Michigan exemptions: good faith requirement eliminated

The Michigan Department of Revenue must be able to verify that all sales and use tax exemptions claimed in Michigan are valid. Unless an exemption is properly documented, a seller could be liable for the uncollected sales tax.

Good faith

For exempt transactions occurring prior to June 29, 2000, a taxpayer is not liable for an exempt transaction later found to be taxable, so long as the taxpayer “exercised reasonable care and effort to determine that the purchaser was entitled to the exemption being claimed.”

For exempt transactions occurring between June 29, 2000 and June 9, 2009, a seller is not liable for an exempt transaction later found to be taxable, so long as the seller obtains a properly completed exemption certificate from the purchaser. See RAB 2002-15 for additional details.

For transactions occurring since January 9, 2009, a taxpayer is not liable for sales or use tax on a transaction later found to be taxable, provided the seller receives a valid exemption certificate from the buyer. To be valid, the certificate must contain the following information:

• Purchaser’s identification (name and address)
• Exemption type (reason the purchaser is claiming the exemption)
• Any other relevant information (e.g., the purchaser’s sales tax license if the item purchased is for resale) or additional requirements

The Michigan Department of Revenue accepts the following as proof that a transaction is exempt:

• Michigan Sales and Use Tax Certificate of Exemption (Form 3372)
• Multistate Tax Commission Uniform Sales and Use Tax Certificate
• Streamlined Sales and Use Tax Agreement Certificate of Exemption
• Any exemption certificate format contained in a current sales and use tax administrative rule
• A purchase order issued by the purchaser meeting the requirements set forth in Revenue Administrative Bulletin 2016-14
• The required statutory information in another format (e.g., a signed letter on the purchaser’s letterhead)

Additional information, including seller recordkeeping requirements, is available in RAB 2016-14.

Sales tax software-as-a-service (SaaS) enables businesses to easily manage exempt transaction documentation. Learn more.

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