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Remote Seller FAQ
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.
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.
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.