Published in Economic Development

New state law requires online retailers to collect Michigan taxes

BY Sunday, December 15, 2019 08:34pm

Online retail websites now have to collect and pay state sales taxes on consumer purchases in Michigan.

Gov. Gretchen Whitmer on Thursday signed legislation requiring sales tax collections by online platforms such as Amazon and eBay. The laws fix a loophole that allowed organizations to forgo tax collection on transactions by sellers who use a third party’s platform.

Michigan Retailers Association President and CEO Bill Hallan COURTESY PHOTO

“These are important bills that will result in significant improvements in state sales tax and use tax collections from retailers who sell their products through online marketplaces such as Wayfair, Overstock, and Amazon,” Gov. Whitmer wrote in a letter informing legislators she had signed the bills.

Michigan retailers had been pushing for the legislation, arguing that the loophole gave online sellers and unfair advantage in the market. The four-bill package would require a so-called “marketplace facilitator” to collect and remit sales taxes to the state.

The law applies to sellers whose gross receipts from sales exceeded $100,000 in the previous calendar year or if they had 200 or more separate transactions in the state.

“These new laws are not an online sales tax, but a fair application of the state’s tax laws,” Michigan Retailers Association President and CEO Bill Hallan said in a statement. “Our retailers — who employ our neighbors, pay taxes and contribute to local charities — have been at a disadvantage compared to online, out-of-state sellers.”

The legislation codifies into state law the guidance issued by the Michigan Department of Treasury in the wake of a June 2018 U.S. Supreme Court decision. The decision issued in a South Dakota case gave states greater ability to collect sales taxes from online sellers.

The ruling established that states can require online retailers to collect and remit sales taxes on purchases if they have an “economic presence” in the state. Sellers previously needed to have a physical presence in a state to be forced to collect and remit sales taxes.

Two of the bills in the state House give the rules the force of law, although based on transactions in the previous calendar year rather than on a rolling 12-month window that’s currently used. The other bill would extend the same legal requirements to so-called online “marketplace facilitators,” or platforms such as Amazon and eBay that sell a third party’s products.

The new law should generate an estimated $60 million in sales tax revenue for the state in the present fiscal year and $96 million in the 2021 fiscal year.

The legislation, which passed by the state House and Senate by unanimous votes, included a ban on class-action lawsuits against marketplace facilitators related to the overpayment of sales and uses taxes. In her letter to legislators, Gov. Whitmer called that part of the bills “an anti-consumer provision that could allow online operators to overcharge Michiganders under the guise of collecting sales tax by depriving consumers of an effective remedy.”

“Michigan has some of the weakest consumer laws in the United States and the Legislature must take action to strengthen protections. The Legislature also should also assume I will not support future laws that contain these types of anti-consumer provisions,” Whitmer said in a statement.

Read 2731 times Last modified on Monday, 16 December 2019 10:12
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