Michigan Sales and Use Tax Protest

MICHIGAN SALES AND USE TAX PROTEST AND REFUND CLAIM

TABLE OF CONTENTS

1. Cover Letter to Hearings Division
2. Identification of Notice and Taxpayer
3. Statement of Protest / Refund Claim
4. Audit Period and Assessment Detail
5. Statement of Facts
6. Legal Argument — General Sales Tax Act
7. Legal Argument — Use Tax Act
8. Legal Argument — Wayfair / Economic Nexus
9. Refund Claim Under MCL § 205.30
10. Specific Items in Dispute and Exhibits
11. Payment of Uncontested Portion
12. Request for Informal Conference
13. Reservation of Rights — Tribunal vs. Court of Claims
14. Verification and Signature
15. Certificate of Service / Mailing
16. Michigan Sales/Use Tax Practice Notes
17. Sources and References

1. COVER LETTER TO HEARINGS DIVISION

[DATE — must be within 60 days of Notice of Intent to Assess]

Michigan Department of Treasury

Hearings Division

P.O. Box 30038

Lansing, MI 48909

Via U.S. Certified Mail, Return Receipt Requested, and Facsimile to (517) 636-4115

Re: PROTEST AND REQUEST FOR INFORMAL CONFERENCE — SALES AND USE TAX

Taxpayer: [TAXPAYER LEGAL NAME]

FEIN / SUW Account: [NUMBER]

Notice Number: [NUMBER]

Tax Type(s): ☐ Sales Tax (MCL § 205.51) ☐ Use Tax (MCL § 205.91) ☐ Both

Tax Periods: [FROM] through [TO]

Dear Hearings Officer:

Pursuant to MCL § 205.21(2)(a), Taxpayer hereby protests in whole or in part the proposed deficiency described in the Notice of Intent to Assess dated [DATE] and respectfully requests an informal conference. Enclosed are: (i) Form 5713; (ii) a copy of the Notice; (iii) this Statement of Protest; (iv) supporting exhibits; and (v) payment of the uncontested portion required by MCL § 205.21(2)(b) and § 205.22(2).

Sincerely,

[________________________________]

[TAXPAYER OR AUTHORIZED REPRESENTATIVE]

2. IDENTIFICATION OF NOTICE AND TAXPAYER

3. STATEMENT OF PROTEST / REFUND CLAIM

3.1. Taxpayer protests in whole or in part the proposed deficiency in sales and/or use tax described in the Notice of Intent to Assess and/or asserts a claim for refund pursuant to MCL § 205.30.

3.2. This protest is timely filed within sixty (60) days of receipt of the Notice as required by MCL § 205.21(2)(a).

3.3. Any refund claim asserted herein is timely under MCL § 205.30 and § 205.27a(2) (within four years of the later of the return's due date or filing date).

3.4. Taxpayer reserves all rights under the Michigan Constitution, the Commerce Clause and Due Process Clauses of the U.S. Constitution, and the Michigan Revenue Act.

4. AUDIT PERIOD AND ASSESSMENT DETAIL

Audit methodology used by Treasury: ☐ Detailed transaction review ☐ Block sample ☐ Statistical sample ☐ Markup analysis ☐ Bank deposit reconstruction ☐ Other: [DESCRIBE].

5. STATEMENT OF FACTS

5.1. Taxpayer [describe business: e.g., is a Michigan-domiciled retailer / a Delaware-formed remote seller with no physical presence in Michigan / a marketplace facilitator under MCL § 205.52c].

5.2. During the audit period, Taxpayer's Michigan-sourced sales totaled $[AMOUNT] comprising [NUMBER] transactions to Michigan purchasers.

5.3. Taxpayer [did / did not] maintain physical presence in Michigan during the audit period. Specifically, [describe inventory locations, employees, agents, FBA fulfillment, click-through arrangements, and any other contacts].

5.4. The proposed deficiency arises from [summarize: disallowed exemption certificates / unsupported resale claims / nexus determination / sourcing dispute / taxability of services bundled with tangible personal property / use tax on out-of-state purchases / accelerated depreciation].

5.5. Taxpayer maintained the records required by MCL § 205.27a and Mich. Admin. Code R 205.4103 through R 205.4111.

6. LEGAL ARGUMENT — GENERAL SALES TAX ACT

6.1. Imposition. The Michigan sales tax under MCL § 205.52 is imposed on sellers, not purchasers, on gross proceeds from retail sales of tangible personal property at retail in Michigan, at the rate of 6%. The tax burden is on the seller; statutory shifting to purchasers via collection is permitted but the legal incidence remains on the seller.

6.2. Issue 1 — [SHORT TITLE, e.g., Resale Exemption]. Pursuant to MCL § 205.54a(1)(b) and Mich. Admin. Code R 205.74, a sale for resale is exempt when supported by a properly completed Form 3372 (Michigan Sales and Use Tax Certificate of Exemption) accepted in good faith. Taxpayer obtained valid Form 3372 certificates from the purchasers identified in Exhibit [A]. The Department's disallowance based on [basis] is contrary to Andrie Inc. v. Department of Treasury, 496 Mich. 161 (2014).

6.3. Issue 2 — [SHORT TITLE, e.g., Industrial Processing Exemption]. The industrial processing exemption under MCL § 205.54t exempts machinery and equipment used in industrial processing. Taxpayer's purchases qualify because [apply facts to MCL § 205.54t and Mich. Admin. Code R 205.90].

6.4. Issue 3 — [SHORT TITLE, e.g., Bundled Transactions / Taxable vs. Non-Taxable Services]. Under MCL § 205.52d, the sale of tangible personal property bundled with a non-taxable service is not subject to sales tax where the service is the predominant element of the transaction. [Apply.]

6.5. Penalty abatement. Pursuant to MCL § 205.23(3) and the reasonable-cause standard, no penalty should be assessed because Taxpayer [acted in good faith on documented exemption certificates / relied on professional advice / acted reasonably in light of unsettled law].

7. LEGAL ARGUMENT — USE TAX ACT

7.1. Imposition. The Michigan use tax under MCL § 205.93 is imposed on the privilege of using, storing, or consuming tangible personal property in Michigan at a rate of 6%. The use tax is complementary to the sales tax and provides a credit for sales tax paid to another state under MCL § 205.94(1)(s).

7.2. Issue 1 — Out-of-state purchase exemption. [Apply MCL § 205.94 exemptions, e.g., motor vehicles, aircraft, services not subject to use tax].

7.3. Issue 2 — Non-taxable service. Use tax is not imposed on services unless specifically enumerated. [Apply MCL § 205.93a (telecommunications), § 205.93b (mobile telecommunications), or other relevant provisions].

7.4. Issue 3 — Constitutional limits. Imposition of use tax beyond the limits of the Commerce Clause is invalid under Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), and South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).

8. LEGAL ARGUMENT — WAYFAIR / ECONOMIC NEXUS

8.1. Threshold standard. Following South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), Michigan adopted economic nexus standards via Revenue Administrative Bulletin 2018-16 (effective October 1, 2018), later codified at MCL § 205.52b: a remote seller has substantial nexus if, in the previous calendar year, the seller had either:

• Gross sales exceeding $100,000 to Michigan purchasers; OR
• 200 or more separate transactions with Michigan purchasers.

8.2. Marketplace facilitators. Under MCL § 205.52c (effective January 1, 2020), marketplace facilitators are required to collect and remit Michigan sales/use tax on facilitated sales when their aggregate Michigan facilitated sales meet the same $100,000 / 200-transaction thresholds. RAB 2021-22 elaborates collection responsibility allocation between facilitator and marketplace seller.

8.3. Application to Taxpayer.

• Pre-October 1, 2018. Per RAB 2018-16, no liability attaches to remote sellers for periods on or before September 30, 2018 based on economic nexus alone.
• Calendar year [YEAR]. Taxpayer's Michigan-destination sales totaled $[AMT] comprising [NUMBER] transactions. [Argue that thresholds were not met / that thresholds were met only in part of the audit period / that Department incorrectly counted exempt or wholesale transactions toward the 200-transaction prong].
• Marketplace facilitator allocation. [If applicable: Taxpayer is a marketplace seller whose Michigan sales were facilitated by [PLATFORM NAME], a registered marketplace facilitator that collected and remitted the tax. Taxpayer is not liable for tax on facilitated sales per MCL § 205.52c and RAB 2021-22.]

8.4. Constitutional safe harbor. Wayfair preserves Commerce Clause protections against:

• Retroactive collection obligations (RAB 2018-16 expressly disclaims pre-October 1, 2018 liability);
• Discriminatory or unduly burdensome regimes that fail the four-prong Complete Auto test;
• Application to sellers whose connections to the state are isolated or de minimis.

9. REFUND CLAIM UNDER MCL § 205.30

9.1. To the extent Taxpayer has overpaid sales or use tax for the periods identified herein, Taxpayer requests refund pursuant to MCL § 205.30 in the amount of $[AMT], plus interest at the rate prescribed by MCL § 205.23 commencing 45 days after the date this claim is filed.

9.2. Refund Computation:

9.3. Limitations. This refund claim is timely under MCL § 205.30(2) and § 205.27a(2), being within four (4) years of the later of the original return due date or the date the return was filed.

9.4. Deemed denial. If the Department fails to act on this refund claim within one (1) year of receipt, Taxpayer elects to treat the claim as denied pursuant to MCL § 205.30(2) and to preserve appeal rights to the Tax Tribunal or Court of Claims under MCL § 205.22.

9.5. If the underlying tax was collected from purchasers, Taxpayer represents that [refunds will be / have been] issued to those purchasers as required to avoid unjust enrichment, consistent with General Motors Corp. v. Department of Treasury, 466 Mich. 231 (2002).

10. SPECIFIC ITEMS IN DISPUTE AND EXHIBITS

Exhibits:

• ☐ Exhibit A — Form 3372 exemption certificates
• ☐ Exhibit B — Sales journals and Michigan-destination transaction list
• ☐ Exhibit C — Marketplace facilitator collection statements
• ☐ Exhibit D — Auditor's sample plan and projection workpapers
• ☐ Exhibit E — Federal RAR / Form 4549 (if applicable)
• ☐ Exhibit F — Receipts for use tax paid to other states (credit under MCL § 205.94(1)(s))

11. PAYMENT OF UNCONTESTED PORTION

11.1. Pursuant to MCL § 205.21(2)(b) and § 205.22(2), Taxpayer tenders payment of the uncontested portion of the proposed assessment in the amount of $[AMT] by [check / EFT / Michigan Treasury Online (MTO)].

11.2. [Check / Confirmation Number: ____________________]

11.3. This payment is made under protest as to any portion later determined to be in excess of the legally correct liability and without prejudice to any refund right under MCL § 205.30.

11.4. Fradco, Inc. v. Department of Treasury, 495 Mich. 104 (2014), is acknowledged: failure to pay the uncontested portion is jurisdictional and divests the appellate forum of authority.

12. REQUEST FOR INFORMAL CONFERENCE

12.1. Taxpayer requests an informal conference under MCL § 205.21(2)(c) at a mutually agreeable time, with not less than twenty (20) days' written notice per MCL § 205.21(2)(d).

12.2. Format requested: ☐ In-person (Lansing) ☐ Telephonic ☐ Video conference ☐ Decision on the written record.

12.3. Taxpayer requests issuance of a written Decision and Order of Determination addressing each contested item by issue.

13. RESERVATION OF RIGHTS — TRIBUNAL vs. COURT OF CLAIMS

13.1. Taxpayer expressly reserves the right to appeal any Final Assessment to:

• The Michigan Tax Tribunal under MCL § 205.22(1) and MCL § 205.735a within thirty-five (35) days of issuance; OR
• The Michigan Court of Claims under MCL § 205.22(1) within ninety (90) days of issuance.

13.2. The two appellate routes are mutually exclusive for the same assessment. Taxpayer will elect a forum after evaluating the strategic factors set out in Section 16.

13.3. Nothing in this protest constitutes an admission of liability or waiver of any defense.

14. VERIFICATION AND SIGNATURE

I, [TAXPAYER OR AUTHORIZED OFFICER NAME], declare under penalty of perjury under the laws of the State of Michigan that I have examined this Protest and Refund Claim, including any accompanying schedules, exhibits, and statements, and to the best of my knowledge and belief the information stated is true, correct, and complete.

Date: [__/__/____]

[________________________________]

[SIGNATURE]

[PRINTED NAME]

[TITLE]

15. CERTIFICATE OF SERVICE / MAILING

I certify that on [__/__/____] I served the foregoing on the Michigan Department of Treasury Hearings Division by:

• ☐ U.S. Certified Mail, Return Receipt Requested, Tracking No. [NUMBER], addressed to: Michigan Department of Treasury, Hearings Division, P.O. Box 30038, Lansing, MI 48909;
• ☐ Facsimile transmission to (517) 636-4115, confirmation No. [NUMBER].

[________________________________]

[NAME OF SERVER]

16. MICHIGAN SALES/USE TAX PRACTICE NOTES

• Tax Tribunal vs. Court of Claims. Both forums hear sales/use tax assessment appeals under MCL § 205.22(1). The Tribunal is the specialty forum (tax-experienced judges, often faster, lower or no filing fee in small claims; 35-day deadline). The Court of Claims allows full MCR civil discovery, jury-of-the-court trial, and is preferable for constitutional challenges or large dollar disputes (90-day deadline). Choose ONE — election of one waives the other.
• Pay-to-play. Fradco, Inc. v. Department of Treasury, 495 Mich. 104 (2014), holds that the uncontested portion of an assessment must be paid before appeal, and failure to do so is jurisdictional.
• Wayfair / Economic Nexus. Per RAB 2018-16 and codified at MCL § 205.52b: $100,000 OR 200 transactions to Michigan in the previous calendar year creates substantial nexus. Treasury treats the thresholds disjunctively. RAB 2021-21 supersedes/clarifies RAB 2018-16; review the most recent published bulletin before relying on threshold analysis.
• Marketplace facilitators. Effective January 1, 2020, MCL § 205.52c requires marketplace facilitators (e.g., Amazon, eBay, Walmart Marketplace) meeting the $100,000 / 200-transaction threshold to collect and remit Michigan tax on facilitated sales. Marketplace sellers should obtain collection statements and rely on RAB 2021-22 to allocate liability.
• Exemption certificates. A properly completed Form 3372 accepted in good faith generally insulates the seller from liability. Andrie Inc. v. Department of Treasury, 496 Mich. 161 (2014). Audit defense often turns on certificate completeness — review for purchaser identification, exemption box selected, signature, and date.
• Refund pass-through. General Motors Corp. v. Department of Treasury, 466 Mich. 231 (2002), and follow-on cases require the seller to refund overpaid tax to purchasers to recover, except in narrow circumstances (e.g., tax paid out of seller's own pocket).
• Sample challenges. Sales/use tax audits routinely use statistical sampling. Object to non-representative samples, period selection, and stratification methodology. Request the sampling plan in writing before audit fieldwork.
• Records retention. MCL § 205.27a(2) — four years; six years if 25%+ omission; indefinite for unfiled or fraudulent returns. Mich. Admin. Code R 205.4103 through R 205.4111 govern paper and electronic records.
• Voluntary disclosure. Pre-assessment, a Voluntary Disclosure Agreement (VDA) limits lookback to four years and waives most penalties — but is unavailable once Treasury initiates contact.
• Successor liability. MCL § 205.27a(1); use Form 5156 (Tax Clearance Request) before asset purchases to manage successor exposure.
• Local tax overlay. Michigan does not authorize local sales taxes — the 6% rate is uniform statewide, simplifying nexus analysis compared with destination-rate states.

17. SOURCES AND REFERENCES

• General Sales Tax Act, MCL § 205.51 et seq. — https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-Act-167-of-1933
• Use Tax Act, MCL § 205.91 et seq. — https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-Act-94-of-1937
• MCL § 205.52b (Remote seller / economic nexus) — https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-205-52b
• MCL § 205.52c (Marketplace facilitator) — https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-205-52c
• MCL § 205.21 — https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-205-21
• MCL § 205.22 — https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-205-22
• MCL § 205.27a — https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-205-27a
• MCL § 205.30 — https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-205-30
• Revenue Administrative Bulletin 2018-16 — https://www.michigan.gov/-/media/Project/Websites/treasury/RAB/2018/RAB_2018-16_629240.pdf
• Revenue Administrative Bulletin 2021-21 (SUW Nexus, Remote Sellers) — https://www.michigan.gov/taxes/-/media/Project/Websites/treasury/RAB/2021/RAB-2021-21-SUW---Nexus-Remote-Sellers.pdf
• Revenue Administrative Bulletin 2021-22 (Marketplace Facilitators) — https://www.michigan.gov/taxes/rep-legal/rab
• Sales and Use Tax Information for Remote Sellers — https://www.michigan.gov/taxes/business-taxes/sales-use-tax/resources/sales-and-use-tax-information-for-remote-sellers
• Form 3372 (Michigan Sales and Use Tax Certificate of Exemption) — https://www.michigan.gov/taxes
• Form 5713 (Request for Hearing/Informal Conference) — https://www.michigan.gov/taxes
• Michigan Tax Tribunal — https://www.michigan.gov/taxtrib
• Michigan Court of Claims — https://www.courts.michigan.gov/courts/court-of-claims/
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)
• Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977)
• Fradco, Inc. v. Department of Treasury, 495 Mich. 104 (2014)
• Andrie Inc. v. Department of Treasury, 496 Mich. 161 (2014)
• General Motors Corp. v. Department of Treasury, 466 Mich. 231 (2002)

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. An attorney or CPA licensed in Michigan must review and customize this protest before submission. Sales and use tax law in Michigan involves overlapping state statutes, regulations, RABs, and federal Commerce Clause limits. Verify all citations, deadlines, and Treasury procedures before filing.