In the aftermath of the repeal of the Use Tax on Services (PA 93 of 2007) the Michigan Department of Treasury (Treasury) has been rejecting applications for Use Tax registration.  Several tax practitioners have reported that they have received a large quantity of rejections from Treasury when attempting to register businesses for Use Tax. 

I have long advocated that every Michigan business should be registered for Michigan Use Tax and that every Michigan business should review purchase invoices on a monthly basis or at least on an annual basis to identify taxable purchases on which sales tax was not paid so as to self accrue and pay Michigan Use Tax directly to the state.  By registering for the Michigan Use Tax, the Michigan business starts the running of the statute of limitations when the combined sales-use-withholding tax return is filed.  If at a later date, Michigan Use Tax is found to be due, the failure to file penalty would not be applicable.  Without the registration and payment of the tax, Treasury could go beyond the four year statute of limitations and could add interest and failure to file penalty (up to 25%) to the tax deficiency.  I continue to recommend registration for the Michigan Use Tax.

Treasury has admitted that they may have made some errors interpreting if the application for Use Tax registration was solely to register for the Use Tax on Services.  My recommendation is to resubmit the application for Use Tax registration.