Michigan has a 6 percent sales and use tax rate for retail sales. Certain utilities are taxed at 4 percent. The use tax is not in addition to the sales tax but rather works in conjunction with it. Additionally, Michigan does not allow local jurisdictions to collect local sales taxes from local businesses.
This guide does not fully describe all of Michigan’s laws and regulations regarding taxes. Businesses should contact a business attorney or visit the Michigan Department of Treasury website to learn more about the rules, regulations, tax laws, and tax information associated with their industries and the types of taxes due.
Types of taxes
Michigan has several types of taxes in addition to its 6 percent sales and use tax rate for sales of goods.
Sales and use tax
The sales tax rate works in conjunction with a use tax rate, which is also 6 percent. If a business purchases taxable tangible personal property without paying the tax and does not resell the property, it must pay use tax. Michigan’s use tax is also 6 percent.
Lodging
Hotelkeepers, motel operators, and anyone else providing accommodations available to the public must pay a use tax of 6 percent. However, if any such business rents a room or other lodging for more than one month to the same tenant, the rental is not taxable.
Rentals and leases
Businesses that rent or lease motor vehicles, equipment and other tangible personal property have a choice of paying the 6 percent use tax on the total rental receipts or the Michigan Tax on the acquisition of the property. If the business chooses to pay the use tax on rental receipts, all charges are taxable, even if itemized separately. Once the business chooses a method, it can never change the method.
Marijuana excise tax
Legislation that approved legal marijuana for adults 21 and over is in effect in Michigan. The Michigan Regulation and Taxation of Marijuana Act imposes a tax of 10 percent in addition to the 6 percent sales tax rate.
To figure the tax on a sale of marijuana, multiply the total sale by 6 percent to obtain the state sales tax. Then multiply the same amount by 10 percent to get the marijuana excise tax.
For example, a person purchases marijuana for $100. The sales tax is $6 and the marijuana excise tax is $10. The total sale is $116.
Tobacco tax
Michigan imposes a tax of $0.10 per cigarette and 32 percent on the wholesale price of other tobacco products. Retailers must submit tobacco tax returns electronically via MiMATS.
The tax on a pack of 20 cigarettes is $2.00 and the tax on a package of loose tobacco is 32 percent. Figure the tax on loose tobacco by multiplying the purchase price of the tobacco by 0.32. For example, a pound of pipe tobacco costs $20. The tax is 20 times .32, which equals $6.40.
Tobacco taxes are due on the 20th day of the month following the month the business collected the tax. For example, taxes collected on tobacco products and cigarettes in January are due on or before February 20.
Inflation-adjusted fuel tax
Michigan adjusts the fuel tax according to the previous year’s inflation. For 2022, the tax on a gallon of fuel is the inflation rate of 3.3 percent or 5 percent, whichever is less. To figure the tax, multiply last year’s tax rate (26.3 cents per gallon) by 1.033 for the new tax of 27.2 cents per gallon.
Utility taxes
The Department of Treasury separates certain fuels used for residential use from regulated and unregulated fuel providers. Regulated fuel providers provide electricity, natural gas, and artificial gas to consumers. Residential consumers pay 4 percent sales tax on electricity and natural or artificial gas, while others pay 6 percent.
Unregulated fuel providers provide propane gas, home heating fuel oil, home heating firewood, and liquefied petroleum gas. Any of these methods of fuel are taxed at the 4 percent rate for residences. Others purchasing these types of fuels pay a 6 percent sales tax.
Registering for and filing Michigan's taxes
While a business can use fillable forms to register and file to submit Michigan sales tax returns and use tax returns, it is better to register and file online. The fillable forms do not have a way to check that the person processing the return for the business entered everything properly. Nor do the forms check the filer‘s math.
If the business has a Federal Employer Identification Number (FEIN), that number is the account number. If the Internal Revenue Service does not require you to have a FEIN or if the business applied for one but hasn’t yet received it, the system will assign a business account number.
Due dates for Michigan’s taxes
Michigan taxes are due based on whether the business files monthly, quarterly or annually as follows:
- Monthly: Taxes collected in any month are due on or before the 20th day of the following month. For example, taxes collected during January are due on or before February 20.
- Quarterly: Taxes collected in any quarter are due on or before the 20th day of the month following the end of the quarter. The first quarter runs from January through March. Taxes collected during those months are due on or before April 20. The second quarter runs from April through June. Taxes collected during those months are due on or before July 20. The third quarter runs from July through September. Taxes collected during those months are due on or before October 20. The fourth quarter runs from October through December. Taxes collected during those months are due on or before January 20.
If a business taxpayer averages over $720,000 in sales and use must remit both taxes on an accelerated schedule. The Michigan Department of Treasury notifies taxpayers if they fall into this category. The taxpayer pays 75 percent of the tax liability from the current year or the amount collected for the same period the prior year, whichever is less.
The balance, called a reconciliation payment, is the difference between the actual tax amount and the prepayment amount and is due on or before the 20th day of the next month.
Michigan tax exemptions
Certain businesses are exempt from paying sales and use tax, including:
- Certain 501(c)(3) and 501(c)(4) organizations for property used in the operations of the organization.
- Wholesalers purchasing tangible personal property for resale. They must provide the seller with Form 3372 Michigan Sales and Use Tax Certificate of Exemption. Since Michigan does not provide an account number for certificates of exemption, the seller must keep a copy of the form in its records.
- Retailers purchasing tangible personal property for resale. They must provide the seller with Form 3372 Michigan Sales and Use Tax Certificate of Exemption. Retailers must check Box 1 in Section 3 and include their sales tax license number.
- Industrial processors purchasing property they use by altering, modifying or transforming the composition or character for resale.
- Churches, but not for property used in commercial enterprises. The only vehicles a church may purchase and qualify for the tax exemption status is one that seats 10 or more and is used primarily for transporting people for religious purposes.
- Hospitals, but only if the hospital is a nonprofit entity.
- Schools, but only if the institution is a nonprofit entity.
- The United States Government.
- The State of Michigan.
- Michigan’s political subdivisions, institutions, and departments, but sales must be ordered on the government form or via purchase order and paid for by warrant on government funds.
Calculating Michigan's sales and use tax rates
To calculate Michigan’s sales tax, multiply the tax rate by the item’s purchase price. For example, if Widget A costs $100, the general tax is 6 percent (100 times .06 equals $6). Thus, the total collected from the consumer is $106.
The same calculation applies to the 4 percent tax rate for utilities. For example, if the electric bill is $100 for a residential consumer, the tax due is $4 (100 times .04 equals $4). The total electric bill, less for any non-taxable charges, is $104.
Remote and marketplace sellers
Out-of-state sellers and marketplace sellers must collect sales and use taxes if they have sales that exceed $100,000 or more than 200 separate transactions with Michigan residents. However, most businesses collect sales and use tax even before meeting the thresholds as a convenience to the buyer.
If the remote business does not collect sales tax from Michigan residents, the resident must pay use tax on purchases.
FAQs
The sales and use tax for Michigan is 6 percent for tangible personal property. Residential utilities are taxed at 4 percent.
Complete Form 3372 Michigan Sales and Use Tax Certificate of Exemption. You must give the completed resale certificate to the seller.
In most cases, yes. If the state does not require a business to collect taxes unless it meets the threshold of $100,000 in sales or 200 individual transactions, a business does not have to collect the other state’s sales taxes. However, most businesses collect sales taxes regardless of the thresholds.
Yes, you must file a sales tax and use tax return, even if the business did not have taxable sales for the period, whether monthly, quarterly or annually.
Yes. Enter the total of all sales the business makes on the line asking for gross sales.
Yes. Postage, handling, shipping, and transportation charges are subject to retail sales tax, as are packaging and crating charges.
Private sales are exempt from sales tax as long as the person is a “qualified” relative. Qualified relatives include a spouse, parent, sibling, child, grandparent, and in-laws. Step-relationships, legal wards, and legally appointed guardians are also exempt.
