Michigan adopts ‘nexus’ law to collect taxes from online sales

Michigan has become the latest state to try and do more to collect taxes from online sales, a move spurred in part by concerns that Main Street businesses have been put at a competitive disadvantage. According to mlive.comSB 658 and SB 659 extend Michigan’s sales and use taxes to out-of-state companies with a “nexus” or physical presence in the state.
The Michigan Retailers Association pushed for the two bills, saying that online retailers such as Amazon have been getting a “6 percent price advantage” over brick-and-mortar sellers (the state’s sales and use tax rate is 6 percent). In this fiscal year alone, an estimated $444.5 million in taxes from online purchases and other remote sales went uncollected, a Michigan House Fiscal Agency analysis found. But the impact of SB 658 and SB 659 on state revenue will depend in part on the response of large online retailers. Will they, for example, remove their nexus and physical presence in Michigan by eliminating affiliate partners or shutting down warehouses?

According to the Institute for Local Self-Reliance, Amazon already collects sales taxes in about half of the U.S. states, including Indiana, Kansas, Minnesota, North Dakota and Wisconsin. In these states, Amazon has a physical presence (a warehouse or other facility) and/or the legislature has adopted an “affiliate nexus law.”

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