Michigan’s sales tax exemption removes the state’s 6% sales tax from specific transactions when the buyer, the product, or how the product is being used meets Michigan’s General Sales Tax Act criteria. Michigan has no local sales tax, which means the rate is a flat 6% statewide, and exemptions attach to the transaction, not permanently to the buyer. Different types of buyers qualify for exemptions, such as resellers, nonprofits, and farmers. Each buyer qualifies under a different statutory basis, with different paperwork and rules for what counts as a valid claim.

Below, we’ll cover who qualifies for exemption in Michigan, which products and services are exempt outright, and how Form 3372 works for both single purchases and ongoing buyer relationships.

Key takeaways

• Michigan sales tax exemptions depend on the buyer, the product, and the product’s intended use.

• Sellers need to collect a complete exemption certificate, commonly Form 3372, before or at the time of sale, and keep it on file for at least four years.

• A facially valid certificate generally protects the seller from liability, while an incomplete or missing one shifts the tax burden back to the seller.

What is a Michigan sales tax exemption?

A Michigan sales tax exemption applies to a specific transaction when the buyer, the item, or its intended use meets certain criteria. It removes the state’s 6% sales tax rate, which generally applies to most retail sales of tangible personal property.

Who qualifies for a Michigan sales tax exemption?

Here are the buyers who can claim sales tax exemption status in Michigan:

Resellers

A business buying inventory it plans to resell doesn’t pay tax on that purchase because the tax is only collected once, at the final sale to the end consumer. This requires a valid resale certificate and Michigan sales tax license number, or the equivalent license from another state.

Nonprofit organizations

Entities recognized under Section 501(c)(3), along with churches and certain other charitable organizations, qualify for exemption on purchases tied directly to their exempt purpose. A nonprofit’s gift shop selling merchandise to the public generally doesn’t get the same treatment.

Government entities

Purchases made directly by the federal government, the State of Michigan, and Michigan’s political subdivisions, such as counties, townships, and public school districts, are exempt when paid for with government funds.

Industrial processors

Businesses that use equipment, materials, or supplies to convert raw materials into a different form, composition, or character for sale can exempt those specific purchases under Michigan’s industrial processing exemption.

Agricultural producers

Farmers and agricultural businesses qualify for an exemption on inputs used to produce crops, livestock, or other agricultural products for sale.

What products and services are exempt from Michigan sales tax?

While sales tax doesn’t apply to services in Michigan, product exemptions fall into two categories based on what the product is and who’s buying it and why. A handful of categories are exempt for every buyer, and no exemption certificate is required. For example, food and food ingredients sold for home consumption are exempt, but prepared food meant for immediate consumption remains taxable even when sold at a grocery store. Prescription drugs and certain medical devices, including insulin and prosthetics, are exempt no matter who’s buying them. Beyond that, exemptions usually require both a qualifying buyer and qualifying use.

Here’s what to know:

• Manufacturing and industrial processing equipment: Exempt when purchased by a qualifying industrial processor for direct use in production, but office furniture or equipment used for administrative work at the same facility doesn’t qualify.

• Agricultural inputs: Seed, fertilizer, and feed are exempt when purchased by a producer for use in agricultural production.

• Rolling stock: Trucks and trailers operated by interstate motor carriers can qualify for exemption under specific weight and use thresholds tied to interstate commerce.

• Utilities used in industrial processing: A portion of electricity, natural gas, and water consumed directly in production can be exempt, though this often requires a utility study to calculate the exempt percentage.

How do you use a Michigan sales tax exemption certificate?

The standard document is Michigan Form 3372, the Michigan Sales and Use Tax Certificate of Exemption. A buyer fills it out, checks the box for their exemption reason, and gives it to the seller instead of paying tax at checkout. Michigan also accepts the Multistate Tax Commission’s Uniform Sales & Use Tax Certificate, which is for buyers purchasing across several states who don’t want to fill out a different form for each one.

Buyers and sellers choose between two exemption certificate formats:

• Single-purchase certificate: Covers one transaction and specifies the date and property being purchased, which fits a one-off purchase where the buyer has no ongoing relationship with the seller.

• Blanket certificate: Covers all future purchases between that buyer and seller until it’s revoked. This is the more common certificate for a recurring relationship, such as a manufacturer buying raw materials from the same supplier every month.

The seller’s job is to collect the certificate before or at the time of sale, confirm it’s complete, and store it in their records. Michigan doesn’t require sellers to independently verify a buyer’s exemption claim. If the certificate is complete and taken in good faith, the seller can accept it and move on, a lower standard compared to some states.

Businesses that handle exemption certificates at checkout can use a solution such as Stripe Tax to apply exemption status to specific customers or transactions, so tax isn’t calculated on qualifying sales.

What are the record-keeping requirements for Michigan sales tax exemptions?

Michigan requires sellers to keep exemption certificates on file for at least four years from the date of the transaction. Sellers need a system for storing certificates that ties each one to the sales it covers, especially for blanket certificates that might apply to hundreds of purchases over several years. If a buyer’s exemption status changes, such as a reseller losing its license or a nonprofit’s status lapsing, the seller needs a way to catch that and not apply the exemption going forward.

Though certificates don’t expire under Michigan law by default, a seller who has actual knowledge that one is no longer valid can’t keep relying on it. Auditors will ask for the certificate tied to any exempt sale under review, and an incomplete or missing certificate shifts the tax liability to the seller.

What happens if a Michigan sales tax exemption certificate is invalid or misused?

If a certificate is facially valid, which means it’s properly filled out, signed, and identifies a reasonable exemption basis, then the seller isn’t held responsible if the buyer turns out not to have qualified. In that scenario, the buyer bears the tax liability, along with any penalties and interest.

If, however, the certificate is incomplete, illegible, or missing, or if the seller had reason to know the exemption claim didn’t hold up, that protection disappears. Additionally, buyers who misuse a certificate, such as claiming exemption on a purchase that doesn’t actually qualify, are responsible for paying the tax that should have been collected. Michigan treats knowing misuse more seriously than an honest mistake. Penalties can include the unpaid tax plus interest, and repeated or willful misuse can lead to additional penalties.

Is your business ready to manage Michigan sales tax exemptions?

To manage Michigan sales tax exemptions well, you need to know which of your buyers and products qualify, collect complete certificates before the sale rather than chasing them down later, and keep those records long enough to survive an audit.

Businesses selling into multiple exemption categories, such as a supplier serving both resellers and industrial processors, often find the biggest risk is the gap between what a sales team promises a customer and what the paperwork actually supports.

If you’re already using Stripe Tax to calculate and collect sales tax, it can also apply exemption status at the customer or transaction level. This means exempt sales get flagged and excluded from tax calculation without manual work at checkout.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful API.

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• Digital goods and services in all US states and over 100 countries
  
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Stripe Tax can help you:

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• Register to pay tax: If you need to register for sales tax in the US, let Stripe manage your tax registrations. You’ll benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

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Learn more about Stripe Tax, or get started today.