Use Tax

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 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 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.