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Nexus

Nexus

Nexus

The connection between an entity and a state that is sufficient to subject the entity to the state’s authority to tax.  An entity with nexus is required to register for, file, and remit tax(es). Nexus with Michigan is created through physical presence and/or economic presence.

Physical presence can be created by employees, agents, brokers, representatives, subcontractors, etc. working on behalf of the entity within Michigan. Physical presence can also be created by the presence of property such as goods, offices, real estate, vehicles, etc. physically within Michigan. Nexus creating activities of employees and representatives can range from soliciting sales to performing services for any length of time.

Economic presence can be created when a company meets certain thresholds (gross receipts/gross sales) or other requirements.

Entities that unknowingly have established nexus may be eligible for Voluntary Disclosure. 

 

Revenue Administrative Bulletins

RAB 2014-5, CIT Nexus Standards

RAB 2021-21, Sales and Use Tax Nexus Standards for Remote Sellers

 

Forms

Form 1353, Michigan Department of Treasury Nexus Questionnaire (Submit this form to evaluate your nexus exposure in Michigan.)

Form 4133, Voluntary Disclosure Request (Submit this form and Form 1353 to apply for Voluntary Disclosure.)

FAQs

  • Q1: How do I respond to your letter?

    Complete and submit the enclosed Form 1353 (Nexus Questionnaire) by the due date on your letter. Please submit by any of the methods below. Form 1353 is required in order to avoid additional inquiries.

    • Email: To the person listed on the letter
    • Mail: Michigan Department of Treasury, Discovery and Tax Enforcement, P.O. Box 30140, Lansing, MI 48909
    • Fax: 517-763-0258

  • Q2: Why did I receive this letter?

    We’ve identified your company as potentially making sales or providing services to customers located in Michigan. We’re looking into the company’s activities within Michigan to determine if nexus is established for Sales and/or Use Tax and any relevant income taxes.

  • Q3: Can I get an extension of time to respond?

    You may contact the auditor named on your letter of inquiry to request an extension.

  • Q4: I’m already filing in Michigan; do I need to do anything?

    Please complete and submit Form 1353 so we can update our records. 

  • Q5: I have a current Michigan registration, is that good enough?

    Please complete and submit Form 1353 so we can update our records. 

  • Q6: What is nexus?

    Nexus is a connection between an entity and a state that is sufficient to subject the entity to the state’s authority to tax. Accordingly, an entity with nexus is required to register, file, and remit tax(es). Nexus with Michigan is created through physical presence and/or economic presence.

  • Q7: What is physical presence?

    Physical presence can be created by employees, agents, brokers, representatives, subcontractors, etc. working on behalf of the entity within Michigan. Physical presence can also be created by the presence of property such as goods, offices, real estate, vehicles, etc. physically within Michigan. Nexus creating activities of employees and representatives can range from soliciting sales to performing services for any length of time.

  • Q8: What is economic presence?

    Economic presence can be created when a company meets certain thresholds (gross receipts/gross sales) or other requirements.

  • Q9: What are the economic presence standards for Michigan Corporate Income Tax?

    C corporations and financial institutions establish economic presence if they; actively solicit sales within Michigan and have gross receipts of $350,000 or more sourced to Michigan; or have an ownership or beneficial interest in a flow-through entity, either directly or indirectly, which has nexus in Michigan.

  • Q10: What are the Michigan Corporate Income Tax nexus standards for insurance companies?

    Insurance companies with written premiums on property or risk located or residing in Michigan are subject to the gross direct premiums tax imposed under MCL 206.635.

  • Q11: What is the economic presence standard for Michigan Sales and Use Tax?

    For periods October 1, 2018 and after, a company has nexus if it meets either of the following requirements:

    1. Michigan sales in prior year exceed $100,000 gross sales (taxable and nontaxable), or

    2. Michigan transactions in prior year exceed 200 (taxable and nontaxable)

    Ex. ABC Company had $200,000 of sales and 100 transactions in 20X1 and would have economic nexus in 20X2. ABC Company has $75,000 of sales and 90 transactions in 20X2 and would not have nexus the following year.

  • Q12: Does Michigan have affiliate, attributional, or representational nexus?

    Yes, Michigan has affiliate, attributional, and representational nexus standards for Sales and Use Taxes. Please refer to RAB 2021-21 for more information.

  • Q13: I’m not a C Corporation, what do I file instead of Michigan’s Corporate Income Tax (CIT)?

    Individuals and members of S corporations, partnerships, trusts, estates, LLCs, LLPs, and LPs with Michigan nexus are required to file for Individual Income Tax. Individual members of flow-through entities (FTEs) are required to file Michigan Individual Income Tax as nonresidents. Multi-member FTEs can elect to file Composite returns on behalf of individual members.

  • Q14: I have nexus with Michigan, now what?

    Complete and submit Forms 1353 and 4133. For more information, please refer to Michigan’s Voluntary Disclosure page.