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Online Sales Tax Collection Legislation Passes House

Oct 18, 2019

Online retailers would be required by law to collect sales tax, regardless of whether they are operating inside or outside of Michigan, under a package passed by the House this week.  For years, the practice was that retailers with a nexus in the state had to collect sales tax. However, as online shopping continued to steadily increase and expand over the years, the debate over requiring out-of-state retailers to collect sales tax also increased. In 2018, the United States Supreme Court ruled in the Wayfair decision that states can collect sales tax from businesses, regardless of their physical presence, or lack thereof, in the state. After the ruling, Michigan put that into practice. This legislation seeks to codify that practice into law.

The proposal also extends the practice to third-party sales facilitators, requiring them to collect and remit Michigan’s sales tax from the sellers who sell on their marketplace. The changes apply to retailers with at least $100,000 in annual sales or more than 200 separate transactions. The legislation will be sent to the Senate for consideration.

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