For entrepreneurs evaluating Michigan as a business location in 2026, the tax landscape is a key factor. With a state sales tax of 6% and potential local additions of up to 0%, the combined rate can reach 6.00%.
Economic Nexus in Michigan
Remote sellers must collect Michigan sales tax if they exceed $100,000 in annual sales or 200 transactions within the state. This threshold has been in effect since 2019-10-01. Marketplace facilitators like Amazon and Etsy are also required to collect and remit tax on behalf of third-party sellers. The Michigan Department of Treasury enforces these provisions and provides registration guidance at https://www.michigan.gov/treasury.
LLC Formation in Michigan (2026)
Forming an LLC in Michigan costs $50 for the initial filing. There is no annual franchise tax, keeping ongoing costs low. The annual report fee is $25. Michigan imposes a state income tax, which affects pass-through LLC taxation.
The process involves filing Articles of Organization with the Secretary of State, obtaining a federal EIN, and registering for applicable state tax accounts. You will also need a sales tax permit from the Michigan Department of Treasury.
Key Tax Rules
• Michigan has a flat 6% state sales tax with no local additions.
• The uniform rate applies statewide, simplifying compliance.
• Groceries and prescription drugs are exempt.
• Economic nexus: $100,000 in sales or 200 transactions.
Sales Tax Exemptions
The following categories are generally exempt from sales tax in Michigan: groceries, prescription drugs, medical devices. Businesses should maintain proper documentation for exempt transactions.