Michigan Sales Tax Rates

Total Range for 2024

6%

Michigan department of revenue logo

Why do you need to collect sales tax in Michigan?

If you’re selling goods and services in Michigan then sales tax might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  1. Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Michigan, triggers this type. If you do, you likely need to collect sales tax.
  2. Economic Nexus: This kicks in when your sales within Michigan exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

In Michigan, there is also a transaction threshold of 200, which means that even if your sales aren’t over $100,000 if you’ve sold more than 200 items then you still need to pay sales tax.

Is what you’re selling taxable in Michigan?

Now that you’ve grasped the basics of Michigan’s sales tax and nexus thresholds, let’s delve into whether your specific products or services are taxable.

OR EMAIL US

How to register for sales tax in Michigan

You can register for a sales tax permit in Michigan online through the Michigan Department of Treasury’s Michigan Business One Stop Website https://www.michigan.gov/taxes/business-taxes/sales-use-tax.

Here’s what you’ll need to have on hand when you register:

  • Personal and business identification information (your name, Social Security number or Employer Identification Number (EIN) for your business)
  • Major business activity (what your business does)
  • Business entity type (sole proprietorship, LLC, etc.)
  • Locations of your business offices or other places of business
  • Projected monthly sales and taxable sales
  • Products or services you will be selling

Once you register and your application is approved, you’ll receive your Michigan sales tax ID and filing frequency in the mail.

How to collect sales tax in Michigan

Collecting sales tax in Michigan involves three main steps:

  1. Charge the Correct Rate:
    • Michigan has a statewide flat sales tax rate of 6% for most taxable goods.
    • There are no additional local sales taxes.
    • Make sure to check if your product or service falls under any tax exemptions (mentioned previously).
  2. Collect the Tax:
    • During checkout, add the 6% sales tax to the sales price of taxable items for customers located in Michigan.
    • Your point-of-sale system can often automate this calculation and collection.
  3. Record the Transaction:
    • Keep good records of all your sales transactions, including the amount of sales tax collected for each sale.
    • This will be crucial when you file your sales tax return
Example:

Let’s say you buy a new pair of running shoes at a store in Michigan. The shoes themselves cost $80 (before tax).

Since Michigan has a flat sales tax rate of 6% for most taxable goods, and running shoes are generally taxable, here’s how to calculate the sales tax:

  1. Multiply the sales tax rate by the original price:  6% (sales tax)  x  $80 (price of shoes) = $4.80 (sales tax amount)
  2. Add the sales tax to the original price to find the final price: $4.80 (sales tax) + $80 (original price) = $84.80 (final price)

FAQs

Do you have a physical nexus in Michigan?

A business has physical nexus in Michigan if it has a physical presence in the state that creates a connection strong enough to require them to collect and pay sales tax. Here are some scenarios that establish physical nexus in Michigan:

  • Physical Location: Owning or leasing a retail store, warehouse, office, or any other physical business location in Michigan creates physical nexus.
  • Inventory Storage: Storing inventory within Michigan, even if through a fulfillment service like Amazon FBA, can trigger nexus.
  • Employees or Representatives: Having employees or sales representatives who regularly solicit sales orders in Michigan (spending more than a day there) can establish nexus.
Do you have an economic nexus in Michigan?

Michigan also has economic nexus rules. This means even without a physical presence, if your business makes more than $100,000 in sales or has over 200 transactions in Michigan in a year, you might have nexus and need to register for sales tax.

What is use tax in Michigan?
  • Use tax applies to:
    • Out-of-state purchases: If you buy something from a seller outside of Michigan (online or by mail order) and bring it back to the state for storage, use, or consumption, you’re liable for use tax.
    • Purchases without sales tax collected: If you buy something within Michigan from a seller who didn’t collect sales tax (e.g., a private seller at a flea market), you’re responsible for paying use tax.
  • Use Tax Rate: The use tax rate in Michigan is the same as the general sales tax rate, which is currently 6%.
Do you need a seller/reseller permit?

In Michigan, a seller’s permit isn’t exactly what you need. What you actually need is a Michigan Sales Tax License or Resale Certificate. These terms are often used interchangeably. Here’s the breakdown:

  • Resale Certificate: This is what you’ll use if you’re buying goods for resale.  With a valid resale certificate, you can avoid paying sales tax when purchasing inventory from your suppliers.
  • Who Needs It: Any business that intends to resell products and goods in Michigan needs a resale certificate.
  • Benefits:  Obtaining a resale certificate helps you avoid double taxation.  You wouldn’t want to pay sales tax on items you’ll eventually sell and collect sales tax on again.
How to get a sales tax permit/license in Michigan?

To get a sales tax permit (aka seller’s permit) in Michigan, you can:

You’ll need basic business info and ID. They’ll mail your permit and filing info once approved.

When are Michigan's Returns Due?

The due dates for Michigan sales tax returns depend on your assigned filing frequency:

  • Monthly filers: 20th day of the following month
  • Quarterly filers: 20th day of the month following the end of the quarter
  • Annual filers: February 28th following the year the taxes were collected
How to file sales tax in Michigan

There are three main ways to file your sales tax return in Michigan:

  1. File Online: This is the quickest and most recommended method.
  2. File by Mail: This method is suitable for less frequent filers (typically monthly or quarterly).
    • Use Form 5080, Sales, Use and Withholding Tax Return: [invalid URL removed].
    • Include your payment with the completed form and mail it to the address provided on the form.
  3. Third-Party Tax Software: Some tax preparation software or services (like us) can handle sales tax filing for you. These services can automate calculations, filing, and potentially even payments.
Is anyone exempt from sales tax in Michigan?

Yes, there are certain categories of people and organizations exempt from paying sales tax in Michigan. Here’s a breakdown:

  • Government Agencies:  Federal, state, and local government entities don’t typically pay sales tax on purchases they make for official government business.
  • Non-Profit Organizations:  Qualifying non-profit organizations with a valid exemption certificate issued by the Michigan Department of Treasury are exempt from sales tax on purchases related to their exempt activities.  This typically applies to 501(c)(3) organizations like charities and religious organizations.
  • Certain Businesses:  Businesses that purchase goods for resale (wholesale) are exempt from sales tax, provided they have a valid resale certificate.  This avoids double taxation as they’ll eventually collect sales tax when they sell the item to their customers.
  • Agricultural Production:  Farmers and agricultural producers may be exempt from sales tax on certain items used in agricultural production, such as seeds, fertilizer, and machinery.
  • Other Exemptions:  There are other specific exemptions for certain goods and services, such as groceries, prescription drugs, and some manufacturing equipment.

Contact Yonda Tax Today

OR EMAIL US