Sales Tax - Avoiding Costly Mistakes

There are many responsibilities that come with owning your own business. Depending on the type of business you operate, one responsibility you may have is collecting and remitting sales tax to the State. The Michigan Sales tax rate is 6%. In Michigan, every individual or business that sells tangible personal property to the final consumer must obtain a sales tax license.
This is true regardless of the size of your business, the amount of sales that are made or whether your business has a net profit. This is a pass through tax that is collected from your customers and has no effect on your profitability.


To obtain a sales tax license, an application (Form 518, Registration for Michigan Taxes) should be submitted to the State of Michigan prior to or at the time the business begins. This may be submitted online by completing the registration form found on the State of Michigan website (www.michigan.gov/treasury). There are no fees associated with obtaining a sales tax license.


After completing the registration, you will receive coupons that are to be used when submitting your payments. These coupons are used to make payments for use and withholding taxes as well as sales tax. Sales, use and withholding taxes are due annually, quarterly, or monthly depending on your total tax liability for the year. Below are the annual tax liability thresholds that will determine how often you must file.

• Less than $750 – annually
• Between $750 and $3,600 - quarterly
• Over $3,600 - monthly.

Once a sales tax license has been obtained, you can make purchases for resale without paying sales tax on the items. To get this exemption, you must fill out Form 3372, Michigan Sales and Use Tax Certificate of Exemption, and provide it to the seller.


Due to the economic conditions in Michigan, the need to generate additional revenue has increased in recent years. One way the State is trying to accomplish this is through sales tax audits. The books, records and papers of any person liable for payment of sales tax may be examined by the State at any time. It is important that complete and accurate records of all sales are kept, regardless of whether or not the seller feels the sale is taxable or non-taxable. In the absence of adequate records, the State can use any information available to determine if an underpayment of liability exists. If it is found that additional tax is due, penalties and interest will be assessed on top of the liability. Therefore, it is essential for taxpayers to report the correct tax liability from the start.

This article is intended to provide some basic information regarding sales tax in Michigan. Additional information can be found on the State of Michigan web-site at www.michigan.gov/treasury

This article was submitted by Rhonda Herzhaft, CPA with Conn, Geneva, and Robinson CPA Firm. Rhonda has ten plus years of tax accounting related experience.