A recent report from the MacKinac Center for Public Policy offers Michigan lawmakers suggestions on how they can modify tax laws to implement new taxation standards set forth by the U.S. Supreme Court’s ruling in South Dakota v. Wayfair last June.
The ruling states businesses no longer need to have physical presence in the state in order to be subjected to the collection and remittance of sales taxes.
Increasing nexus thresholds is one recommendation made in the report.
“The first improvement Michigan policymakers could make to their economic nexus legislation would be to scale up the nexus thresholds it uses in order to avoid targeting small businesses without the means to adjust to this new compliance burden,” the report states. “The internet has been an effective tool for small businesses to reach the same markets as large corporate retailers, and Michigan should not be derail this great equalizer in the name of a small amount of added revenue.”
Another recommendation relates to having economic nexus standards apply only to sales tax collection on remote sales.
“[It] should not be construed to weaken nexus requirements already in statute for business income tax or individual income tax collection,” the report states. “Legislators should also distinguish between tax-exempt and non-tax-exempt sales for the purposes of threshold requirements, so that wholesale suppliers with no taxable sales are not required to report to the state.”
Other recommendations include clarifying that remote retailers will be protected from aggressive tax collection and audit procedures in the event of unintentional errors, and ensuring states meet certain standards before being allowed to go forward with collection efforts on Michigan businesses.
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