First, identify the state where your customer is located. Michigan has reciprocal agreements with several states. If your customer resides in one of these states, you generally do not collect Michigan sales tax on sales to them, even if the sale originates from Michigan.
Consult the official Michigan Department of Treasury website for the most up-to-date list of reciprocal states. This list can change, so regular review is advised. Pay close attention to any exceptions or conditions noted within the agreement for each state.
Next, accurately determine the location of the sale. If your business operates in multiple locations, ensure you correctly attribute the sale to the appropriate physical address for tax purposes. This directly impacts which state’s sales tax rules apply.
Then, examine the specific details of each transaction. Some reciprocal agreements might contain exceptions based on the type of goods or services sold. For example, specific items might be exempt from the reciprocal agreement. Always carefully review your sales documentation for details.
Finally, maintain thorough records of all transactions and your sales tax calculations. The Michigan Department of Treasury may request documentation to verify your compliance. This includes detailed records of customer addresses, product or service information, and sales tax collected (or not collected) along with the rationale.
Remember: While these agreements simplify sales tax collection, careful attention to detail is key for compliance. Non-compliance can result in penalties. If you have questions, seek professional tax advice.
Disclaimer: This information is for guidance only and does not constitute legal or tax advice. Consult with a qualified professional for personalized advice.
