Gavin Howe
Michigan imposes a 6% sales tax on the sale of most tangible personal property and certain services. Sales or rentals of manuals, books, pamphlets, computer data cards, and equipment are subject to sales tax. Sales of food intended for immediate consumption are also taxed, except when purchased by students with a valid ID from university facilities. Overnight lodging and accommodations of a month or less are taxable, while long-term rentals are not. Telecom services, installation and repair services, and certain transactions that include telecommunications services are also taxed. However, many services are exempt from sales tax, including professional services requiring specialized knowledge, services related to an individual's personal well-being, and services related to real property.
| Characteristics | Values |
|---|---|
| Sales tax on tangible personal property | 6% |
| Sales tax on food and beverages | Exempt, except for excise taxes on liquor, tobacco, marijuana products, and soda |
| Sales tax on accommodation rentals | Applicable |
| Sales tax on telecom services | Applicable |
| Sales tax on installation/repair services to property | Applicable |
| Sales tax on courses, seminars, and other forms of training or education | Exempt |
| Sales tax on insurance premiums and related services | Exempt |
| Sales tax on goods for resale | Exempt |
| Sales tax on goods for industrial processing | Exempt |
| Sales tax on goods for agricultural production | Exempt |
| Sales tax on goods sold to consumers outside Michigan | May or may not be taxable |
| Sales tax on goods sold by wholesalers | Exempt, if a valid resale certificate is provided |
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What You'll Learn
Sales of tangible personal property
In Michigan, sales tax is primarily focused on tangible personal property, which includes items that can be touched or moved, such as goods, products, or merchandise. This also includes electricity, water, gas, steam, and prewritten computer software. Michigan imposes a 6% sales tax on the sale of most of these items.
Tangible personal property is defined as personal property that can be seen, weighed, measured, felt, or touched. It is perceptible to the senses. This is in contrast to real property, which includes real estate (land) and anything permanently attached to the land. Michigan does not have a clear rule for when tangible personal property becomes connected with real property, but it considers tangible personal property a fixture when it meets certain criteria. For example, if an object is meant for permanent use on a premise, it is still considered tangible personal property, even if it is not attached to the land or a structure.
Some examples of transactions involving tangible personal property that are subject to sales tax in Michigan include the sale of manuals, books, pamphlets, computer data cards, and equipment. Sales of food intended for immediate consumption, such as coffee and snack items, are also subject to sales tax, except when purchased by students with a valid ID from university facilities. Sales of overnight lodging and accommodations of a month or less are also taxable, unless they are not available to the general public and are not rented on a commercial basis.
On the other hand, services are generally exempt from sales tax in Michigan unless specifically listed by state law. For example, professional services requiring specialized knowledge or expertise, as well as services related to an individual's personal well-being, are exempt. Additionally, courses, seminars, and other forms of education are also exempt from sales tax.
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Accommodation rentals
In Michigan, sales tax is primarily focused on tangible personal property, such as goods, products, or merchandise. However, certain services are subject to sales tax, including rental charges for overnight lodgings or accommodations. This applies to short-term rentals, such as hotel and B&B stays, as well as vacation rentals like Airbnb, HomeAway, or VRBO.
Hosts of short-term rentals are responsible for collecting applicable taxes from their guests and remitting them to the proper authorities. This includes not only the rental fee but also any additional charges such as cleaning fees, pet fees, or extra person fees. The tax rate for short-term rentals can vary depending on the location, so it is essential to stay updated on the latest rates to ensure compliance.
There are some exemptions to the short-term rental tax in Michigan. For instance, long-term rentals are generally exempt from short-term lodging taxes. Additionally, accommodations furnished directly to government entities, legally qualified nonprofit organizations, and churches are also exempt from taxes.
It is important to note that sales and rentals for industrial processing, agricultural production, or resale are typically not subject to sales and use tax. This is because the tax will be collected at the point of final sale or because certain exemption certificates are obtained.
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Telecom services
In Michigan, sales tax is typically focused on tangible personal property, such as goods, products, or merchandise. However, certain services are also subject to taxation under Michigan law.
Telecommunications services are one such example. The Michigan Use Tax Act imposes a 6% use tax on qualifying telecommunication services provided as part of telephone communications. This includes both intrastate and interstate calls originating or terminating in Michigan and billed to a Michigan service address or phone number. Telecommunication companies must register annually with the Michigan Public Service Commission and are not exempt from sales tax.
It is important to note that certain exemptions may apply to telecommunication services. For example, wide-area telecommunication services and international calls may be exempt from taxation under specific criteria.
Additionally, businesses that provide services tied to producing goods for resale may qualify for sales tax exemptions. This promotes manufacturing and commerce within the state by removing the tax burden on intermediate services contributing to the final product.
Other services that are generally exempt from sales tax in Michigan include professional services requiring specialized knowledge or expertise, services related to an individual's personal well-being, and services related to real property such as land and buildings.
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Insurance services
In Michigan, sales tax is primarily imposed on the sale of tangible personal property, such as goods, products, or merchandise. Services, on the other hand, are generally exempt from sales tax unless specifically listed by state law.
It is worth noting that disability insurance premiums written in Michigan are also treated differently. The first $190,000,000 of such premiums, excluding credit insurance and disability income insurance premiums, are exempt from tax. However, this exemption is reduced by $2.00 for every $1.00 by which the insurance company's gross direct premiums exceed $280,000,000.
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Education services
In Michigan, sales tax is typically levied on the sale of tangible personal property, such as goods, products, or merchandise. Services, on the other hand, are generally exempt from sales tax unless specifically listed by state law.
Other examples of services that are exempt from sales tax in Michigan include those related to an individual's personal well-being, such as counselling, physical fitness training, and personal care services. Services related to real property, such as land and buildings, are also generally exempt, as are professional services that require specialised knowledge or expertise.
It's important to note that Michigan's tax laws can change, so staying informed about the latest regulations is essential for maintaining compliance.
In addition to sales tax, Michigan also imposes a State Education Tax (SET) on property. This tax is assessed at 6 mills as part of summer property taxes, which are typically due by September 14 and collected by the local treasurer.
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Frequently asked questions
Yes, most services are not taxable in Michigan. However, some services that are exempt include professional services requiring specialized knowledge, services related to an individual's personal well-being, and services related to real property. Courses, seminars, and insurance services are also exempt from sales tax.
Some services that are subject to sales tax in Michigan include accommodation rentals, telecom services, and installation/repair services. Sales of food and beverages are also generally subject to a 6% sales tax, although there are exceptions for grocery food and non-alcoholic drinks.
Yes, certain items are exempt from sales tax in Michigan, such as vehicles sold to relatives of the seller, equipment used in agriculture, and some types of industrial machinery. Sales for resale, industrial processing, and agricultural production are also typically exempt from sales tax.
No, courses, seminars, and other forms of education or training are exempt from sales tax in Michigan. This exemption is in place to promote the public good.
Michigan is a destination-based sales tax state, which means that sales tax is charged based on where the product or service is delivered to the customer. The state imposes a 6% sales tax on most tangible personal property, such as goods and products.
