listed on the license.
What is the expiration date for my current Sales tax license?
Sales tax licenses are issued yearly and are valid January – December of the tax year listed on the license.
How can I request a copy of my sales tax license?
Taxpayers can print their current sales tax license from MTO with Registration access.
Alternatively, taxpayers or a power of attorney can request a copy of a sales tax license by calling the Registration Unit at 517-636-6925.
Allow 7-10 days for mailing.