Michigan Sales and Use Tax Overview
Michigan has a 6 percent sales and use tax rate for retail sales. Certain utilities are taxed at 4 percent. Retailers selling to consumers must collect 6% sales tax on taxable retail sales. Sales of residential electricity, gas and heating fuel are taxed at 4%. Michigan does not allow local sales taxes. Use tax applies if sales tax was not charged, or to items purchased exempt from tax which are then used in a taxable manner. Goods subject to sales tax include retail physical property, vehicles and more, while groceries, medicine and gasoline are exempt.
Use Tax Specifics
Use tax is similar to sales tax but applies when Michigan sales tax was not charged. Out-of-state online, phone and mail order purchases with no sales tax charged are subject to 6% Michigan use tax, less any foreign sales tax paid. Registered businesses may remit use tax on returns, and individuals can pay use tax on income tax returns.
Compliance and Administration
Sales tax filing frequency depends on business size and proper compliance is important to avoid problems. The Department of Treasury administers Michigan sales and use tax. There is a Michigan Sales and Use Tax Certificate of Exemption form that you may complete to claim exemption from sales or use tax; this certificate must be renewed every three years.
Most telecommunications, hotel/motel type accommodations, and industrial laundry services have been subject to Michigan use tax for many years. These services continue to be subject to the tax. Small business owners in Michigan typically need to pay state income tax, sales tax, local taxes, property tax, and possibly federal taxes. While the burden of paying sales tax in Michigan is on the seller, the burden of paying the use tax in Michigan is on the purchaser.