State House Plans First Hearing to Codify Economic Presence Nexus Rules

May 19, 2019

It has been almost one year since the U.S. Supreme Court ruled on the South Dakota V. Wayfair case which dramatically altered long-established nexus standards in place since 1992. With an economic nexus standard deemed constitutional by our nation’s highest court, Michigan is finally codifying the ruling in our state's Sales and Use Tax Acts.

Spurred by a push to expand Michigan's Sales and Use Tax laws to include “marketplace facilitators,” the House Tax Policy Committee plans to take up HBs 4540-3 on May 22nd for testimony only.  

After the Supreme Court ruling in Wayfair, the Michigan Department of Treasury issued Revenue Administrative Bulletin (RAB) 2018-16, titled “Sales and Use Tax Nexus Standards for Remote Sellers." Having the administrative authority to apply the Wayfair ruling to Michigan was deemed allowable. The one piece Michigan's current Sales and Use Tax Acts did not include were marketplace facilitators like Amazon and eBay; the RAB, therefore, excluded some purchase transactions from taxability.

While Amazon sells its own products to consumers, Amazon also allows for the sale of other entity’s products to consumers through its website or “marketplace” by companies across the United States. In the legislative effort to ensure purchases made through marketplace facilitators were taxable, it was decided to also codify RAB 2018-16.

For more information about this proposal, contact Dan Papineau at dpapineau@michamber.com.