Michigan Sales Tax Nexus
Michigan Risk Profile
The Trigger: $100,000 in annual gross sales OR 200 separate transactions.
(Note: Michigan still uses the 200-transaction count threshold. If you have a high volume of low-dollar sales, you can trigger nexus even with very low total revenue.)
Physical Nexus: Standard triggers include offices, employees, and inventory. Michigan is particularly focused on inventory in third-party warehouses (including Amazon FBA), which triggers immediate nexus regardless of sales volume.
Effective Date: October 1, 2018.
Look-back Exposure: Standard look-back is 4 years. Michigan is an active member of the Streamlined Sales Tax (SST) group and uses shared data to identify out-of-state sellers who haven’t registered.
Danger Level: LOW (The Single-Rate Setup)
Michigan is one of the most straightforward states for sales tax compliance. There are no local, county, or city sales taxes. There is only a single 6% statewide rate. This means once you are registered, the calculation is simple regardless of where the customer is located.
The Trap: The “Next Year” Rule
In Michigan, if you exceed the threshold in one calendar year, you are generally required to begin collecting on January 1 of the following year. While this provides a clear grace period, failing to register by that January 1 deadline can result in immediate penalties for the entire new year.
Michigan Sales Tax Nexus
Understanding Michigan Sales Tax Nexus
Michigan requires businesses to collect sales tax if they have either a physical presence in the state or meet certain sales thresholds. Here’s what you need to know.
Economic Nexus (Remote Sellers)
You have economic nexus in Michigan if you meet EITHER of these thresholds during the previous calendar year:
- $100,000 or more in gross sales to Michigan customers, OR
- 200 or more separate transactions with Michigan customers
Important points about economic nexus:
- Gross sales include ALL sales (taxable, nontaxable, exempt, and wholesale)
- Each order counts as one transaction, no matter how many items are in it
- Sales made through marketplace facilitators like Amazon count toward YOUR threshold
- If you exceed the threshold in 2025, you must register and start collecting on January 1, 2026
Physical Nexus
You have physical nexus in Michigan if you have any of these in the state:
- An office, warehouse, distribution center, or sales location
- Inventory stored in the state (including Amazon FBA warehouses)
- Employees, sales reps, or independent contractors working in Michigan
- A business location of any kind
Physical nexus requires you to register and collect sales tax immediately, with no minimum sales threshold.
What Gets Taxed in Michigan
Michigan’s 6% sales tax applies to:
- Retail sales of tangible personal property (products you can touch)
- Certain enumerated services specified in state law
- Downloaded software (treated as tangible personal property)
Most services are NOT taxable in Michigan unless specifically listed in state law.
Exemptions
Some sales are exempt from Michigan sales tax:
- Most services (unless specifically listed as taxable)
- Sales for resale (with proper documentation)
- Sales to certain organizations (nonprofits, government entities, schools)
- Certain manufacturing equipment and agricultural products
To claim an exemption, you need to get an exemption certificate from your customer. Michigan accepts Form 3372 as the standard exemption certificate.
Marketplace Facilitators
If you sell through platforms like Amazon, eBay, or Etsy, here’s what you need to know:
- Marketplace facilitators must collect Michigan sales tax if they meet the nexus thresholds
- Your sales through these platforms still count toward YOUR nexus threshold
- If the marketplace is collecting tax for you, you don’t need to collect it again
- You may not need a Michigan license for facilitated sales, but check with the state
How to Register
Once you have nexus in Michigan, you need to register for a sales tax permit. You can register:
- Online through Michigan Treasury Online (fastest option, permit in about 7 business days)
- Through the Streamlined Sales Tax Registration System (good if you need to register in multiple states at once)
Registration is free.
Filing and Payment
Michigan assigns you a filing frequency based on your sales volume:
- Monthly filers: High volume sellers
- Quarterly filers: Medium volume sellers
- Annual filers: Low volume sellers
Returns are due on the 20th of the month following your reporting period. If you don’t make any sales during a period, you still need to file a zero return.
Destination-Based Tax
Michigan uses destination-based sourcing. This means you charge sales tax based on where your customer receives the product, not where you’re located.
What If You Already Have Nexus But Haven’t Been Collecting?
If you’ve been making sales to Michigan but haven’t been collecting sales tax, you may qualify for the Voluntary Disclosure Program. This program can:
- Waive penalties
- Limit your lookback period to 48 months (instead of unlimited)
- Help you get into compliance
The catch is you must commit to ongoing compliance moving forward.
Important Dates and Deadlines
- Economic nexus effective date: October 1, 2018 (after the Wayfair decision)
- Compliance start: January 1 following the year you exceed thresholds
- Return due dates: 20th of the month after the reporting period
- Review filing frequency: The state reviews your filing frequency annually
Frequently Asked Questions
Do I have to collect sales tax if I only sell through Amazon?
It depends. If Amazon is fulfilling your orders and collecting tax for you, they’ll handle it. But your Amazon sales still count toward your $100,000/200 transaction threshold. If you make sales through other channels too, you might need to register.
What counts as a transaction?
One customer order equals one transaction, regardless of how many items are in the order. A $5 sale and a $500 sale both count as one transaction each.
Do I need a new permit every year?
No. Once you register, your permit stays active until you close it. However, your filing frequency might change based on your sales volume.
What if my sales drop below the threshold?
Once you have nexus, you must continue collecting until you’ve had an entire calendar year below BOTH thresholds. For example, if you had nexus in 2025 but your 2026 sales fall below $100,000 AND 200 transactions, you can stop collecting on January 1, 2027.
Do shipping charges get taxed?
Yes. If the product you’re shipping is taxable, the shipping charges are also taxable. If the product isn’t taxable, shipping isn’t taxed either. If you’re shipping both taxable and nontaxable items, the entire shipping charge is taxable.
Is Michigan part of the Streamlined Sales Tax program?
Yes. Michigan is a full member of the Streamlined Sales Tax Governing Board, which helps simplify compliance for multi-state sellers.
What if I’m a wholesaler selling only for resale?
You still have nexus if you exceed the thresholds, but you don’t need to register for sales tax since your sales aren’t subject to tax. However, you must keep proper resale exemption certificates from your customers.
Are there any sales tax holidays in Michigan?
No. Michigan does not currently have any sales tax holidays.
What happens if I don’t register when I should?
You could face back taxes, penalties, and interest going back to when you first established nexus. The state can audit you and assess taxes you should have collected, plus penalties.
How do I know what to charge for sales tax?
Michigan has a flat 6% statewide rate with no local taxes. This makes it simple compared to many other states. Just charge 6% on all taxable sales.
Get Help With Michigan Sales Tax Compliance
Figuring out nexus can be tricky, especially if you sell in multiple states. We specialize in helping businesses understand their sales tax obligations and get into compliance.
Contact us for a free consultation:
Phone: 720.878.2280
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