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Michigan starts collecting sales tax on online purchases Oct. 1
'Amazon Tax' will be in effect in more than half of the states

Online sales tax collection is about to cross the halfway mark. On Thursday, Oct. 1, Michigan will become the 26th state in which Amazon will collect sales tax.

Amazon box by MikeBlogs via Flickr CC
Amazon box photo by MikeBlogs via Flickr

The Seattle-based online retail giant, however, isn't the only company affected.

Michigan operations, taxes: Michigan's new Main Street Fairness Act that takes effect tomorrow applies to all Internet retailers with a presence in the Great Lakes State.

The affected businesses will be required to collect and remit to the Michigan Department of the Treasury the state's 6 percent sales tax on all purchases made by in-state shoppers.

Of course, as in other states with sales taxes, Michigan has a use tax. That means that online shoppers in the state should have been paying the state's 6 percent use tax on products they bought from all online sellers.

They didn't, at least not in any notable numbers. Only 117,000 Michigan residents reported untaxed online purchases on their 2013 tax returns.

Those use tax filings accounted for $6.7 million, which state officials estimate was only 2.5 percent of the total sales tax due on online sales.

So state officials opted to use Internet sellers that have actual operations in Michigan as de facto tax collectors.

The Michigan Main Street Fairness Act is expected to bring the state treasury between $50 million to $60 million a year from affected online sales.

The law's physical presence requirement, though, means that online shoppers still can avoid/evade sales/use taxes by buying from companies with no Michigan locations.

26 and counting: Since Amazon is the big dog in the Internet sales world, similar sales tax collection laws in 25 other states are generally referred to as Amazon Tax laws.

Amazon already collects sales taxes on purchases by customers in Arizona, California, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania, Tennessee, TexasVirginia, Washington, West Virginia and Wisconsin.

South Carolina will become the 27th state to join the Amazon Tax club on Jan. 1, 2016.

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