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Michigan exemptions: good faith requirement eliminated


 Only if a seller obtains the proper documentation.

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:

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.

photo credit: BRITISH COLUMBIA 1971 MUNICIPAL EXEMPT plate via photopin (license)


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.