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Michigan Department of Treasury will begin collecting sales tax from online retailers

Aug 9, 2018

The Michigan Department of Treasury announced earlier this month that online retailers with no physical presence in Michigan will have to pay the state's sales tax starting October 1st.

The decision follows a Supreme Court case from this past June that upheld South Dakota's right to charge online shops for sales taxes. Michigan will adopt the same taxing model that South Dakota uses for their online retailers, meaning that the tax will apply to businesses who sold more than $100,000 worth of goods or made over 200 transactions in the state in the past year.

Some businesses, such as Amazon, have already been collecting sales tax for several years. 

Gregory Nowak, the principal lawyer in charge of state and local tax issues at Miller Canfield, says businesses with physical stores in Michigan are celebrating the new policy. They see it as a way to level the playing field between online and physical shops.

“There's a benefit to Michigan treasury, [and] Michigan's revenue stream has increased. Obviously individuals who purchase in Michigan are the ones paying that, but in-state retailers view this as a major victory,” Nowak says.

This policy, enacted via an administrative bulletin from the Treasury, is not yet an actual state law. However, according to Nowack, “the right thing to do from a clarity standpoint is to put this standard into the statute.”

If the policy doesn't become a law, there's nothing to stop the Treasury from enforcing the new tax at an earlier date-- and Nowak thinks it'll already be hard for businesses to adjust to the new policy in the two months they’ve been given.

Nowak doesn't necessarily feel it would be hard to pass a law introducing the tax. He’s more worried lawmakers won't agree on what to do with the extra $250 million dollars in tax revenue it would bring in.