Graves & Company, P.C.
Use Tax Information
The State of Michigan wants a pound of your flesh!
The State of Michigan estimated there was $170 million
of uncollected Use Taxes in one year alone. How will
they get it from you? They added a line to your Michigan 1040
to collect this tax! What will it be used for? Schools
(K-12), local and state services such as libraries, fire
departments, road improvements, higher education, public
protection services and Michigan's retailers will all benefit
from approximately $2 million dollars in collected tax.
Use Tax has been on the books since the 1930's but is now
receiving plenty of attention because of internet sales. The
tax applies to purchases made outside the state on things
such as computer equipment, clothing, jewelry, those hard to
find items - anything tangible. Basically, if you buy
something through the internet or by catalog and don't pay
sales tax, then the 6 (six) percent Use Tax is due. Every
state with a sales tax has a companion tax for purchases made
outside the state. In Michigan, that tax is called the "Use
Tax" but might be described more accurately as a remote sales
tax. As a general rule, you owe this tax if you purchased
merchandise and did not pay sales tax of 6 percent. Typically
this happens when you purchase an item (for example,
clothing, books, furniture, computers) by telephone, catalog,
internet, or in person from an out-of-state business that
does not add sales tax to your bill.
The State says, "If no Use Tax is shown on your
Michigan 1040, chances are you will get a letter to verify no
liability." Here are your options:
1. Check the box on your Michigan return showing no Use
Tax liability
and wait to see if you get a
letter.
2. List all single purchases over $1,000 in 2003 on a
workpaper and
multiply by 6 (six) percent. Again,
check the new charts for changes
in limits for 2004.
3. If the chart amount seems to high, calculate the
actual Use Tax.
If we don't get a Use Tax figure from you, we will assume
there is no tax due. To find out more about the Use Tax,
review the attached information. You can also visit the State
of Michigan website at www.michigan.gov/treasury for more
information.
We are not
recommending you pay more tax than you owe, but we want you
to be aware of this matter so you can decide for yourself how
you want to handle any Use Tax due.
Please check the newest available chart at www.michigan.gov/treasury
to verify limits and tax amounts.
Please note that using the Use Tax Table to estimate your
taxes does not preclude the Michigan Department of Treasury
from auditing your account. If it is determined that
additional tax is due, you may receive an assessment for the
amount of the tax owed, plus applicable penalty and interest.