What is the sales tax rate in Michigan?
The state sales tax rate in Michigan stands at 6% as of 2023. This flat rate applies regardless of the county or city in which the transaction takes place, making it relatively simple for businesses to calculate the sales tax they should charge their customers.
Sales Tax Michigan: When should your business start with its sales tax compliance in Michigan?
Michigan businesses should collect sales tax if they have a sales tax nexus within the state. This can be a physical nexus or an economic nexus.
Michigan Physical Sales Tax Nexus
A physical sales tax nexus in Michigan exists when your business has a physical presence within the state, and thus has the obligation to collect sales tax.
Sales Tax Physical Nexus checklist for Michigan
To determine if your business has a physical nexus in Michigan, consider the following:
- Do you have a physical location in Michigan, such as a store or office?
- Do you have merchandise stored in a warehouse in Michigan?
- Do you have an employee or a contractor working in Michigan?
- Do you deliver merchandise in Michigan using Michigan-registered vehicles?
A yes to any of these indicates a physical nexus, obligating your business to collect sales tax.
Michigan Economic Nexus: Revenue, Thresholds and Transactions
Michigan established economic nexus legislation following the South Dakota v. Wayfair Supreme Court ruling. If your business makes $100,000 in sales or conducts 200 transactions in Michigan in the current or previous calendar year, you have an economic nexus in the state.
Which services are taxable in Michigan?
Most services in Michigan are exempt from sales tax, but there may be exceptions such as amusement services or services that involve creating or manufacturing a product. It is recommended to consult the Michigan Department of Treasury or a tax professional for specific guidance on taxable services in Michigan.
Michigan Sales Tax on Products: How to Calculate What Your Business Should be Charging
Calculating sales tax in Michigan involves multiplying the total cost of the product by the state sales tax rate. For example, if a product costs $100, the sales tax charged would be $6 (6% of $100).
How much is the Michigan clothing tax?
The sale of clothing is subject to 6% sales tax in Michigan. And as Michigan does not allow city or local units to impose additional sales taxes, the calculation is rather straightforward.
Note that Michigan clothing tax is only applicable on items sold for more than $110.
Michigan also taxes the sales of watches and other jewelry items, as well as the repair of these items.
Michigan Online Sales Tax: Are SaaS and Digital Services Taxable?
In Michigan, certain digital goods and services, such as streaming content, are considered taxable.
SaaS Sales Tax Michigan: Does my Business Need to Charge Sales Tax for SaaS in Michigan?
As of 2023, businesses providing SaaS products do not need to charge sales tax. But even though Michigan SaaS sales tax isn’t a concern yet, it doesn’t mean it will stay that way. As tax laws evolve to address the rapidly growing SaaS industry, these products may soon become taxable. So it’s vital for SaaS providers to keep a keen eye out for tax law changes in this regard.
How can a business get a sales tax permit in Michigan?
Businesses can apply for a sales tax permit in Michigan through the Michigan Treasury Online (MTO) website. The application process requires details such as your business’s Employer Identification Number (EIN), Social Security Number, and business address.
The process of registering for sales and use tax collection in Michigan is free and can be completed electronically. While online registration is faster, it is not required to wait for the sales tax license to arrive before starting to sell items at retail.
Collecting Sales Tax in Michigan as a Business
When you have discovered that you have a nexus in the state of Michigan, and you are not exempt from collecting tax, you should begin collecting sales tax from your customers on taxable sales. It’s critical to keep precise records of all transactions and taxes collected.
Michigan Sales Tax Return Due Dates Explained
According to the Michigan state website the monthly filing due date for return and payment is on or before the 20th day of the following month.
Filing Quarterly due date for return and payment is on or before the 20th day of the month following the quarter end.
Filing Annually due date for return and payment is February 28 of the year following the tax year reported.
What is the required frequency for sales tax returns in Michigan?
The frequency of filing sales tax returns in Michigan depends on your tax liability. It is important to note that the due dates for sales tax returns are subject to change, and it is recommended to consult the Michigan Department of Treasury or a tax professional for the most up-to-date information on sales tax return due dates in Michigan.
