Michigan Sales Tax On Software Maintenance Access

If a maintenance agreement is required as part of the purchase of taxable prewritten software and includes future updates or enhancements, the entire cost is generally taxable . Optional Agreements:

Are you currently reviewing a or trying to determine if a specific SaaS product with a desktop agent is taxable? Michigan Sales Tax On Software Maintenance

When a transaction includes both taxable software and exempt services, Michigan uses this test to determine if the primary "object" of the sale is a service or a product. If the software is merely incidental to a professional service, the whole transaction may be exempt. Compliance Tips To protect against audit risks, businesses should: If a maintenance agreement is required as part

Maintenance contracts for custom software (designed for a specific user's needs) are generally considered non-taxable services. Critical Factors and Exemptions If the software is merely incidental to a

Out-of-state vendors must collect tax if they have a physical presence or meet economic thresholds ($100,000 in annual sales or 200+ transactions in Michigan).

If an optional agreement for prewritten software includes future updates or "tangible deliverables" (like new code versions), it may become subject to tax .

Michigan's 6% sales and use tax applies to "tangible personal property," which the state defines to include (canned) computer software. Maintenance agreements follow these specific triggers: