By Gloria M. Chon & Christopher R. Martella

‘Twas the night before October 1st, 2015 and all through the State, local retailers and tax officials were all snug in their beds, anxiously awaiting that special October date.  For when they awoke the very next day; there would be a new way to collect the sales tax we pay.  On that fateful day in October those of us who regularly shop on websites like Amazon, Wayfair, or Overstock noticed something new had snuck into our carts … Michigan’s 6% sales tax!  The Michigan Main Street Fairness Act (the “Act”), State Bills 658 and 659, came into effect on October 1, 2015 in an effort to level the playing field between local business and remote sellers of goods, along with raising approximately $50 Million in additional sales and use tax revenue.  The Act did two very fundamental things: i) changed the definition of a “remote seller” and ii) shifted the responsibility of remitting sales tax.

Prior to the Act, a retailer would only have to charge sales tax if they had a physical presence within the state.  Companies like Amazon or that shipped goods to Michigan residents from warehouses outside Michigan were considered remote sellers and relied on the purchaser to submit the sales tax.  However, Michigan legislators decided not to rely on this self-reporting method any longer.  In order to simplify and ensure the collection of sales tax on purchases made through internet retailers, the Act shifted the responsibly to online retailers to collect and remit sales tax.  This is expected to impact  businesses that, among other things: i) maintains a warehouse within Michigan, ii) delivers, installs, assembles or performs maintenance and repair services within Michigan or iii) conducts any other activities within Michigan that are significantly associated with the remote seller’s ability to establish and maintain a market in Michigan.  No longer are internet businesses that simply ship goods to Michiganians without a physical presence in the State exempt from collecting sales tax.

Taxing online activities is a growing area of the law.  With the rise of Airbnb, HomeAway, VRBO, Uber and the “sharing economy,” the way we buy and sell goods and services is changing.  As we increase our use of the internet, we can expect local, state and federal taxing authorities to constantly revise how and what types of transactions they tax.

For further information regarding these matters, please contact Ms. Chon or Mr. Martella at 248.528.1111 or via email.