The idea of nexus is essential in the world of sales tax. Nexus is the degree of affiliation between a company and a state that entitles the state to demand that the company collect and remit sales tax. Historically, a company’s physical presence in a state, such as operating a store or warehouse, has been used to determine nexus. However, the concept of physical presence has gotten more nuanced with the growth of e-commerce, changing how governments approach sales tax nexus.
The traditional criterion for physical presence was eliminated by the Supreme Court’s decision in South Dakota v. Wayfair in 2018, allowing states to show economic linkage instead. This means that a company may be obligated to collect and submit sales tax even though it has no physical presence in the state if it hits specific sales benchmarks there. Since then, a large number of states have passed economic connection legislation with various sales levels and restrictions.
But some governments have also gone a step farther by enacting legislation governing marketplace facilitators. According to these legislation, online marketplaces like Amazon and Etsy are required to gather and submit sales tax on behalf of their third-party merchants. This assures that sales tax is being collected on all marketplace transactions and relieves individual sellers of the burden of navigating the intricate sales tax regulations of numerous states.
Although the idea of sales tax nexus may appear simple, it can have significant effects on businesses. Heavy fines and penalties may apply if sales tax is not correctly collected and submitted. To maintain compliance and stay out of trouble with the law, businesses must keep abreast of the sales tax regulations in every state where they operate.
Moving on to a related issue, the pink tax refers to the practice of charging women’s products a greater price than those promoted to men. This can apply to products like apparel, toiletries, and even toys. Because it supports gender-based price discrimination and may widen the gender pay gap, the pink tax is viewed as unfair.
As of January 1, 2021, feminine hygiene products, such as tampons and pads, will no longer be subject to Michigan’s sales and use tax. This is a part of a bigger effort to do rid of the “tampon tax,” which is the sales tax on feminine hygiene items that has come under fire for being unfair to women.
A 501(c)(3) nonprofit is a category of tax-exempt organization that the IRS recognizes as being set up and run for charity, religious, educational, scientific, or literary purposes. These organizations are not subject to federal income tax and might also be free from municipal and state taxes.
The amount of income exempt from state income tax in Michigan is referred to as the exemption allowance. The exemption allowed is $4,750 for single filers and $9,500 for married couples filing jointly for the 2021 tax year. Individuals or couples can make up to that amount of money without having to pay any state income taxes. It is crucial to remember that this exemption allowed is subject to change each tax season and should be verified.
A Michigan resale certificate is a form that exempts a registered seller from paying sales tax when purchasing items for resale. It is a declaration that the buyer does not intend to utilize the products they have acquired for personal use, but rather to resell them. The Michigan Department of Treasury issues this certificate to authorized Michigan sellers who want to buy products to resell.