Marketplace facilitators: Prepare to collect Michigan sales tax on third-party sales

Update 12.16.2019: HB 4540, HB 4541, HB 4542, and HB 4543 have been enacted. Together, they require remote retailers and marketplace facilitators to collect and remit Michigan sales or use tax. See the Michigan Department of Treasury for more information about whether a seller should remit sales tax or use tax.

Michigan has required certain remote sellers to collect and remit sales tax since October 1, 2018. Now it’s looking to codify that requirement and expand it to marketplace facilitators.

Michigan Department of Treasury Revenue Administrative Bulletin 2018-16 requires businesses with no physical presence in the state to register with the tax department, collect and remit sales or use tax, and file returns if, in the previous calendar year, the seller has:

• More than $100,000 in taxable or non-taxable sales into the state, or
• At least 200 separate taxable or non-taxable transactions

Both House Bill 4542 and House Bill 4543 would codify that requirement retroactively to October 1, 2018. They would also require remote marketplace facilitators with economic nexus to collect and remit sales tax on their direct and third-party sales. When calculating the threshold, marketplace facilitators and marketplace sellers would both have to include direct sales and marketplace sales. It’s unclear when the obligation for marketplace facilitators would take effect.

There are slight differences between the bills. HB 4542 applies only to sellers of tangible personal property, while HB 4543 applies to sellers of tangible personal property or taxable services. The threshold in HB 4542 is based only on sales to purchasers, while the threshold in HB 4543 is based on sales for storage, use, or consumption in the state.

House Bill 4540 and House Bill 4541 would establish a sales tax collection requirement for marketplace facilitators but wouldn’t codify economic nexus for remote sellers. Both measures would take effect January 1, 2020.

The only difference between the two bills is that HB 4541 explicitly excludes lodging and telecommunications marketplaces from the definition of “marketplace facilitator.”

The legislative analysis provides a summary and comparison of the bills, which were all unanimously approved by the House and Senate and currently sit on Governor Gretchen Whitmore’s desk. If any are enacted as written, marketplace facilitators could need to collect and remit tax on behalf of marketplace sellers as early January 1, 2020.

In addition to Washington, D.C., 43 states have economic nexus and 37 have a sales tax collection requirement for marketplace facilitators. Get the details for each in our state-by-state guide to economic nexus and state-by-state guide to marketplace facilitator laws.