How to Register for a Sales Tax License in Michigan
Most businesses starting in Michigan selling a product or offering certain services will need to register for a sales tax license. A sales tax license is commonly referred to as a seller’s permit, sales tax license, sales tax number, or sales tax registration.
Check out the rest of this guide to determine who needs a sales tax license, what products and services are taxable, how to register for a permit, and reporting requirements.
Also See: Guide to Starting a Business in Michigan
Who needs a sales tax license in Michigan?
A business must register for a sales tax license in Michigan when:
- A business has sales tax nexus or economic nexus. Nexus means having a physical presence in the state, such as having a physical location like a retail store or office or using a warehouse or fulfillment center to store inventory.
- Making retail sales of products and taxable services in Michigan
- Employees (including sales representatives or agents) are working in Michigan
- An online business located in Michigan is selling taxable products to Michigan residents
- A remote seller meets one of the following scenarios:
- Making total sales of tangible personal property to Michigan residents of $100,000 or more; or
- Shipping 200 or more separate transactions to Michigan residents.
Contractors and subcontractors are not required to get a sales tax license since they are considered the final consumers of the materials they affix to real property and will pay sales tax at the time of purchase.
What products and services are taxable in Michigan?
Physical products
There are a few exceptions, but almost all physical products are taxable when sold at retail in the state of Michigan. Common examples include:
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
Certain manufacturing and agriculture equipment are tax-exempt, along with prescriptions, groceries, and medical devices. The Department of Treasury has a list of sales tax exemptions.
Labor, in most cases, isn’t taxable in Michigan. For instance, let’s say you broke the screen of your cell phone and take it to a cell phone repair shop to have it fixed. Sales tax would be added to the selling price of the new screen and any additional parts to fix the phone. The labor to replace the screen isn’t taxable. However, a business that makes furniture will indirectly have a sales tax on labor. In this instance, let’s say this business is building a dining room table for a customer. Through labor, the pieces of wood are shaped, sanded, and painted to build this piece of furniture. While the labor isn’t directly taxable, sales tax is charged to the final selling price of the table.
Digital Products
Digital products, with the exception of pre-written computer sold online, isn’t taxable.
Services
Most services aren’t taxable in Michigan, however, there are a few exceptions, some of which include:
- Short-term lodging
- Industrial laundry services
More information about taxable services is available from the Department of Treasury.
How to register for a sales tax license in Michigan
A sales tax license can be obtained by registering the E-Registration for Michigan Taxes or submitting Form 518. This registration will also allow a business to register for their Employer Account Number.
A business making sales at fewer than 3 events in Michigan should instead file the Concessionaire’s Sales Tax Return and Payment (Form 2271).
Information needed to register includes:
- Federal Employer Identification Number (FEIN) from the IRS, or the owner’s Social Security Number if a sole proprietorship with no employees
- Company name or owner’s name
- Legal business name or Doing Business As (DBA)
- Physical and mailing address of the business
- Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
- Date taxable sales will begin
- Standard Industrial Code (SIC) – describes what the business does
Sales tax reporting
How is sales tax collected?
When a business makes a sale of a taxable product or service, the business charges the appropriate sales tax rate to the customer. This tax is collected by the business which is then sent to the Michigan Department of Treasury.
How much is sales tax in Michigan?
Michigan has a flat 6% sales tax rate across the state.
When are Michigan sales tax returns due?
The Department of Treasury will determine a filing frequency based on the expected volume of sales, which will either be monthly, quarterly, semiannually or annually. Generally, a business selling over $16,675 in taxable sales each month will file monthly.
The due dates of filings are the 20th day of the month following the reporting period unless the 20th falls on a weekend or federal holiday, which would move to the next business day.
Even if the business had no sales during the reporting period, a filing is still required indicating no sales occurred.
How much does a sales tax license cost in Michigan?
There is no cost for a sales tax license in Michigan.
How long does it take to get a Michigan sales tax license?
Expect 8-10 business days for the processing of a Michigan sales tax license. This license must be displayed at each business location.
Do you have to renew a Michigan sales tax license?
Sales tax licenses expire on September 30 of each year. Often, the Department of Treasury automatically renews the license, but will periodically request updated information.
How do I get a wholesale license in Michigan?
A business is able to purchase items to resell without paying state sales tax. The tax liability is passed from the wholesaler or distributor to the retailer, who will then charge sales tax to the end-user of the item.
There isn’t a tax-exempt number provided to a business, however, there is a Michigan Certificate of Exemption (also referred to as a wholesale license, resale certificate, or sales tax exemption certificate) that allows for purchases to be made tax-free.
Is a business license the same thing as a sales tax license?
In addition to registering for a sales tax permit, there may be other business licenses needed before starting a business in Michigan.
If you have questions about the sales tax license, the Michigan Department of Treasury has a guide to the Michigan Sales & Use Tax or can be contacted by calling 517-636-6925.
