You may owe Use Tax (Sales Tax by another name) on those online purchases!

Nov. 17, 2017

Michiganders purchasing holiday gifts from online retailers can conveniently pay their outstanding use tax when filing their annual Michigan Individual Income Tax Return, according to the Michigan Department of Treasury.

Michigan’s use tax generally applies to purchases made when a retailer does not collect sales tax. This often happens when individuals purchase items through online or mail-order retailers or television shopping networks without physical locations inside the state of Michigan.

“With the kick-off of the holiday shopping season happening after Thanksgiving Day, be sure to check if you are being charged sales tax when you purchase items online,” said Deputy State Treasurer Glenn White, head of Treasury’s Tax Administration Group. “If the online retailer doesn’t charge sales tax, state law requires you to keep a running total and pay your outstanding use tax when you file your annual state income tax return.”

Taxpayers paid millions of dollars in use tax through their state income tax return this filing year, helping fund schools and local police and fire departments. Most of the dollars collected from taxpayers through the use tax go to the School Aid Fund, General Fund and to the Local Community Stabilization Authority

The use tax is calculated at the rate of 6 percent of the total purchase. Items subject to use tax include appliances, books, clothing, computers, DVDs, CDs, electronics, furniture, pre-written computer software and tobacco products.

Taxpayers can report their total outstanding use tax annually when filing their Michigan Individual Income Tax Return between January and April.