All businesses, whether they are online-only businesses, small businesses, or bigger retail chains, cannot legally do business without a seller’s permit in Michigan. So, when you want to open a business in Michigan, you will need to obtain a seller’s permit in Michigan.
What Is a Seller’s Permit in Michigan?
A seller’s permit in Michigan is the same thing as a sales tax license, sales tax registration, or sales tax ID number. You must first obtain your sales tax license from the state before applying for your Michigan sales tax exemption certificate.
What Is a Michigan Sales Tax Exemption Certificate?
A Michigan sales tax exemption certificate is another type of certificate certain businesses will want to obtain if they intend to resell products and goods to their customers. This certificate provides a tax exemption for any items purchased with the intention to be resold to others.
Other Names for a Michigan Sales Tax Exemption Certificate
Some of the other names a sales tax exemption certificate in Michigan can be called include:
- Michigan Wholesale License
- Michigan Wholesale Certificate
- Michigan Reseller’s Permit
- Michigan Reseller’s License
- Michigan Sales and Use Tax Certificate of Exemption
- Michigan Resale Certificate
- Michigan Resale Permit
Who Needs a Michigan Resale Certificate?
Any business that intends to sell products and goods needs a Michigan resale certificate. Without one, sales taxes would be collected twice, first when you purchased the items from your vendors and suppliers, and a second time when you resold them to your customers.
With a wholesale license in Michigan, you do not pay sales taxes to your suppliers and vendors for your inventory items. Instead, sales taxes are only collected when you resell the items to your customers.
Do Michigan Resale Certificates Expire?
A Michigan resale certificate is valid for four years from the issue date. So, if you want to continue to avoid paying sales taxes on your inventory goods and products, you need to apply for a new Michigan sales and use tax certificate of exemption.
How Do I Use My Wholesale License in Michigan?
Once you obtain your Michigan resale license, you present a copy of it to your vendors and suppliers. Any items you are purchasing for your inventory are tax-exempt, and you only pay the pre-tax price.
In addition, they will retain the copy on file for their own records. It is the responsibility of the seller to review the resale certificate to ensure it is valid and filled out correctly.
Are All Sellers Required to Accept My Wholesale Certificate?
It is generally accepted that a part of doing business with other retailers is to accept their wholesale certificates. However, a business is not required to accept one and can decline to accept it.
Should that occur, then you will pay sales taxes on your inventory items. However, when you submit the sales tax payments from the sales taxes you have collected, you are allowed to deduct any sales taxes you paid out of your pocket on your inventory items—although you do need to keep your receipts showing where you paid the sales taxes and provide them if requested.
How Do I Accept a Michigan Sales Tax Exemption Certificate?
You verify the certificate is valid, and it shows the purchaser’s seller’s permit number. You also need to keep the certificate on file until it expires. Then you waive sales taxes on any items the business intends to resell.
Furthermore, it is up to you to determine which items qualify for tax exemptions and which ones do not. For example, a beauty salon owner purchases shampoo and conditioner they intend to resell and buys nail polish they intend to use as part of their nail services.
In this example, you would give a tax exemption on the shampoo and conditioner. However, a tax exemption would not be provided on the nail polish since the business owner would use it as part of their day-to-day operations.
Can I Use My Michigan Wholesale License Out-of-State?
Yes, you can use your Michigan wholesale license in most other states to obtain a sales tax exemption on your inventory items. However, there are 10 states that will not accept an out-of-state resale certificate, including Illinois.
So, if you intend to purchase goods from vendors and suppliers in Illinois and do not want to pay sales taxes, you’ll need to obtain an Illinois wholesale license first.