LANSING – Out-of-state retailers that maintain a website that accepts orders from Michigan residents could be considered actively soliciting business in the state and could be subject to the new Michigan Business Tax if their sales to state residents exceed $350,000 a year, according to a Revenue Administrative Bulletin issued by the Department of Treasury.
The bulletin, RAB 2007-6, was posted this past Friday, and defines the phrase “actively solicits” in the new MBT. The degree to which a company actively solicits business in the state is one of the two nexus conditions that determine if a business has to pay the tax. The other nexus condition is whether the business maintains a physical presence in the state, and the bulletin does not deal with that condition.
U.S. Supreme Court decisions have held that companies that do mail order in a state are not subject to that state’s sales and use tax collections, but the bulletin said that exemption does not mean a company is necessarily free from other state taxes, such as the MBT.
The bulletin said the department interprets the phrase “actively solicit” to include both “speech or conduct that explicitly or implicitly invites an order” and activities that neither explicitly nor implicitly invite an order but are ancillary to order requests.
“Solicitation is purposeful when it is directed at or intended to reach persons within Michigan or the Michigan market,” the bulletin said. That can include sending catalogs or credit card applications, using email to solicit sales, maintaining a website that takes orders or using telemarketing.
In listing examples of how the definition should be applied, a company that maintains a website that residents of Michigan can make orders through that websites is actively soliciting business. A company that maintains a website where customers can browse its products but not make orders is not actively soliciting in the state, the bulletin said.
This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com
a>>
