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Learn the fundamentals of sales tax
Do you need to collect sales tax in Michigan?
You’ll need to collect sales tax in Michigan if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
Do you have physical nexus in Michigan?
Michigan considers a seller to have physical nexus if you “sell tangible personal property to a consumer.”
You can click here to read exactly what the Michigan Department of Treasury has to say about sales tax nexus.
Do you have economic nexus in Michigan?
Effective October 1, 2018, Michigan considers vendors who make more than $100,000 in sales or have more than 200 transactions in the state in the previous calendar year to have economic nexus. This means that according to Michigan state tax laws, these vendors are obligated to collect sales tax from buyers in the state. You can read Michigan’s economic nexus guidance for sellers here and you can read more about economic nexus in every state here.
Is what you’re selling taxable?
Services in Michigan state are generally not taxable. However, if the service you provide includes creating or manufacturing a product, you may have to deal with the sales tax on products.
Tangible products are taxable in Michigan, with a few exemptions. These tax exemptions include vehicles sold to relatives, some industrial machinery, and some equipment used in agriculture.
Is SaaS taxable in Michigan?
SaaS is non-taxable in Michigan unless there is a downloadable component. (Source)
How to get a sales tax permit in Michigan
Register online at the Michigan Department of Treasury’s Michigan Business One Stop Website.
You need this information to register for a sales tax permit in Michigan:
- Personal and business identification information
- Major business activity
- Business entity type
- Locations of offices or other places of business
There’s no charge to register for a Michigan sales tax permit, but other business registration fees may apply.
Collecting Sales Tax
The sales tax rate you collect in Michigan is fairly simple. There are no local sales tax rates in Michigan, so you would charge buyers in Michigan the 6% state sales tax rate on regular taxable items. This is true whether you are based in Michigan or considered a “remote seller” (i.e. based outside of Michigan but have sales tax nexus in Michigan.)
Should you collect sales tax on shipping charges in Michigan?
In most cases if you have sales tax nexus in Michigan and the item you are selling to a buyer in Michigan is taxable then you are required to charge sales tax on shipping and handling charges.
Read a full explanation of sales tax on shipping in Michigan here.
When are Returns Due?
When you file and pay Michigan sales tax depends on two things: your assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in Michigan?
States assign you a filing frequency when you register for your sales tax permit. In most states, how often you file sales tax is based on the amount of sales tax you collect from buyers in the state.
In Michigan, you will be required to file and remit sales tax either monthly, quarterly, or annually.
All taxpayers, even those on a monthly or quarterly schedule, are required to file an annual sales tax return by the final day of February in the year following the taxable period.
Michigan sales tax returns are almost always due the 20th of the month following the reporting period. (The exception is the annual sales tax return, which is due the last day of February the year following the taxable period.) If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.
Filing Sales Tax
When it comes time to file sales tax in Michigan you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
How to Calculate How Much Sales Tax You Owe in Michigan
Calculating how much sales tax you should remit to the state of Michigan is easy with TaxJar’s Michigan sales tax report.
All you do is connect the channels through which you sell – including Amazon, eBay, Shopify, Square and more – and we’ll calculate exactly how much sales tax you collected. All the information you need to file your Michigan sales tax return will be waiting for you in TaxJar. All you have to do is login.
How to File and Pay Sales Tax in Michigan
You have three options for filing and paying your Michigan sales tax:
- File online – File online at the Michigan Department of Treasury. You can remit your payment through their online system.
- File by mail – You can use Form 5080 and file and pay through the mail, though this form is only applicable for monthly or quarterly filers.
- AutoFile – Let TaxJar file your sales tax for you. We take care of the payments, too. You’ll never have to worry about spreadsheets, calculations or filling out complex sales tax returns.