Michigan Click-through Nexus Law Goes Online in October
- Sales Tax
- Sep 20, 2015 | Laura McCamy
Like many other states, Michigan has recognized that it is losing sales tax revenue to Internet sales. Starting October 1, 2015, the Michigan Department of Treasury will begin requiring online sellers with nexus in the state to remit sales tax under new conditions.
Nexus in Michigan
Nexus is defined as a physical business presence in a particular state. It is most commonly triggered by having a business headquartered at a location in a state. However, you don’t need an office in Michigan to create nexus. Other conditions, such as a salesperson, a drop-ship location, or a warehouse in the state, can give you nexus in Michigan.
If it turns out you have nexus, you will have to get a Michigan sales tax license and remit sales taxes on your taxable sales to Michigan residents.
If your only physical presence in the state is limited to vending at events a couple of times per year, you can still avoid the necessity of getting a Michigan sales tax license and filling out a bunch of blank tax returns. Michigan has a Concessionaire’s Sales Tax Return and Payment form you can use to report and pay the state sales taxes you collected on your sales at the event. Note that you are required to remit payment within three days after the event to avoid interest and penalties.
To add an extra wrinkle to the Michigan sales tax picture, the state’s new sales tax law includes click-through nexus. Click-through nexus means you can have nexus if you receive sales through links from a company that has nexus in Michigan.
For example, you run a company selling yarn you make from your herd of alpacas on your farm in Idaho. You have an agreement with a yarn store based in Ann Arbor. The yarn store’s website lets customers click through to your site and, every time one of those click-throughs turns into a purchase, you give the yarn store a small commission on the sale. Bang--you have click-through nexus in Michigan.
The good news for smaller online sellers is that click-through nexus only kicks in once your referral sales from Michigan-based businesses or websites exceed $10,000 per year. Online sellers with affiliate agreements in Michigan should carefully track their click-through sales to make sure they don’t cross the $10,000 threshold unknowingly.
Michigan is just the latest state to adopt click-through nexus on Internet sales. New York, New Jersey, Pennsylvania, California, Tennessee, and several other states have already adopted similar click-through nexus laws.
Remitting Michigan Sales Taxes
The good news about Michigan is that it has one sales tax rate (six percent) for the whole state, so you don’t have to worry about a patchwork of local sales tax rates. To register for a Michigan sales tax license, visit the state government’s sales and use tax page. Remitting Michigan sales tax can be handled quickly and easily via Avalara TrustFile.