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Michigan Sales Tax Guide

By Cristina Garza

Michigan, the tenth most populous state in the union, is known as the Great Lakes state. And for good reason! You cannot stand anywhere in the state and be further than 85 miles from a Great Lake. In addition to its abundant lakes and waterways, or perhaps because of them, it's a state with rich industry in many sectors. Whether Yooper or Michigander, many people are happy to live and work in Michigan. If you’re one of the lucky small business owners making Michigan your home, you’ll need to stay in compliance with the Michigan Department of Treasury's sales tax laws to keep things flowing smoothly.

No sweat! We have assembled this complete guide so that you can meet all the sales tax requirements for a small business in Michigan. 

After reading this guide, you will have learned:

  • How to be prepared for your call with the Michigan Department of Treasury.
  • How to contact the Michigan Department of Treasury.
  • When to charge sales tax in Michigan.
  • What goods, products, and services are taxable in Michigan.
  • When you establish a sales tax nexus with the state of Michigan, and the nuances of various thresholds.
  • How to register for a sales tax license in Michigan.
  • How to collect sales tax in Michigan.
  • How to file and pay sales tax in Michigan.

If, after reading, you still have any questions to help you determine your tax sales obligations in Michigan and how to fulfill them, we are here for your small business bookkeeping needs! 

 

 


Sales Tax Contacts in Michigan

Michigan Sales Tax Contacts

 

✅  Do you need to get in touch with the Michigan Department of Treasury?

✅  Are you uncertain about whether to visit, call them, or contact them through their website?  

✅ Do you wonder what information you should have ready before you contact them?

 

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

The Michigan Department of Treasury is reachable by phone at (517) 636-6925. 

Exclusively!  Which is to say, they don’t offer an email or physical location to drop in on. What’s worse is they have a disclaimer on their contact page letting you know that they’re sorry for any inconvenience you face when their insufficient phone system drops your call. We suggest a round of deep breathing before reaching out, just in case :). 

When you do call the Michigan Department of Treasury, you will want to have some information on hand. It will save time to have the following information easily accessible before you call: 

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number

If you are calling on behalf of an individual or a business, or having a third party call on your behalf, you must have a Michigan Authorized Representative Declaration (power of attorney form, PDF) signed before you call or else you will waste your time; they will only help if you have a completed ARD form. 

Should you have more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

 


Michigan Sales Tax Registration

Michigan Sales Tax Registration

 

Are you a new business selling tangible property in Michigan? If yes, you are going to want to register your business with the Michigan Department of Treasury so that you can pay your sales tax on time. 

You needn’t fret as this is a fairly simple process and one for which we’re about to fully prepare you. We are going to outline the steps below so you are totally ready to register for your sales tax license.

 

 

Here we go! Remember...

Preparation is key. 

Let’s get started!

 

 

How do I register to collect sales tax in Michigan?

You can most quickly register your Michigan state sales tax permit by visiting the Michigan Treasury Online site and following the instructions provided.

If, for some reason, you prefer the paper version, Michigan offers a sales tax registration (PDF) you can print and mail in. 

 

 

What information do I need to register for a Michigan sales tax permit?

Great question!

Before you sign up for Michigan sales tax permit you’ll want the following information on hand:

  • Business name
  • Business entity type 
  • Description of business activities
  • Date business activities began or will begin
  • Business address and mailing address
  • Business contact information
  • Associated business entities 
  • NAICS code that best matches the business
  • Federal Employer Identification Number (FEIN)

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the Michigan Treasury Online website. 

 

 

How much does it cost to register for a Michigan sales tax permit?

The cost to register a new sales tax permit in Michigan is $0. We are always thrilled when we get to give this answer! :) 

 

 

Do I need a Federal Tax ID Number or EIN to register for a Michigan sales tax permit?

Yes! You will definitely need one, but if you don’t already have one and need to get a new EIN, it’s a straightforward process. You can register for a Federal EIN right here :). 

 

 

Which agencies in Michigan do I need to additionally register with?

You may additionally need to contact some of the following agencies: 

You’ll want to think this through and do some research and investigating; every business is unique and, because of that, different rules, regulations, and laws may apply. 

We suggest contacting the Michigan Department of Treasury to verify which additional government agencies you may be required to register with. 

 

*****

 

Yippee!!!

You are now prepared to register for your Michigan sales tax permit in Michigan. 

Let’s summarize what we have covered so far:  

  • Have all the required information easily accessible before registering online.
  • Acquire a tax ID or EIN before registering for a Michigan sales tax permit.
  • Register online at the Michigan Treasury Online site.
  • Look into what other agencies you may have to additionally register with.

Registering for your Michigan sales tax permit will be stress free as long as you are adequately prepared. We always recommend organizing all the essential information in a folder, preferably mirroring paper files with a system like Box.com or Dropbox (something we’re happy to handle for our customers). 

 

 


Michigan Sales Tax FAQ

Michigan Sales Tax FAQ 

 

By now, you may have already contacted the Michigan Department of Treasury and applied for a Michigan sales tax permit. 

Once you have a license to collect and remit sales taxes in Michigan, you will probably be asking yourself two questions: 

  • When do I charge a sales tax in Michigan?
  • What goods and services are subject to sales taxes in Michigan? 

We are going to go over the most common sales tax questions our clients ask. We believe the answers to these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations. 

Let’s start with the first question…

 

 

What goods and services are considered taxable in Michigan?

Unless exempted specifically, all sales of tangible personal property are considered taxable in the state of Michigan!

 

The bottom line is …

Your business must pay taxes on sales of any non-exempt goods.

 

Let’s now review some of our clients’ frequently asked questions:

  • Is Michigan an Origin or Destination sales tax State?
  • What creates a sales tax nexus in Michigan?
  • What is the economic threshold in Michigan?
  • Does Amazon have fulfillment centers in Michigan?
  • Does Michigan have a Click-Through Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions (such as affiliate marketers). 

 Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.   

 

 

Is Michigan an origin or destination-based sales tax state?

Michigan is a destination-based sales tax state. This means you charge sales tax based on the location of the purchaser rather than that of the seller. Michigan is one of those lovely states that doesn’t have any additional local taxing, so it’s the same rate throughout the state! 

 

 

 Protip: Charge the customer tax based on their location.

 

What creates a tax nexus with the state of Michigan?  

Having nexus, also known as "sufficient business presence,” with Michigan means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Michigan because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Michigan Department of Treasury even if you never step foot in Michigan.   

 

So, how do you create a sales tax Nexus in Michigan?

What creates sales tax nexus?

 

A business establishes a nexus in Michigan by:

  • having a business location in Michigan;
  • having property stored in Michigan;
  • employing any person in Michigan;
  • contracting with a salesperson or other agent in Michigan;
  • leasing equipment used in Michigan;
  • performing services in Michigan;
  • licensing the use of intangible property in Michigan, or transporting property in Michigan using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored, such as in the instance of an Amazon warehouse. 

 

 

Does Amazon have fulfillment centers in Michigan?

Yes, just one of them at the time of this article’s publishing:

  • 39000 Amrhein Rd. // Livonia, MI // 48150

This is relevant if you sell your products on Amazon or are recognized as an Amazon FBA (Fulfillment by Amazon) seller. When Amazon stores your products in one of its fulfillment centers in any state, including Michigan, this triggers a sales tax requirement. If Amazon is storing your products in a warehouse in Michigan, you have created a taxing connection with the state of Michigan.

We can help guide your small business through this! We use tools like A2X and Wherestock to identify where our clients' inventory is currently being held and shipped from so that we can keep them in compliance.

 

 

Does Michigan have economic nexus?

Yes! This means that even if your business isn’t located in the state or doesn’t in any traditional way create nexus, you may still have to register and pay sales tax in Michigan.

The threshold for creating economic nexus with Michigan is in line with the original Wayfair decision: over $100,000/year in sales to Michigan purchasers or 200 separate transactions in a year. Remote sellers must register if they meet either threshold. 

For more information keep an eye on Michigan DOR’s remote sellers page.

 

 

Does Michigan have click-through nexus?

Yes, Michigan does have “click-through nexus” which refers to revenue made from referring sales (sometimes referred to as third-party sales). This only applies to those making revenue from sales in excess of $50,000 in a year. For more information, click here (PDF).

 

 

Is Michigan a streamlined sales tax state?

Yes! Since October, 2005 Michigan has been a full member of Streamlined Sales Tax.

If you are planning on taking advantage of the Streamlined Sales Tax as a business, it is recommended that you use a Certified Service Provider (though businesses may opt to register themselves without a CSP). Ultimately the aim of streamlined sales tax is to simplify payment of sales and use tax to multiple different states. It isn’t required that you utilize them, but it can significantly reduce complexity to do so, especially if your business sells in multiple states.

 

 

More effectively manage your tax needs by keeping this guide handy. 

You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Michigan.

 

 


Collecting Sales Tax in Michigan

Collecting Sales Tax in Michigan

 

By now you know if you are a business that has established a nexus with Michigan. So you have an understanding about whether, or when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Michigan Sales Tax obligations. 

  • How do I collect Michigan Sales Tax?
  • Who is eligible for Michigan Sales Tax exemptions?
  • What should I do if my customer is exempt from sales tax in Michigan?
  • What happens if I lose a Michigan nontaxable transaction certificate? 

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Michigan.

 

 

How do I collect Michigan sales tax?

Because Michigan is a destination-based sales tax state, your business should charge sales tax based on the location of the purchaser, at the time of the transaction. This is usually as simple as configuring the Point-of-Sales system accordingly. Michigan keeps it simple with just one rate for the whole state, which we think is great! :]

 

 

What are the current Michigan sales tax rates?   

At the time of this article’s publication, Michigan’s state-wide sales tax rate is 6%. Since sales tax rates may change, we suggest utilizing this link to stay up to date.

It always helps to be accurate and up to date with this type of information! :) 

 

 

What is exempt from Michigan sales tax?

What is exempt from sales tax in Michigan?

 

Here is a sample list of exemptions: 

  • purchases for resale
  • most services
  • medical supplies
  • groceries, unprepared food 
  • agricultural supplies
  • manufacturing machines, supplies

Michigan’s Department of Treasury FAQ page goes into more detail. Beyond that, everything is included in taxable goods. 

 

 

Who are eligible for Michigan sales tax exemptions?

At this point, you should know what products are exempt from sales tax in Michigan. You also want to know who may be exempt. 

Under Michigan law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

  • Government agencies
  • Non-profit organizations
  • Religious groups
  • Out-of-state buyers (should their business not have nexus in their home state).

For more information, check out Michigan Department of Treasury’s common exemption page.

 

 

What should I do if my customer is exempt from sales tax in Michigan?

Purchasers who are tax exempt must have completed an exemption certificate 3372 (PDF) and must present their completed exemption certificate at the time of purchase. It is then up to the seller to hang on to this exemption certificate. Failure to do so may leave you unable to justify tax exempt sales.

 

 

What happens if I lose a Michigan sales tax exemption certificate?

Ideally this situation is to be avoided entirely! Finding out you’ll be audited and then discovering you cannot produce a required exemption certificate is a bad day. That scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This whole ordeal could be easily avoided by taking proper care with your paperwork… which happens to be one of our specialties! :) 

 

 

Does Michigan have a sales tax holiday?

No, the tax man doesn’t rest in Michigan :( Boo! 

 

***** 

 

 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in Michigan state. 

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper! 

 

 


Filing and Paying Sales Tax in Michigan

Filing and Paying Sales Tax in Michigan

 

It is time to talk about filing and paying your sales taxes in Michigan. In this section, We are going to cover the following frequently asked questions from our clients:

  • When is Michigan Sales Tax due?
  • What are the Michigan Sales Tax thresholds?
  • What if a Michigan Sales Tax filing date falls on a weekend or holiday?
  • How do I file a Michigan Sales Tax Return?
  • How do I correct a Michigan Sales Tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in Michigan?
  • If I close my business, do I need to file a final sales tax return?
  • Does the Michigan Department of Treasury offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Michigan Sales Tax.

 

 

When is Michigan sales tax due?

Michigan sales tax payments are due no later than the 20th day following the reporting interval for monthly and quarterly filers. Annual filers must file by February 28th. 

 

 

What are the Michigan sales tax filing interval thresholds?

The thresholds for filing intervals in Michigan are:

 

Tax Amount Owed monthly*

Filing interval

$62 or less

Annually

From $63 to $1,000

Quarterly 

$1,001 or more

Monthly

 

*based on actual sales for existing companies or projected for new ones

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point-of-Sale Software to see the volume of sales you have generated. 

Don't worry though! The state will let you know when your due dates change. :) 

Keep an eye out for notices in your mail from the State of Michigan so that you don't miss any shift in deadlines.

 

 

What if a Michigan sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday, of course ;). 

 

 

How do I file a Michigan sales tax return?

Paper: Fill out form 5080 (PDF) and mail it to the address on the form. 

Electronic: File online via the Michigan Treasury Online website and submit payment via EFT.

Michigan has a PDF Guide on the filing process you may find handy if you get lost [it’s simple enough that you likely won’t need it]  

 

 

How do I correct a Michigan sales tax return?

Paper: File a new form 5092 (PDF) and mail to address on form.

Electronic: Correct the submitted return via the Michigan Treasury Online website and submit payment via EFT

Should you need it, they have a PDF Guide on how to amend a return.

 

 

What happens if I fail to collect sales tax?

Michigan requires businesses with nexus to collect and remit sales tax on all applicable purchases. If you were required to collect sales tax and failed to do so for whatever reason, that’s a big time no-no! The business will be held liable for the due tax.

Always make sure to collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful. 

 

 

Protip: You are still be responsible for remitting sales taxes even if you failed to collect them. 

 

 

What happens if I file or pay my sales tax return late?

The Michigan Department of Treasury charges 5% penalty for late filing or failure to pay for the first two months, up to a maximum of 25% thereafter. Additionally, interest is applied to any outstanding balance. The current rate is published on the Michigan DOT website (PDF). They even offer a penalty calculator, which we hope you never have to use... We suggest you file and pay on time! :) 

 

 

Do I need to file a return if I don’t collect any sales tax in Michigan?

Yes, Michigan requires businesses file a “Zero-Tax” return even when they have no sales during a taxing period. 

 

 

If I close my business, do I need to file a final sales tax return?

Yes, Michigan requires businesses to file a final return via the Michigan Treasury Online website site when closing their doors. Additionally you must submit form 163 (PDF) when closing your doors.

 

 

Does the Michigan Department of Treasury offer a discount for filing on time?

Yes! One of the stoutest in the country! To a maximum of $15,000 (!!!) you can save .5% for filing early. We obviously suggest you don’t leave these savings behind! Capitalize by being timely.

 

 

*****

 

Now that we have covered all the bases for filing and paying sales taxes in the state of Michigan, you should feel more at ease about the process.

 

Some things to remember:

  • Due dates are important. If anything, file and pay your taxes early.
  • There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
  • You can file and pay your taxes electronically or by mail
  • If you need to amend a return, you may do so electronically or by paper.
  • If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Michigan.
  • You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
  • Even if you collect no sales tax, you still need to file a return.
  • You need to file a “Final return” when you close your business.

 

Now you are ready to file and pay your sales tax in Michigan! If you have any more questions, feel free to contact us.

  

Click here if you think sales tax is boring. Book a meeting.

 


Please note: This blog is for informational purposes only and the information is accurate as of 8/1/2019. If you want legal advice on sales tax law for your business, please contact a Sales Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.