Proposed Legislation Designed to Capture Michigan Tax on Internet Sales
Senate Bill 658 (Sales Tax) and Senate Bill 659 (Use Tax) have been introduced in the Michigan Senate. They would, if enacted, add affiliate and click-through nexus provisions to the sales and use tax acts.
The legislation would provide that a seller is presumed to be engaged in business in Michigan if any other person, other than a common carrier, that has substantial nexus with Michigan does any of the following:
- sells a similar line of products as the seller under the same or a similar business name;
- maintains an office, distribution facility, warehouse, storage place, or similar place of business in Michigan to facilitate the delivery of tangible personal property sold by the seller to customers in the state;
- uses trademarks, service marks, or trade names in the state that are the same or substantially similar to those used by the seller;
- delivers, installs, assembles, or performs maintenance or repair services for the seller’s customers in Michigan;
- facilitates the seller’s delivery of property to customers by allowing the seller’s customers in the state to pick up tangible personal property sold by the seller at an office, distribution facility, warehouse, storage place, or similar place of business maintained by the person in the state; or
- conducts any other activities in the state that are significantly associated with the seller’s ability to establish and maintain a market in the state.
A seller would also be presumed to be engaged in the business of making retail sales in Michigan if any "affiliated person" has substantial nexus with the state.
The presumption may be rebutted by demonstrating that activities of the other person or affiliated person were not significantly associated with the seller’s ability to establish or maintain a market in Michigan.
The legislation would also provide that a seller is presumed to be engaged in business in Michigan if the seller enters into an agreement with one or more other persons under which the person, for a commission or other consideration, directly or indirectly, refers potential customers, by a link on an Internet website, in-person oral presentation, or otherwise, to the seller. The presumption requires that the cumulative gross receipts from sales by the seller to customers in this state who are referred to the seller be greater than $10,000 during the immediately preceding 12 months.
The presumption may be rebutted by demonstrating that the persons with whom the seller had agreements did not engage in activities that were significantly associated with the seller’s ability to establish or maintain a market in Michigan.