Most businesses starting in Michigan that are selling a product or offering certain services will need to register for a sales tax license. This 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 find out who needs a sales tax license, what products and services are taxable, how to register for a permit and reporting requirements.
Who needs a sales tax license in Michigan?
A business must register for a sales tax license in Michigan when:
- A business has “nexus” (significant presence in the state) such as a retail store, office or warehouse where products are produced, stored and/or delivered
- Selling 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
- An out-of-state business selling to Michigan residents and one of the
- Total sales of tangible personal property to Michigan residents is $100,000 or more; or
- Having 200 or more 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?
There are a few exceptions, but almost all physical products are taxable when sold at retail in 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 to 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 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, with the exception of pre-written computer sold online isn’t taxable.
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 by 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) instead.
Information needed to register includes:
- Federal Employer Identification Number (FEIN), unless the business is organized under the owner’s SSN
- Company name or owner’s name
- Business name, assumed name of Doing Business As (DBA)
- Physical and mailing address of the business
- Type of business entity (Sole Proprietorship, Partnership, Corporation, LLC)
- Date taxable sales will begin
- Standard Industrial Code (SIC) – describes what the business does
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 to receive a sales tax license. This license must be displayed at each business location.
Do you have to renew your Michigan sales tax license?
Sales tax licenses expire on September 30 each year. Often, the Department of Treasury automatically renews the licenses, but may ask to update certain information.
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 who then sends it to the Michigan Department of Treasury.
How much sales tax is charged?
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 be monthly, quarterly, semiannually or annually. Generally, a business selling over $16,675 in taxable sales each month will file monthly.
Filings are due the 20th day of the month following the reporting period, unless the 20th falls on a weekend or federal holiday, in which case 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.
Sales tax on purchases for resale
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, that allows for purchases to be made tax-free.
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.