Effective Date: October 1, 2018
Threshold: $100,000 or 200 or more separate transactions
Measurement Date: Previous calendar year
Includable Transactions: Gross sales; Marketplace sales included towards the threshold for individual sellers
When You Need to Register Once You Exceed the Threshold: January 1 following the year the threshold is exceeded
On August 1, 2018, the Michigan Department of Treasury issued a notice and Revenue Administrative Bulletin 2018-16 detailing the state’s policy changes in response to the U.S. Supreme Court’s decision in South Dakota v. Wayfair. Effective after September 30, 2018, the Treasury will require remote sellers with both taxable and non-taxable sales to Michigan customers exceeding $100,000 or sellers with 200 or more separate transactions (both taxable and non-taxable) in the previous calendar year to remit sales or use tax on all of its taxable sales into the state. Sellers will be required to collect tax for the entire following calendar year. If in the current calendar year the threshold is not met, tax collection can cease for the subsequent calendar year. Remote sellers must also file all required returns. No specific legislation was passed to enforce the remote seller collection responsibility.
To determine if their sales have exceeded Michigan’s threshold, remote sellers must review their 2017 calendar year sales. Exceeding the threshold January 1, 2017-December 31, 2017 means that a seller has nexus in Michigan after September 30, 2018 and must register and collect.
The Treasury reminds sellers that the new economic nexus standards do not affect a seller that has nexus due to its physical, representational, attributional, or click-through presence in Michigan – those sellers must continue to report and pay tax. For more information see our prior tip.
The Treasury will not enforce their policy change retroactively. Remote sellers that only have nexus due to exceeding one of Michigan’s economic thresholds are not liable for any tax, penalty, or interest for any transactions occurring on or before September 30, 2018. For examples and more information, you can read RAB 2018-16 and visit the Treasury’s Sales and Use Tax Information for Remote Sellers page. (Notice to Remote Sellers Regarding Sales Tax and South Dakota v Wayfair, Michigan Department of Treasury, August 1, 2018 and Revenue Administrative Bulletin 2018-16, Michigan Department of Treasury, August 1, 2018).
UPDATE: The Michigan Department of Treasury released a series of FAQs for remote sellers. Several answers detail that a seller must register to collect and remit sales tax by January 1 following the year they exceed the economic threshold.