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Michigan Sales Tax 2022 for Businesses: A Complete Guide

“The sales tax for businesses in Michigan is 6%”

What Does Michigan Sales Tax Mean?

Michigan’s tax code, like that of every other state, is a complex structure with a lot of moving components. Knowing the basics is the first step in comprehending Michigan’s tax system.

Individual income taxes in Michigan are a flat 4.25 percent. Several authorities collect local income taxes as well. The corporate income tax rate in Michigan is 6 percent. Michigan has a statewide sales tax of 6.00 percent and no local sales taxes. On the 2022 State Business Tax Climate Index, Michigan’s tax system ranks 12th nationwide.

Michigan has a straightforward sales tax rate and is one of the few states that does not levy local municipal or county taxes. Since 1994, the sales tax has remained unchanged, with a voter initiative to raise it to 7% failing in 2015.

There is also a usage tax that applies to things that are brought into Michigan.

It’s worth mentioning that Michigan is a Streamlined Sales Tax State, which means that even if an out-of-state business doesn’t have a sales tax duty, it’s nevertheless encouraged to collect and remit sales tax.”

How Much is the Sales Tax in Michigan?

Individuals and corporations selling tangible personal property to the ultimate consumer must pay a 6% sales tax to the state of Michigan on the whole price (including shipping and handling expenses) of their taxable retail sales. Residential sales of electricity, natural or artificial gas, and home heating fuels are taxable at a rate of 4%. The state of Michigan does not allow cities or local governments to levy sales taxes.

Now, the question arises: what types of goods and services are taxable under the Michigan sales tax 2022? Let’s see.

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Michigan Sales Tax

Threshold Limit

6%

$100,000 economic sales threshold and 200 transaction threshold limit

Do You Need To Collect Michigan Sales Tax for Your Ecommerce Business?

You must apply the correct rate to all taxable transactions, remit sales tax, file timely returns with the Michigan Department of Treasury, and maintain meticulous records. Here’s what you need to know to organize and be on top of things.

How you sell your goods has an impact on how you collect Michigan sales tax:

Physical store: Do you have a physical store? Users can select the sales tax rate linked with the store location in brick-and-mortar point-of-sale solutions. Then there can be the development of new tax groups to provide for product-specific tax rules.

Hosted store: The systems, such as Shopify and Squarespace, provide integrated sales tax rate determination and collection. Hosted storefronts provide sellers with a dashboard where they can handle Michigan sales tax collection.

Marketplaces: Such as Amazon and Etsy offer integrated sales tax rate determination and collection for a fee. You can set things up from your seller dashboard, just as with hosted stores, and let your marketplace provider handle the majority of the heavy lifting.

Mobile point-of-sale systems: The system such as Square’s, rely on GPS to determine sale position. After that, there is a calculation and application of the relevant tax rate to the order. Within the system, there can be a creation of specific tax rules to enable specific product tax rules.

There can be automation in sales tax collection in Michigan, making your life much easier.

Which Goods & Services are Taxable under Michigan Sales Tax 2022?

The first step in sales tax compliance is determining if the products or services your company sells are taxable in Michigan.

  • Traditional goods and services

Physical items, such as furniture, home appliances, and automobiles, are all subject to sales tax in Michigan.

Groceries, prescription drugs, and gasoline are all excluded from paying sales taxes.

  • Digital goods

Anything that is available electronically, such as an album downloaded from iTunes or a video purchased from Amazon, refers to as a digital good or service.

Businesses in Michigan are not required to collect sales tax on the sale of digital products or services.

However, there is one exception to this rule in Michigan. On pre-written computer software that is available online for sale, businesses must collect sales tax.

  • Services

In Michigan, services are often non-taxable. In contrast, you may need to collect product sales tax if you create or manufacture a product.

In Michigan, tangible goods are taxable, with a few exceptions. Vehicles sold to family, some industrial gear, and some agricultural equipment are all eligible for tax deductions.

Therefore, these are the goods and services that are taxable under the Michigan sales tax 2022. You might be wondering do you need to collect the sales tax? Let’s see.

Read More: New York Sales Tax 2022 for Businesses: A Complete Guide

Filing Michigan Sales Tax

You must remit sales tax to the Michigan Department of Treasury by a particular date after collecting it. After then, the Michigan Department of Treasury will disperse it as needed.

The filing of a Michigan sales tax return consists of two steps: reporting the appropriate sales data (filing a return) and remitting the collected tax dollars to the Michigan Department of Treasury (if any). You must identify your total sales in the state, the amount of sales tax collected, and the location of each sale as part of the filing procedure.

How often do you need to file a sales tax return?

When you apply for a sales tax permit, the state assigns you a filing frequency. In most states, you can determine the frequency with which you file sales tax by the amount of sales tax you collect from state buyers.

You must file and remit sales tax in Michigan on a monthly, quarterly, or annual basis.

All taxpayers must file an annual sales tax return by the last day of February in the year after the taxable period, even if they pay on a monthly or quarterly basis.

Also, as per the law, there are some penalties chargeable if someone fails to file the sales tax return before the due date. 

What is the Deadline for Michigan Filing Sales Tax?

The 20th of the month after the reporting period is nearly always the deadline for Michigan sales tax returns. (The yearly sales tax return, which is due on the final day of February in the year following the taxable period, is an exception.) Sales tax is usually due the next business day if the reporting deadline falls on a weekend or holiday.

Penalty

Michigan levies a late fee of 5.000% of the unpaid sales tax. This tax builds up to a maximum penalty of 25.000 percent of the sales tax payable.

Need Assistance With Michigan Sales Tax?

The Freecashflow.io team is here to aid internet business owners with tax and accounting concerns. Our employees have worked for multibillion-dollar companies such as Warner Brothers, EY, and Paramount Pictures. For tax and accounting help, you can rely on us. Contact us right away for assistance.

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