Michigan 2023 Sales Tax Guide

Michigan Sales Tax in a Word

Michigan Sales Tax Contacts

When it comes to Michigan sales tax, it's essential to know who's in charge and how to communicate with them. In this section, we'll introduce you to the tax authorities responsible for managing Michigan sales tax and provide their contact information to ensure you have direct access to the experts.

The Michigan Department of Treasury is the state agency responsible for administering sales tax, along with other state taxes and revenue collection. The Department of Treasury is your go-to source for all things related to Michigan sales tax, including registration, filing, payment, and compliance.

You can contact the Michigan Department of Treasury through various channels, depending on your needs and preferences:

• General Phone: For general inquiries related to sales tax, you can reach the Department of Treasury by calling their main phone line at (517) 636-6925.

• Mailing Address: If you need to send correspondence or documents to the Department of Treasury via mail, their mailing address is:

  Michigan Department of Treasury
  Lansing, MI 48922

• Michigan Treasury Online: For online sales tax filing, payment, and account management, visit the Michigan Treasury Online website here.

Now that you have the Michigan sales tax authorities' contact information, you can confidently reach out for guidance, support, and expert advice whenever you need it. And, of course, your reliable partners at Accountingprose are always here to help you navigate the sales tax landscape and ensure your small business stays on track.

Do You Have Nexus in Michigan?

Hello, intrepid small business owners! As you venture into the realm of Michigan sales tax, it's crucial to determine whether your business has Nexus in the Wolverine State. Fear not, for we're here to help you understand the various types of Nexus that may apply to your business.

What Creates Sales Tax Nexus in Michigan?

In the world of sales tax, Nexus is a connection or presence that a business has within a state, which then triggers the responsibility to collect and remit sales tax on taxable transactions. In Michigan, there are several types of Nexus that can be established, each with its own unique criteria. Let's explore these categories in more detail below.

physical nexus in Michigan

Physical nexus is established when your business has a tangible presence within Michigan, such as:

• Owning or leasing property (e.g., office, warehouse, storefront)

• Employing sales representatives or other personnel

• Storing inventory in a Michigan warehouse, even if owned by a third party

If your business meets any of these criteria, you'll need to begin collecting and remitting sales tax in Michigan.

economic nexus in Michigan

Economic nexus is established when your business meets certain sales thresholds within Michigan. As of October 1, 2018, economic nexus is triggered when your business has:

• More than $100,000 in sales, or

• At least 200 separate transactions

These thresholds apply to a calendar year. If your business surpasses these limits, it's time to comply with Michigan sales tax regulations.

affiliate nexus in Michigan

Affiliate nexus occurs when your business has a relationship with another entity in Michigan that helps promote or facilitate sales. Examples of relationships that may create affiliate nexus include:

• Using a Michigan-based affiliate to advertise or promote your products

• Sharing management, business systems, or employees with a Michigan-based entity

If your business has any of these connections in Michigan, you'll need to navigate the sales tax landscape accordingly.

click-through nexus in Michigan

Click-through nexus comes into play when your business has an agreement with a Michigan-based affiliate who refers customers to your website through a link or advertisement. If the cumulative gross receipts from these referrals exceed $10,000 during the preceding 12 months, you'll need to comply with Michigan sales tax regulations.

marketplace nexus in Michigan?

Marketplace nexus is established when your business sells goods through a marketplace facilitator, like Amazon or eBay, and that facilitator has nexus in Michigan. In this case, the marketplace facilitator is responsible for collecting and remitting sales tax on your behalf, but you'll still need to be aware of any additional sales tax obligations that may arise from your other business activities.

As you delve into the Michigan sales tax realm, it's essential to understand the various types of Nexus and how they may apply to your small business. And remember, your dependable team at Accountingprose is always here to help you navigate these complexities and ensure a smooth journey through your sales tax journey.

Michigan Sales Tax Registration

Greetings, small business dynamos! If you've determined that your business has Nexus in Michigan, it's time to register for a Michigan sales tax license. In this section, we'll guide you through the registration process and provide essential information to help get your business up and running in the Great Lakes State.

How to Register for Sales Tax in Michigan

Registering for a Michigan sales tax license is a breeze when you follow these simple steps:

1. Determine your business structure: Before registering for a sales tax license, make sure you've determined your business structure, such as a sole proprietorship, partnership, LLC, or corporation. This will impact the type of tax license you'll need and the registration process.

2. Obtain a Federal Employer Identification Number (EIN): If you don't already have one, apply for an EIN from the IRS, as it will be required during the registration process.

3. Gather necessary information: Before completing your sales tax registration, gather essential information about your business, including your EIN, business name, legal structure, mailing address, business location(s), and contact information.

4. Visit the Michigan Treasury Online (MTO) website: Head to the Michigan Treasury Online (MTO) website to begin the registration process.

5. Create an MTO account: If you don't already have an account, click on "Create a New MTO Account" and follow the prompts to set up your account.

6. Log in and select "Register a New Business": Once you're logged into your MTO account, click on "Register a New Business" to begin the sales tax registration process.

7. Complete the online registration form: Fill out the registration form with the necessary information about your business. Be thorough and accurate to avoid any delays or issues with your sales tax license.

8. Submit your registration: After completing the online form, click "Submit" to send your registration to the Michigan Department of Treasury for processing. You'll receive a confirmation number for your records.

9. Wait for approval: Once submitted, the Department of Treasury will review your sales tax registration. This process typically takes 7-10 business days. You'll receive a confirmation email with your sales tax license number once approved.

10. Display your sales tax license: Upon receiving your sales tax license number, ensure it's prominently displayed at your place of business, as required by Michigan law.

How Much Does it Cost to Register for a Michigan Sales Tax License?

Great news! Registering for a Michigan sales tax license is absolutely free. There's no fee to apply or maintain your license, so you can focus on growing your business without worrying about additional costs.

Do I Need a Federal Tax ID Number or EIN to Register for a Michigan Sales Tax License?

Which Agencies in Michigan Might I Need to Register With Additionally? 

Depending on your business type and activities, you may need to register with other Michigan agencies in addition to the Department of Treasury. Some common agencies and registrations include:

• Michigan Department of Licensing and Regulatory Affairs (LARA): Register your business entity, such as an LLC or corporation, and obtain necessary licenses or permits.

• Michigan Unemployment Insurance Agency (UIA): Register for unemployment insurance if you have employees.

• Michigan Workers' Compensation Agency: Obtain workers' compensation insurance if required for your business.

Navigating the Michigan sales tax registration process is a breeze when you follow these steps and keep the essential information at your fingertips. And remember, your trusty team at Accountingprose is always here to help you through the process and ensure your small business operates smoothly in the Wolverine State.

Collecting Sales Tax in Michigan

Is Michigan aN Origin or Destination Sales Tax State? 

Michigan is a destination-based sales tax state. This means that sales tax is collected based on the location where the buyer takes possession of the item or where the item is shipped. As a small business owner, you'll need to determine the appropriate sales tax rate for each transaction based on the destination of the sale.

What Sales are Subject to Sales Tax in Michigan?

In Michigan, sales tax applies to the sale of tangible personal property, as well as certain services. Some examples of taxable items and services include:

• Furniture and home goods

• Clothing and accessories

• Electronics and appliances

• Motor vehicles and parts

• Prepared food and beverages

• Admission fees to events or amusement parks

• Pre-written computer software, whether delivered electronically or on physical media

It's essential to familiarize yourself with the types of sales subject to sales tax in Michigan to ensure accurate collection and remittance.

Is Software as a Service (SaaS) taxed in Michigan?

What is Exempt from Michigan Sales Tax?

Some items and services are exempt from sales tax in Michigan. Common exemptions include:

• Prescription drugs and durable medical equipment

• Raw materials and equipment used in industrial processing

• Farm and agricultural equipment

• Newspapers and periodicals

• Non-profit organization sales

• Sales to the federal or Michigan state government

Understanding these exemptions will help you accurately collect sales tax and avoid potential penalties for under-collection.

Who is Eligible for Michigan Sales Tax Exemptions?

What Should I Do If My Customer is Exempt from Sales Tax in Michigan?

If your customer is exempt from sales tax, you should:

1. Obtain a valid Michigan sales tax exemption certificate from the buyer.

2. Keep the certificate on file to document the exempt sale.

3. Ensure that you do not collect sales tax on the exempt transaction.

Following this process will help you maintain accurate records and avoid potential penalties for under-collection of sales tax.

What Happens If I Lose a Michigan Sales Tax Exemption Certificate?

If you lose a Michigan sales tax exemption certificate, it's essential to:

1. Contact the buyer and request a copy or a new certificate.

2. Update your records to ensure accurate documentation of the exempt sale.

3. Keep a diligent eye on your record-keeping system to prevent future losses.

Proper documentation and organization are key to navigating sales tax exemptions with confidence and ease.

As you work to collect sales tax in Michigan, remember that the knowledgeable team at Accountingprose is always here to support your small business. By understanding the ins and outs of Michigan sales tax, you'll be well on your way to a successful and compliant business journey

Filing and Paying Sales Taxes in Michigan

Congrats, small business champions! You've conquered registering for and collecting sales tax in Michigan. Now, it's time to tackle the final stage: filing and paying your sales taxes. In this section, we'll break down all the essential information you need for a seamless and stress-free filing experience.

What If a Michigan Sales Tax Filing Date Falls on a Weekend or Holiday?

How Do I File a Michigan Sales Tax Return?

Filing a Michigan sales tax return is a cinch when you follow these steps:

1. Gather your sales records: Before filing your sales tax return, gather your sales records for the filing period, including total sales, taxable sales, and sales tax collected.

2. Log in to your Michigan Treasury Online (MTO) account: Head to the MTO website and log in to your account.

3. Select "File/Amend a Tax Return": From your account dashboard, click on "File/Amend a Tax Return" to access the sales tax return form.

4. Choose the appropriate tax period: Select the tax period for which you're filing the sales tax return.

5. Enter your sales and tax information: Fill in the required fields with your sales and tax information for the filing period. Be sure to double-check your numbers for accuracy.

6. Calculate your sales tax due: The MTO system will automatically calculate your sales tax due based on the information you entered.

7. Submit your sales tax return: Once you've entered all the required information and confirmed its accuracy, click "Submit" to file your sales tax return.

8. Schedule your sales tax payment: After filing your return, schedule your sales tax payment through either the MTO system or your preferred payment method (such as EFT or credit/debit card payment).

9. Keep a copy of your filed return: Maintain a copy of your filed sales tax return and payment confirmation for your records.

Following these steps will ensure a smooth and hassle-free sales tax filing experience in Michigan.

What are the various penalties that can be assessed for sales tax filing in Michigan?

Penalties for sales tax filing in Michigan can include:

• Late filing penalty: A penalty of 5% of the tax due per month (or fraction of a month) for up to six months, with a maximum penalty of 25%.

• Late payment penalty: A penalty of 5% of the tax due if the payment is late by seven days or less; if more than seven days late, an additional penalty of 5% applies for each additional 30-day period, up to a maximum of 25%.

• Interest: Interest is assessed on both late payments and underpayments of tax at a rate determined by the Michigan Department of Treasury.

To avoid these penalties, be sure to file and pay your sales tax on time and accurately.

5 Tips to Avoid Common Mistakes When Filing Michigan Sales Tax Returns

Have sales tax in more than one state?

Check out All of our Sales Tax Guides

And don't forget to check out our blog about Economic Nexus, which serves as an invaluable resource for businesses who have sales that are subject to sales tax. 

This blog is for informational purposes only and the information is accurate as of 2023-06-19. If you want legal advice on sales tax law for your business, please contact a State and Local Tax (SALT) 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.