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.
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.
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.
What is use tax on purchases?
Almost every business has a use tax liability.
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 charges include, but are not limited to, transportation, shipping, postage, handling, crating, and packing and are generally subject to Michigan tax. Michigan's sales price definition includes delivery charges incurred or to be incurred before the completion of the transfer of ownership of tangible personal property from the seller to the purchaser. It is immaterial whether the delivery charges are broken out separately or combined with the sale amount.
Therefore, if the tangible personal property a retailer is selling is subject to Michigan sales or use tax then any delivery charges are subject to Michigan sales or use tax. However, if the tangible personal property qualifies for exemption from Michigan sales or use tax, the exemption also applies to the delivery fees charged as part of the price of the property. For more information see RAB 2015-17, MCL 205.51, MCL 205.92.
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 proper.
The retailer may request proof of Michigan sales tax paid, such as your receipt.
Do I need to update my direct pay authority letter if I've had an address, owner/officer, or sales tax license change?
Yes, you will need to update your direct pay authority letter. Please contact Michigan Department of Treasury, Technical Services Section at 517-636-4357.
I paid tax to another state/country on items purchased there. Is tax still owed to Michigan?
Items brought into Michigan for storage, use or consumption may be subject to 6% Michigan 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. However, credit is given for any sales or use tax that is legally due and paid in another state at the time of purchase.
Michigan provides an exemption from use tax on items purchased for personal use that are purchased outside of this state and that is not an aircraft.
For non-resident of this state, this exemption applies to property brought into this state more than 90 days after the time of purchase.
For residents of this state, this exemption applies to property brought into this state more than 360 days after the time of purchase.
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.
Do I pay use tax on the transfer of a vehicle?
Section 3 of the Use Tax Act, MCL 205.93; MSA 7.555(3), states, in pertinent part:
(3) The following transfers or purchases are not subject to use tax:
(c) When a vehicle, ORV, mobile home, aircraft, snowmobile, or watercraft that has once been subjected to the Michigan sales or use tax is transferred in connection with the organization, reorganization, dissolution, or partial liquidation of an incorporated or unincorporated business and the beneficial ownership is not changed.
This statutory language imposes three requirements that must be met in order to gain exemption from use tax on the transfer. They are:
- "has once been subjected to the Michigan sales or use tax"
- "transferred in connection with the organization, reorganization, dissolution, or partial liquidation of an incorporated or unincorporated business"
- "beneficial ownership is not changed".
If all three requirements are met, the transfer will be exempt from use 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.