A change to Michigan’s sales tax administration will require many mail-order and online retailers located outside of Michigan to pay the state’s 6 percent sales tax on taxable sales into the state.
“This is an important step forward in the fair administration of our tax system” says Nick Khouri, state treasurer. “With more and more shopping being done online, this change will make sure both hometown businesses and out-of-state online retailers are treated equally.”
The change comes on the heels of a June U.S. Supreme Court decision to overturn a more than 30-year precedent in South Dakota v. Wayfair, allowing state departments of treasury to collect sales tax from retailers physically located outside a given state if the retailer exceeds $100,000 in sales or 200 or more transactions in affected state within the previous calendar year.
In Michigan, shoppers were previously required to track and annually self-report uncollected taxes from mail order and online retailers located outside of Michigan. The new system allows for more efficient collection of sales tax by collecting it from businesses instead of individuals.
All applicable mail-order and online retailers located outside of Michigan must pay state sales tax and file tax returns for taxable sales made after Sept. 30.
“We will be working closely with our retail and business partners to ensure a smooth transition to the new rule,” says Khouri.
The state Treasury Department estimates more than $200 million in additional state revenues will be collected annually with the new rule.