Michigan Sales Tax Rate 2025: Rules & Filing Guide

Businesses operating in Michigan must understand and follow the Michigan sales tax. It significantly impacts businesses by helping them avoid any legal issues and ensure smooth operations. Whether you are a retailer or an eCommerce seller, staying informed ensures accurate tax collection and reporting.

This guide provides a detailed look at Michigan’s sales tax rates for 2025, including how to comply with the rules, what penalties businesses might face for not following them, and how to properly file Michigan sales tax.

What is the Sales Tax Rate in Michigan?

The Michigan sales tax rate for 2025 is 6% at the state level. Michigan does not allow local jurisdictions to add their own sales taxes, which means the rate remains consistent across the entire state.

• State Sales Tax Rate: 6%
• Local Sales Tax Rate: 0%
• Maximum Combined Sales Tax Rate: 6%

Also read: US Sales Tax Guide: Introduction, Nexus, and How to Calculate Rates

Michigan Sales and Use Tax Overview

Michigan imposes a sales tax on the retail sale of tangible personal property and certain services, including the sales tax on shipping. The general sales tax rate applies uniformly across the state and does not include any additional local sales tax rates.

Businesses in Michigan must collect this tax at the point of sale and remit it to the Michigan Department of Treasury. Compliance with these regulations is monitored closely, and penalties for non-compliance can include fines and interest on unpaid taxes.

Key Features of Michigan Sales Tax

• Tax Base: Applies to retail sales of tangible goods and specific services like telecommunications and hotel accommodations.
• Filing Requirements: Businesses must register and file through Michigan Treasury Online (MTO), with filing frequency varying by tax liability.
• Penalties: Late payments can lead to penalties of 5% per month, up to 25%, and interest accrues on these late payments.
• Exemptions: Includes prescription medications, food for home consumption, agricultural inputs, and sales for resale.

Taxable and Exempt Items

Taxable Items:

• Prepared Foods and Beverages: This category includes all meals prepared by restaurants, cafes, and similar establishments, alongside beverages served within these venues.
• Tangible Personal Property: General consumer goods like electronics, furniture, and apparel, unless they are explicitly exempt under state law, fall into this category.
• Selected Services: Services that involve the installation, repair, or maintenance of personal and real property are taxable. This includes things like automotive repairs and home improvement services.

Exemptions in Michigan are strategically placed to reduce the financial burden on essential goods and services. These exemptions support consumer affordability and public welfare.

Exempt items include:

• Groceries: Food items purchased for home preparation and consumption are exempt from Michigan sales tax, promoting access to basic necessities.
• Prescription Medications and Medical Devices: All prescription drugs, alongside vital medical appliances, are not subject to sales tax, supporting healthcare affordability.
• Industrial Machinery: Equipment used directly in the manufacturing process, which contributes to production capabilities and economic growth, is exempt from sales tax.

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For a complete list of taxable and exempt goods, visit the Michigan Department of Treasury.

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To simplify tax collection and compliance, Commenda offers automated tax solutions that accurately calculate Michigan sales tax rates and handle tax reporting. Learn more here.

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When Do Businesses Need to Collect Sales Tax in Michigan?

Businesses need to collect sales tax in Michigan when they establish a sufficient connection, or “nexus,” with the state. This sales tax nexus can be achieved through various activities that imply a significant presence in Michigan, warranting the collection and remittance of sales tax to the Michigan Department of Treasury. Once a nexus is established, companies are obligated to comply with Michigan’s sales tax laws, including registration and tax filings​.

1. Physical Nexus

Physical nexus in Michigan is established when a business has a sufficient physical presence in the state. Below are key indicators that create physical nexus:

• Office or Place of Business: Operating an office, store, or any business location in Michigan creates a nexus.
• Employee or Representative Presence: Having employees, agents, or representatives working in Michigan creates a nexus.
• Inventory Storage: Storing goods or inventory in Michigan, whether in a warehouse or other facility, establishes a nexus.
• Real Property or Equipment: Owning or leasing property, such as real estate or equipment, within Michigan creates a nexus.
• Trade Shows and Events: Participating in trade shows, conventions, or events within Michigan can trigger nexus.
• Services or Activities in the State: Providing services or conducting business activities within Michigan through employees or agents can establish a nexus.

2. Economic Nexus

Economic nexus in Michigan refers to the obligation of businesses to collect and remit sales tax based on their economic activities within the state, irrespective of physical presence.

In Michigan, economic nexus is established if a business exceeds either of the following thresholds in the previous calendar year:

• Sales Revenue Threshold: Gross sales of $100,000 or more.
• Transaction Threshold: 200 or more separate transactions with Michigan customers.

Meeting or exceeding either threshold requires businesses to register for a Michigan sales tax permit, collect sales tax on applicable sales, and remit the tax to the state.

These standards apply to all sellers, including those operating online, and are designed to ensure that businesses contributing significantly to Michigan’s economy through substantial sales or transaction volumes are compliant with state tax laws.

Also checkout: US sales tax calculator to calculate the sales  tax of your required city.

Failure to Collect Michigan Sales Tax

Failure to collect Michigan sales tax results in significant legal and financial consequences for businesses operating within the state. Adhering to Michigan’s sales tax obligations is essential to avoid penalties and interest charges that can accumulate from oversight or intentional evasion. Key penalties and repercussions for failing to comply with Michigan sales tax collection and filing requirements include:​

Penalties for Late Payment and Filing

• Late Filing Penalties: 5% of the tax due for the first two months, with an additional 5% penalty for each subsequent month, up to a maximum of 25%.
• Late Payment Penalties: 5% of the unpaid tax for the first two months, with an additional 5% penalty per month thereafter, up to 25%.

Interest Charges

• Interest accrues on unpaid taxes from the original due date until payment is made.
• The interest rate is set at one percentage point above the adjusted prime rate. The prime rate is updated semiannually, and for the period January 1, 2025, to June 30, 2025, the annual interest rate is 9.47% (7.47% prime rate + 1% additional).
• Interest is compounded daily, based on this annual rate, and applied to the outstanding balance until paid.

Underpayment Penalties

• Negligence Penalties: A 5% penalty applies for underpayment due to negligence, compounded daily at an annual rate, adjusted every six months.

Criminal Penalties for Tax Evasion

• Fines up to $5,000 and imprisonment for up to five years for willfully failing to collect or pay Michigan sales tax.
• Misdemeanors for knowing violations without fraud, punishable by fines up to $1,000 and imprisonment for up to one year.

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To avoid penalties and interest, businesses should ensure timely payments and use automation tools like Commenda to streamline tax collection and remittance.

Michigan Sales Tax for Out-of-State Sellers and Amazon FBA Program Sellers

Michigan requires out-of-state sellers, including those participating in the Amazon FBA program, to collect and remit sales tax if they establish an economic nexus in the state. Once the economic nexus is established, sellers must register with the Michigan Department of Treasury before collecting sales tax.​

Non-compliance with these requirements can result in penalties, including fines and interest on any unpaid taxes. Therefore, it is essential for out-of-state and Amazon FBA sellers to maintain accurate transaction records and ensure timely registration and tax remittance to remain compliant with Michigan tax laws.

Also read: Which States Do Not Accept Out-of-State Resale Certificates

Registering for a Michigan Seller’s Permit

In Michigan, registering for a seller’s permit is essential for businesses selling taxable goods or services. This permit authorizes businesses to collect sales tax from customers. The Michigan Department of Treasury oversees the registration process.

1. Determine the Need for a Permit

Assess if your business activities require a seller’s permit. It’s mandatory for selling goods, providing taxable services, or operating as a vendor in Michigan.

2. Gather Required Information

Prepare the following details before applying:

• Federal Employer Identification Number (FEIN): Issued by the IRS.
• Business Structure: Specify your entity type (e.g., sole proprietorship, LLC, corporation).
• Business Owner Information: Provide personal details of the owner(s).
• Business Activity Details: Include your NAICS code, start date in Michigan, and estimated monthly sales tax liability.

3. Submit Application

Choose one of these methods to apply:

• Online: Use the Michigan Treasury Online (MTO) portal.
  • Create a user profile.
  • Complete the e-Registration process.
  • Obtain your sales tax license within 10-15 minutes.
• By Mail: Complete Form 518, “Registration for Michigan Taxes.”
  • Mail it to the address provided on the form.
  • Allow 4-6 weeks for processing.

4. Display the Permit

Once received, display your sales tax license prominently at your business location. Michigan law mandates its visible display for public awareness.

How to Collect Sales Tax in Michigan

Collecting sales tax in Michigan requires adherence to state regulations. First, determine if your business has a nexus in Michigan, established through physical presence, economic activity, or affiliate relationships. Once nexus is established, register for a sales tax permit before collecting sales tax.​

To collect sales tax in Michigan, follow these clear steps:

1. Determine Nexus:
   • First, establish if your business has a nexus in Michigan.
   • Nexus can be created through physical presence, economic activity, or affiliate relationships.
   • If nexus exists, you are required to collect sales tax in Michigan.
2. Register for a Sales Tax Permit:
   • Register for a sales tax permit through the Michigan Department of Treasury’s online portal, Michigan Treasury Online (MTO).
   • This step is essential before businesses can begin collecting sales tax.
   • There is no registration fee, and the permit will typically arrive within seven business days.
3. Understand the Sales Tax Rate:
   • Michigan has a state sales tax rate of 6%.
   • For specific items like residential energy, a reduced rate of 4% applies.
   • Businesses should ensure to apply the correct tax rate based on the goods or services being sold.
4. Collect the Sales Tax:
   • Add the appropriate sales tax to the price of taxable goods and services at the point of sale.
   • Michigan follows a destination-based sales tax system, so charge the tax rate based on the customer’s delivery address.
5. File Sales Tax Returns and Make Payments:
   • File sales tax returns and submit payments according to the assigned filing frequency (monthly, quarterly, or annually).
   • Filing and payment can be done electronically through the MTO portal.
   • Stay on top of deadlines to avoid penalties for late filing or payment.
6. Maintain Accurate Records:
   • Keep detailed records of all sales transactions, including tax collected and remitted.
   • These records are essential for accurate filing and to defend against audits.
   • Proper documentation will also help manage exemptions and ensure ongoing compliance.

Tax-Exempt Customers in Michigan

There are certain businesses in Michigan that qualify for exemptions from sales tax. These customers must present valid exemption certificates to benefit from these exemptions.​

Key tax-exempt entities include:

• 501(c)(3) and 501(c)(4) Organizations: These organizations must provide proof of their exempt status under these IRS codes, along with a certificate stating that the property will be used in their operations.
• Churches: Sales to organized churches are exempt, provided the property isn’t used in commercial enterprises. Vehicles like vans or buses may be purchased tax-exempt if used primarily for religious transportation. 
• Government Entities: Purchases by the U.S. government, Michigan state, and its subdivisions are exempt when ordered and paid for directly with government funds.
• Hospitals: Sales to nonprofit hospitals are exempt if the income doesn’t benefit private individuals. Construction materials for nonprofit hospitals may also be exempt.

To claim these exemptions, purchasers should provide sellers with a completed Michigan Sales and Use Tax Certificate of Exemption (Form 3372) or an acceptable alternative. Sellers are advised not to accept tax-exempt numbers alone as proof of exemption.

Filing Sales Tax Returns in Michigan

Filing sales tax returns in Michigan involves determining the assigned filing frequency, adhering to specified procedures, and utilizing appropriate payment methods. Businesses must accurately report all taxable transactions and remit the correct amount of sales tax due. The state provides electronic filing options through the Michigan Treasury Online (MTO) portal, streamlining the process and ensuring timely submissions.

Filing Frequencies:

Filing Procedures:

1. Electronic Filing: Businesses are encouraged to file electronically via the MTO portal, ensuring efficiency and compliance.
2. Paper Filing: Businesses may file by mail using Form 5080, Sales, Use, and Withholding Tax Return. Completed forms and payments should be sent to the Michigan Department of Treasury.

Payment Methods:

• Electronic Payments: Made through the MTO portal using ACH debit or credit.
• Paper Checks: Accompany paper returns filed by mail.

Timely and accurate filing is crucial to avoid penalties and interest. For comprehensive guidelines, refer to the Michigan Department of Treasury’s resources.

Using Sales Tax Automation Tools

Utilizing sales tax automation tools is essential for businesses aiming to streamline their Michigan sales tax compliance. These tools simplify tax calculations, ensure accurate reporting, and help avoid potential penalties.

Commenda offers a comprehensive solution tailored for Michigan sales tax management. It automates tax calculations, manages filings, and provides expert support to ensure timely and accurate submissions. This platform integrates seamlessly with various business systems, reducing manual errors and saving valuable time.

Incorporating such automation tools enables businesses to stay compliant with Michigan’s sales tax regulations, minimize the risk of audits, and focus more on core operations. By automating these processes, companies can navigate the complexities of sales tax with greater efficiency and confidence.

Book a demo today with our sales tax expert to comply with Michigan sales tax.

How to Pay Your Michigan Sales Tax

To pay your Michigan sales tax, you’ll need to follow a structured process to ensure compliance with state regulations. This includes registering your business, collecting the appropriate sales tax, filing returns, and remitting payments in a timely manner. Here’s a step-by-step guide to help you navigate the payment process effectively:

1. Register Your Business: Establish your business presence by registering through the Michigan Treasury Online (MTO) portal.
2. Collect Sales Tax: During transactions, add the 6% sales tax to applicable sales. This aligns with Michigan’s standard rate.
3. File Sales Tax Returns: Submit your sales tax returns electronically via the MTO portal. This method is efficient and ensures timely processing.
4. Remit Payment: Alongside your electronic filing, remit the collected sales tax payment through the MTO portal. This streamlines the process and helps avoid delays.
5. Maintain Records: Keep accurate records of all sales and tax payments. Proper documentation supports compliance and simplifies future filings.

By following these steps, you ensure compliance with Michigan’s sales tax regulations and contribute to a transparent business environment.

Michigan Sales Tax Compliance Checklist

To ensure compliance with Michigan sales tax requirements, businesses should follow these steps:

1. Obtain a Sales Tax License: Register online through the Michigan Department of Treasury’s Michigan Treasury Online portal before collecting sales tax.
2. Determine Taxability: Understand which products and services are taxable. Generally, tangible personal property is taxable, while most services are exempt. 
3. Collect Correct Sales Tax: Apply Michigan’s 6% sales tax rate to taxable transactions. For residential sales of electricity, natural or artificial gas, and home heating fuels, apply a 4% rate.
4. File Timely Returns: Submit sales tax returns by their due dates, which are typically the 20th day of the month following the reporting period. Filing frequency may be monthly, quarterly, or annually, depending on the tax liability.
5. Maintain Records: Keep detailed records of all taxable and exempt sales, as well as tax collections, to facilitate accurate filings and support audits. ​
6. Stay Informed: Regularly review updates from the Michigan Department of Treasury to ensure the tax practices align with current legislation.​

How Should I Prepare for Michigan Sales Tax Audits and Appeals?

​Preparing for Michigan sales tax audits and appeals requires a thorough understanding of the state’s tax regulations and proactive measures to ensure compliance. By focusing on key aspects such as understanding audit triggers, maintaining proper documentation, preparing for the audit process, and comprehending the appeals process, businesses can navigate audits more effectively.​

Understand What Triggers an Audit

• Audits in Michigan may be triggered by discrepancies between the business’ reported sales and the amount of sales tax remitted to the state.
• Late filings, failure to file tax returns on time, or submitting incorrect returns can also lead to an audit.
• Excessive or unsupported deductions and credits, such as exemptions for tax-free sales, may raise suspicion.
• Random selection or the identification of tax reporting inconsistencies by Michigan’s Department of Treasury could also initiate an audit.

Maintain Proper Documentation

• Keep comprehensive records, including all sales invoices, purchase receipts, and exemption certificates for business transactions.
• Ensure that all tax-related documents, such as sales tax returns, are organized and easily accessible for review.
• Retain records of any claimed tax deductions, credits, or exemptions and the supporting documentation for these claims.
• Maintaining accurate records for at least 4 years (the statute of limitations for Michigan audits) is essential in case of a review by the Department of Treasury.

Be Prepared for the Audit Process

• If selected for an audit, the Michigan Department of Treasury will notify the business with a letter outlining the audit process, what documents are required, and deadlines.
• Respond to the audit notice promptly and provide all requested records and documentation to avoid unnecessary delays.
• If businesses are unsure about the audit process or how to present their records, consider hiring a qualified tax professional or attorney to assist in navigating the audit.
• During the audit, remain cooperative and professional, answering questions clearly and providing accurate information to help resolve any issues efficiently.

Understanding the Appeals Process

• If businesses disagree with the results of the audit, they can request an informal conference with the Michigan Department of Treasury’s Hearings Division within 60 days of receiving the audit determination.
• If businesses are not satisfied with the outcome of the informal conference, they can appeal the decision to the Michigan Tax Tribunal or, in some cases, the Michigan Court of Claims.
• It’s important to adhere to strict deadlines for filing appeals. Failing to meet these deadlines may result in the forfeiture of the right to appeal.
• Consider enlisting a tax professional or legal expert to assist with the appeals process, as the procedures can be complex.

Also read: Sales Tax Audit Checklist: How to Prepare and Avoid Costly Mistakes

Conclusion

Michigan sales tax rate remains steadfast at 6%, covering tangible personal property and certain services. To avoid penalties, businesses must adhere to timely tax reporting and remittance practices. Accurate record-keeping is crucial for supporting tax-related filings and facilitating compliance with Michigan’s tax laws.

Commenda can assist businesses with Michigan’s sales tax by automating tax calculations and filings, ensuring compliance, and optimizing the management of tax obligations. With tools that keep track of nexus criteria and apply the correct tax rates, Commenda simplifies the complexities of sales tax management.

Book a demo today with our sales tax expert to get started.

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FAQs

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