Sales Tax Obligations of Sellers in Michigan

April 13, 2006

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Michigan imposes various requirements on sellers doing business in the state. We recommend that you go through the items below to help you with the most frequently asked questions concerning sellers and sales and use tax issues.

Procedure for accepting resale certificates. When the resale exemption is claimed on a transaction, a seller must keep a record of:

the name and address of the person to whom the sale is made
the date of the sale
the article purchased
the use to be made of the article
the amount of the sale
the buyer's sales tax license number (if available)

Records must be retained for four years.

Procedure for accepting blanket certificates. In a majority of states, including Michigan, retailers making recurring exempt sales of the same type to the same purchaser don't have to secure a separate exemption certificate for each transaction — they're allowed to accept a blanket exemption certificate from the purchaser covering future sales. This blanket exemption certificate covers all exempt transfers between a buyer and a seller for a period of three years or for an agreed-upon, stated shorter period of time. The blanket certificate must be on a form prescribed by the Department of Treasury.

Sales and use tax liability for out-of-state mail order and catalogue retailers. Michigan does not have a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Michigan. To determine if you have physical presence, ask yourself the following:

Do I have retail facilities, a warehouse, or any office space in Michigan? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
Do my employees or I enter Michigan for purposes of taking and transmitting orders from Michigan? If your employee or independent contractor goes into Michigan to take or transmit orders, your business may have physical presence in Michigan. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
Do my delivery vehicles frequently enter Michigan for purposes of delivering property? Frequent deliveries in Michigan by your trucks will give you physical presence in Michigan.

Sales tax "bracket system." The following bracket system may be followed by sellers in computing the gross receipts tax due upon a particular sale:

Amount of Sale	Tax
0.01 to 0.10	no tax
0.11 to 0.24	0.01
0.25 to 0.41	0.02
0.42 to 0.58	0.03
0.59 to 0.74	0.04
0.75 to 0.91	0.05
0.92 to 0.99	0.06
and so forth

Absorbing the tax — using a "no sales tax" advertising strategy to drum up business. In Michigan it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.

Claiming refund for excess tax payments. A taxpayer claiming a refund or credit must file a petition for refund with the Department. A tax return filed that reflects an overpayment or credits in excess of the tax liability is considered a claim for refund.