Michigan Sales Tax Handbook

RATE OF SALES TAX:

6.00%

LOCAL & COUNTY MAXIMUM RATES:

None

What are the taxable goods and services?

The first step in sales tax compliance is determining if the items or services your firm offers are taxable in Michigan.

Traditional Products and Services

Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in Michigan.

Groceries, prescription medications, and fuel are all free from sales tax.

In Michigan, several services are subject to sales tax. View the Overview of Use Tax from the Michigan Department of Treasury for a complete list of taxable services.

Digital Products and Services

A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.

Businesses in Michigan are not required to collect sales tax on the sale of digital products or services.

Michigan, however, has one exemption to this restriction. Businesses are required to collect sales tax on pre-written computer software offered online.

How to Register for Sales Tax in Michigan

If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.

This enables your company to collect sales tax on behalf of the municipal and state governments.

You will need the following information to register:

Identification information for individuals and businesses
Significant commercial activity
Type of business entity
Locations of offices or other commercial establishments

A Resale Certificate might help you save money.

When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.

Sales Tax Collection

After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.

When computing sales tax, consider the following types of transactions:

Retail Sales
Shipping inside the state
Out-of-State Purchases

Sales inside the state

It is simple to calculate sales tax on products sold in Michigan. Simply impose a flat sales tax of 6.000% on all products, whether sold in-store or sent across the state.

Out-of-State Purchases

Businesses in Michigan must only pay sales tax on out-of-state sales if they have a presence in other states.

Nexus indicates that the company has a physical presence in another state.

Common nexus types include:

A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.

Submit Your Sales Tax Return

You’re ready to submit your sales tax return now that you’ve obtained your Michigan seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.

How to File a Claim

Businesses in Michigan are required to file sales tax forms and make sales tax payments online.

How Frequently Should You File?

The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.

Annual filing: If your company receives less than $62.50 in sales tax each month, you must submit returns on an annual basis.
Quarterly filing: If your company receives between $62.50 and $300.00 in sales tax each month, you need submit quarterly reports.
Monthly filing: If your company receives more than $300.00 in sales tax each month, you must submit monthly returns.

Deadlines for Filing

The deadline for all Michigan sales tax returns is the 20th of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day.

Penalties for Filing Late

Michigan levies a late fee equivalent to 5.000% of the due sales tax. This tax accumulates up to a maximum penalty of 25.000% of the overdue sales tax.