Michigan Enacts Marketplace Nexus Legislation

Michigan has enacted legislation that creates new requirements for marketplace facilitators. Effective January 1, 2020, a marketplace facilitator who meets either of the following criteria is considered engaged in business with the state and must remit tax on behalf of their marketplace sellers:

  • The marketplace facilitator’s gross receipts from sales to purchasers in Michigan exceed $100,000 in the previous calendar year;
  • The marketplace facilitator has 200 or more separate transactions into Michigan in the previous calendar year

A marketplace facilitator must remit tax on all taxable sales directly made by the marketplace facilitator or facilitated for marketplace sellers, regardless if the marketplace sellers have nexus with the state.

A marketplace seller shall include its sales made through a marketplace with its direct sales into Michigan to determine if the seller exceeds the state’s economic nexus thresholds.

A “marketplace facilitator” is defined as a person that facilitates a retail sale for a marketplace seller by listing or advertising the product or taxable service, and then either directly or indirectly through agreements with third party or affiliates, collects payment from the customer and transmits the payment to the marketplace seller for consideration. A marketplace facilitator does not include someone who solely operates a platform/forum that provides internet, print, electronic, or any other form of advertising services.

Marketplace facilitators are relieved of tax remittance liability if they can demonstrate that a failure to collect the correct amount of tax is due to incorrect information provided by the marketplace seller. The Michigan Department of Treasury will only audit a marketplace facilitator for facilitated sales – the Department will not audit a marketplace seller for sales facilitated by the marketplace facilitator required to collect tax on the seller’s behalf.

Class action lawsuits cannot be brought against a marketplace facilitator on behalf of purchasers resulting from or relating to overpayment of sales tax remitted on facilitated sales.

The new legislation also codifies the state’s economic nexus thresholds for remote sellers, previously enforced through administrative bulletin. The legislation applies to transactions occurring on or after October 1, 2018, when the remote seller requirements were originally enforced. (H.B. 4540, H.B. 4541, H.B. 4542 and H.B. 4543, Laws 2019, Effective January 1, 2020)

Posted on December 16, 2019