Michigan & Wisconsin and Sales Tax – SaaS, Software & Other - Multi State Tax Solutions

This month, we continue our “compare and contrast” blog series with a couple of Great Lakes states – Michigan and Wisconsin – specifically their treatment of technology items for sales tax purposes.

Here’s what you can discover:

SaaS in Michigan vs. SaaS in Wisconsin:
- Michigan: SaaS is generally not subject to sales tax unless it involves downloadable software.
- Wisconsin: SaaS is non-taxable as long as the customer does not have physical access to the server or control over it.
Software in Michigan vs. Software in Wisconsin:
- Michigan: Prewritten software delivered electronically is taxable; custom software delivered electronically is not taxable.
- Wisconsin: Prewritten software delivered electronically is taxable; custom software delivered electronically is not taxable.
Digital Goods:
- Michigan: Digital products, such as e-books and music, are not taxable.
- Wisconsin: Certain digital products, like streaming video and digital audio works, are taxable.
Sales Tax Holidays:
- Michigan: No sales tax holidays.
- Wisconsin: No sales tax holidays.
Economy:
- Michigan: Renowned for its automotive industry, agriculture, and manufacturing, particularly in the Detroit metropolitan area.
- Wisconsin: Leading in dairy production and agriculture, especially cheese, cranberries, and ginseng, with a strong manufacturing sector focused on transportation and food processing.

Wait! Already know you need help with Michigan or Wisconsin issues? Please reach out to us at info@milesconsultinggroup.com

1. Software as a Service (SaaS) in Michigan vs. SaaS in Wisconsin

Software as a Service (SaaS) is subject to sales tax in several jurisdictions across the country. Approximately half of states do tax the SaaS revenue stream. As you’ll see below, both states are similar regarding their treatment of sales tax.

Cloud Computing Services are likely to be nontaxable in Michigan.

The state generally looks to whether any piece of the transaction includes a downloadable piece of software. Software delivered electronically is subject to tax. But rulings in Michigan have found the software merely accessed electronically in the cloud (where nothing is truly downloaded or delivered) is not subject to tax.

SaaS is nontaxable with exceptions in Wisconsin.

For SaaS arrangements, if the customer is simply accessing prewritten software provided by a host and located on the host’s server, the service is not taxable as long as the customer does not have physical access to the server or control the operation of the server.

2. Software in Michigan vs. Software in Wisconsin

Michigan does impose sales and use tax on prewritten computer software sold electronically.

Prewritten computer software is subject to sales and use tax in Michigan when delivered via electronic transfer.

Prewritten computer software delivered electronically is subject to tax in Wisconsin.

Prewritten computer software is taxable as tangible personal property when delivered electronically.

The sale of custom computer software delivered electronically is not subject to tax in Michigan.

Custom software is not subject to sales or use tax in Michigan when delivered via electronic transfer.

The sale of custom computer software delivered electronically is not subject to tax in Wisconsin.

Software that is not prewritten software is not taxable when delivered electronically.

3. Digital Goods

States vary in their treatment of electronically delivered goods including e-books, music, and streaming video. Some states consider all of these types of products to be taxable or not, while others call out specific taxability depending upon the product.

In Michigan, digital products are nontaxable.

Michigan does not impose sales or use tax on the sale of specified digital products.

In Wisconsin, certain digital products are taxable.

Wisconsin imposes sales and use tax on the sale, lease, license, rental, or use of certain digital products.

4. Sales Tax Holidays

States often offer sales tax holidays during specific times of the year, during which certain items are sold tax free. These holidays vary greatly by state. Here’s how Michigan and Wisconsin shake out.

Michigan does not have any sales tax holidays.

Wisconsin also does not have any sales tax holidays.

For more information on sales tax holidays, click here.

5. Economy

Although Michigan has come to develop a diverse economy, it is widely known as the center of the U.S. automotive industry, being home to the country’s three major automobile companies (whose headquarters are all within the Detroit metropolitan area). While sparsely populated, the Upper Peninsula is important for tourism thanks to its abundance of natural resources, while the Lower Peninsula is a center of manufacturing services, and the high-tech industry.

Products and services in the state include automobiles, food products, information technology, aerospace, military equipment, furniture, and mining of copper and iron ore. Michigan is the third leading grower of Christmas Trees with 60,520 acres of land dedicated to Christmas tree farming. The beverage Vernors was invented in Michigan in 1866, sharing the title of the oldest soft drink with Hires Root Beer. Two of the top four pizza chains were founded in Michigan and are headquartered there: Domino’s Pizza by Tom Monaghan and Little Caesars Pizza by Mike Ilitch.

Kellogg’s cereal is based in Battle Creek, Michigan and processes many locally grown foods. Thornapple Valley, Ball Park Franks, Koegel Meat Company, and National Hebrew sausage companies are all based in Michigan as well.

Michigan is home to very fertile land in the Saginaw Valley and “Thumb” areas. Products grown there include corn, sugar beets, navy beans, and soy beans. Michigan’s largest sugar refiner, Michigan Sugar Company, is the largest east of the Mississippi River and the fourth largest in the nation. Potatoes are grown in Northern Michigan, and corn is dominant in Central Michigan. Alfalfa, cucumbers, and asparagus are also grown in the state.

Wisconsin produces about a quarter of America’s cheese, leading the nation in cheese production. It is second in milk production, after California. Wisconsin is second in butter production, producing about one-quarter of the nation’s butter. The state ranks first nationally in the production of corn for silage, cranberries, ginseng, and snap beans for processing. It grows over half the national crop of cranberries and 97% of the nation’s ginseng. Wisconsin is also a leading producer of oats, potato, carrots, tart cherries, maple syrup, and sweet corn for processing. A large part of the state’s manufacturing sector includes commercial food processing, including well-known brands such as Oscar Meyer, Tombstone frozen Pizza, Johnsonville brats, and Usinger’s sausage. Kraft Foods alone employs over 5,000 people in the state. Milwaukee is a major producer of beer and was formerly headquarters for the Miller Brewing Company- the nation’s second-largest brewer- until it merged with Coors Brewing Company.

Wisconsin is home to a very large and diversified manufacturing economy, with special focus on transportation and capital equipment. Some major Wisconsin companies include the Kohler Company, Mercury Maine, John Deere and Oshkosh Corporation.

Fun Facts

Michigan Fun Facts

Michigan has 64,980 inland lakes and ponds. A person in the state is never more than 6 miles from a natural water source or more than 85 miles from a Great Lakes shoreline.

Michigan has more freshwater coastline than any province of any country in the world (3,126 miles).
Michigan has the world’s only floating post office. It delivers mail to ships as they pass under the Ambassador Bridge.
Michigan has about 150 lighthouses, more than any other state in the United States.
Michigan grows about 70% of tart cherries (sour cherries) produced in the United States (Washington state is the leading producer of sweet cherries in the United States). Traverse City, Michigan claims to be the “Cherry Capital of the World,” hosting a National Cherry Festival and makes the world’s largest cherry pie.
Battle Creek, Michigan, is called the cereal capital of the world as it is home to Kellogg’s.
Michigan has more miles of freshwater shoreline than any other state in the nation.
Frito-Lay, one of the world’s largest potato chip producers, sources around 40% of the potatoes used for chips from Michigan. In fact, one out of every 4 bags of potato chips that are consumed in the U.S. is made from potatoes grown in Michigan.

Wisconsin Fun Facts

Wisconsin’s Door County has five state parks and 250 miles of shoreline along Lake Michigan. These figures represent more than any other county in the country.
Devil’s Lake was established in 1911. The facility has become one of Wisconsin’s oldest and most famous state parks. It leads the state parks in attendance.
The Cheese capital of the world is Monroe, WI. Visit Monroe in September of every even numbered year for their festival called Green County Cheese Days.
Known for its dairy production, Wisconsin actually leads the nation in exports of cranberries, whey, ginseng root and sweet corn.
The American Birkebeiner, a 52K cross country ski race between Cable and Hayward, is the largest on the North American Continent.
The state’s constitution is the oldest of any state west of the Allegheny Mountains. It was adopted in 1848.
The state is the 23^rd largest state by total area and the 20^th most populous state.

Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Michigan, Wisconsin, or other U.S. States, and help you navigate the complex tax structures arising from multistate operations. Book a consultation, drop us a line, or send us an email at info@milesconsultinggroup.com.