Michigan Company Owes Use Tax on Direct Mail: Sales and Use Tax Implications Explained

1. Use Tax Assessment: The Michigan Court of Appeals upheld a use tax assessment against AAA Life Insurance Company for direct mail advertisements distributed in Michigan, which were processed and printed by an out-of-state printer, American Direct Marketing Resources, LLC (ADMR). The court ruled that AAA exercised sufficient control over the direct mail process within Michigan to establish a taxable use.
2. Complex Tax Implications: Direct mail campaigns often involve multiple parties across different states, leading to complex sales and use tax issues due to varying state tax rules. The interactions between the advertising company, the printer, and the postal service can complicate tax compliance.
3. Control over the Process: The court found that AAA maintained control over the tangible personal property by drafting advertising materials and reviewing proofs in Michigan, thereby supporting the use tax assessment despite AAA’s arguments that it did not control the final product delivered to recipients. This case underscores the importance of understanding tax obligations related to direct mail advertising.

Source: aprio.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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