Tax Law Blog
Are you an out-of-state business making Internet sales into Michigan? If so, take notice.
The Michigan Main Street Fairness Act (the “Act”) is now effective. Designed to level the playing field between “brick and mortar” retailers and out-of-state Internet sellers, the Act creates two new tests whereby out-of-state sellers are presumed to have Michigan nexus.
A quick reminder – if an out-of-state seller has Michigan nexus, then it is required to collect and remit 6 percent Michigan sales tax on all sales to Michigan residents.
Test #1 is the affiliate nexus test. Under the affiliate nexus test, an out-of-state retailer will be presumed to have Michigan nexus (i.e., required to collect and remit 6 percent Michigan sales tax on all Michigan sales) if the seller or an affiliate of the seller:
- sells a similar line of products as the seller and does so under the same business name as the seller or a similar business name as the seller
- uses its employees, agents, representatives, or independent contractors within Michigan to promote or facilitate sales to Michigan purchasers
- maintains, occupies, or uses an office, distribution facility, warehouse, storage place, or similar place of business in Michigan to facilitate the delivery or sale of products sold to Michigan purchasers
- uses, with the seller’s consent or knowledge, trademarks, service marks, or trade names in Michigan that are the same or substantially similar to those used by the seller
- delivers, installs, assembles, or performs maintenance or repair services for the seller’s Michigan purchasers
- facilitates the sale of products to Michigan purchasers by allowing the seller’s Michigan purchasers to pick up or return products sold by the seller at an office, distribution facility, warehouse, storage place, or similar place of business maintained by that person in Michigan
- shares management, business systems, business practices, or employees with the seller
- conducts any other activities in Michigan that are significantly associated with the seller’s ability to establish and maintain a market in Michigan for the seller’s sales of product to Michigan purchasers
Test #2 is the “click-through” nexus test. Under the “click-through” nexus test, an out-of-state seller is presumed to have Michigan nexus if the seller enters into an agreement with a Michigan resident whereby the resident, for a commission, refers potential purchasers, whether by a link on an Internet website or otherwise, to the seller, if all of the following conditions are satisfied:
- the cumulative gross receipts from sales by the seller to purchasers in Michigan who are referred to the seller by Michigan residents with an agreement with the seller are greater than $10,000 during the immediately preceding 12 months
- the sellers total cumulative gross receipts from sales to purchasers in Michigan exceed $50,000 during the immediately preceding 12 months
If you have questions about Michigan sales taxes, including nexus issues, please contact Nick Oertel.
Shareholder and Firm TreasurerNicholas focuses his practice in the areas of Michigan non-property tax disputes, business entity selection, corporate transactions, and information technology.
