Committee backs fix to prevent double sales tax on third‑party delivery app orders

The Senate Committee on Regulatory Affairs voted to report Senate Bill 229 to the Senate floor with a recommendation that it pass after testimony from representatives of Instacart and DoorDash describing how current law can produce unintended double remittance of sales tax on orders placed through delivery apps.

Raj Lapsawana, senior manager for tax issues at Instacart, testified that when a consumer orders through a delivery app the marketplace facilitator remits tax to the Michigan Department of Treasury and, in many cases, the brick-and-mortar retailer’s point-of-sale system also charges and remits tax when the store’s shopper pays at pickup. "Because most small businesses are not able to implement a technological solution to suppress tax at the point of sale system," Lapsawana said, "the shopper will pay tax on the purchase of goods at the retailer's point of sale system," creating double taxation.

Evan Marolf of DoorDash echoed that the current law requires marketplace facilitators to collect and remit tax but provides no mechanism for the facilitator to claim credit where the retailer also remitted tax. He said SB 229 would let delivery network companies deduct or exclude from their sales-tax liabilities the amount already charged and remitted by the marketplace seller, subject to limits in the bill: the facilitator cannot claim the deduction if the marketplace seller did not charge tax, and the deduction cannot exceed the amount actually charged by the marketplace seller.

Instacart told the committee it partners with more than 80 retailers across over 2,500 stores in Michigan, and said its platform has helped increase retailer sales in the state (company-reported figure entered into testimony). Instacart also told the committee fewer than half of Michigan retailers on its platform have systems able to suppress sales tax at the point of sale, which the company said imposes operational and financial burdens on small businesses.

The testimony said the Michigan Department of Treasury worked with proponents and supports the bill. Support was also entered in writing by the Detroit Regional Chamber of Commerce, whose card was read into the record.

Procedural actions: Vice Chair Hauck moved to report SB 229 to the floor with the recommendation that it pass; the clerk recorded the vote as 11 yeas, 0 nays.

If enacted, the bill would change how marketplace facilitators account for tax remitted by merchants and is designed to prevent duplicate remittance while maintaining tax compliance under marketplace-facilitator rules. Committee testimony cited similar fixes adopted in other states.