If you're a Michigander, you're familiar with the state sales tax – a flat 6 percent rate on almost everything you buy at retail. This includes household sundries that you typically find at a grocery store, but the state exempts sales tax on food and prescription drugs. Some organizations are exempt from sales tax, and the IRS offers a deduction you can take for the payment of sales tax.
While Michigan does not tax most food or prescription drugs, foods prepared for immediate consumption are not exempt.
Food Tax in Michigan
Michigan requires any business entity that sells tangible property to charge sales tax at the rate of 6 percent of the purchase price, and remit collected taxes to the state. The state exempts sale tax on food, prescription drugs, and magazines. There is no exemption for household items such as cleaners, flatware or cooking equipment that you might find at the store. The state reserves the right to impose a sales tax on food prepared for immediate consumption, such as food purchased from a vending machine or a deli. Michigan sets a lower rate of 4 percent sales tax on home heating fuels.
Retailers remit collected sales tax to the Michigan Department of Treasury. The state does not allow local authorities, such as a city or county, to levy additional sales taxes. Anyone required to collect sales tax needs a sales tax license, which retailers apply for with Form 518, Registration for Michigan Taxes.
Exemptions to the Rules
Michigan imposes sales tax only on the final user. This means other buyers may claim an exemption; for example, a wholesaler purchasing an item for eventual resale need not pay sales tax. Items intended for agricultural use or for use in industrial processing are also exempt. A non-profit group such as a church, school or hospital may also claim an exemption, as may any organization with 501(c)(3) or 501(c)(4) non-profit, tax-exempt status with the IRS. To claim an exemption, you must present an exemption certificate at the point of purchase. Michigan does not issue tax-exempt numbers.
Federal Tax Deduction
The IRS allows Michiganders, and all other U.S. taxpayers, to deduct either state sales taxes or state income taxes, as long as the taxpayer itemizes deductions on Schedule A of IRS Form 1040. If you choose to deduct sales taxes, you must keep your receipts, or use a sales tax calculator that the IRS offers online. If you are filing a married, separate return, both spouses must choose the same method of deducting expenses: a standard deduction on Form 1040 or itemized deductions calculated on Schedule A. For 2019, the IRS has updated the Form 1040 to a shorter version which will replace the current Form 1040, 1040A and 1040EZ.
- Department of Treasury: Michigan Taxes
- Michigan Sales and Use Tax Certificate of Exemption
- IRS: Sales Tax Deduction Calculator
- IRS Working on a New Form 1040
- National Conference of State Legislatures. "Remote Sales Tax Collection." Accessed March 22, 2020.
- Mass.gov. "830 CMR 64H.6.7: Out-of-State Sales and Deliveries." Accessed March 22, 2020.
- California Department of Tax and Fee Administration. "Sales & Use Tax in California." Accessed March 22, 2020.
- California Department of Tax and Fee Administration. "Regulation 1620. Interstate and Foreign Commerce." Accessed March 22, 2020.
- Washington State Department of Revenue. "Destination-Based Sales Tax." Accessed March 22, 2020.
- Michigan Department of Treasury. "FAQs for Sales and Use Tax." Accessed March 22, 2020.
- IRS. "Publication 334 (2019), Tax Guide for Small Business (For Individuals Who Use Schedule C): For Use in Preparing 2019 Returns," Page 25. Accessed March 22, 2020.
- Illinois Revenue. "Collections Process." Accessed March 22, 2020.
Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.