Can I collect sales tax from customers in different states without violating tax laws in Michigan? What are the requirements?

Can I collect sales tax from customers in different states without violating tax laws in Michigan? What are the requirements?

Michigan requires businesses to collect sales tax on taxable sales made within the state. If you are selling to customers in other states, you may also be required to collect sales tax in those states. This is determined by each state’s sales tax laws, which can vary widely.

Sales Tax Nexus

Before you can collect sales tax in a state, you must have a sales tax nexus in that state. A sales tax nexus is a connection between your business and the state that triggers a sales tax obligation. The most common types of nexus are physical presence nexus and economic nexus.

Physical presence nexus is established when a business has a physical presence in a state, such as a store, warehouse, or office. Economic nexus is established when a business meets certain sales thresholds in a state, even if it has no physical presence there.

Michigan Sales Tax Requirements

In Michigan, businesses are required to register for a sales tax license if they have a physical presence in the state or meet certain sales thresholds. Once registered, businesses must collect and remit sales tax on taxable sales made within the state.

Other States’ Sales Tax Requirements

If you have sales tax nexus in other states, you may be required to register for a sales tax license and collect sales tax in those states as well. Each state has its own sales tax laws and requirements, so it is important to research the rules for each state where you have nexus.

Streamlined Sales and Use Tax Agreement

Michigan is a member of the Streamlined Sales and Use Tax Agreement (SSUTA), which is an effort to simplify and standardize sales tax collection across multiple states. Under the SSUTA, businesses can register to collect and remit sales tax in multiple states through a central registration system. The SSUTA also provides for certain uniform definitions and rules across participating states.

Conclusion

In summary, you can collect sales tax from customers in different states, but you must first determine if you have a sales tax nexus in those states and if you are required to collect sales tax under each state’s sales tax laws. It is important to stay up-to-date on the sales tax laws in each state where you do business to ensure compliance. Additionally, Michigan is a member of the SSUTA, which provides for simplified sales tax collection across multiple states.

Jurisdiction

Michigan

• General