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Committee advances bill to prevent double taxation for third-party delivery services
Summary
Senate Bill 229 would allow delivery network companies to claim a credit or deduction when a retailer has already collected sales tax on the same transaction, aimed at preventing double remittance to the Department of Treasury. The committee reported the bill unanimously (11-0).
The Senate Committee on Regulatory Affairs unanimously voted to report Senate Bill 229 to the Senate floor, endorsing a proposal to prevent double taxation in transactions fulfilled through third-party delivery platforms.
Under current Michigan law, marketplace facilitators such as Instacart and DoorDash are required to collect and remit sales tax on orders placed through their platforms. Committee testimony described situations in which a delivery worker pays for goods at a merchant's point-of-sale system that still collects tax, creating duplicate remittances to the Michigan Department of Treasury on a single sale.
The bill would permit delivery network companies to deduct or otherwise exclude from their sales tax liability the amount of sales tax previously charged and remitted by the marketplace seller, subject to conditions such as not claiming a credit when the marketplace seller did not charge tax and limiting the deduction to the actual amount charged, witnesses said.
"On the Instacart platform, consumers can shop for goods from a local retailer...Because most small businesses are not able to implement a technological solution to suppress tax at the store's point of sale system for marketplace facilitated sales, the shopper will pay tax on the purchase of goods at the retailer's brick and mortar location," an Instacart representative testified, saying that less than half of Instacart retailers in Michigan had been able to suppress tax at the point of sale.
A DoorDash representative described the same problem and said SB 229 "will allow delivery network companies like DoorDash or Instacart or others to deduct from their tax liability the amount of tax already paid to a merchant in a situation like this. This would ensure that the state only collects the correct amount of tax on purchases made on platforms like ours." The DoorDash witness noted other states, including North Carolina, have taken similar steps.
Witnesses said the Michigan Department of Treasury worked with the bill sponsor and supports the fix. Written support from the Detroit Regional Chamber of Commerce was entered into the record.
The committee voted to report SB 229 to the floor with the recommendation that the bill pass; the clerk recorded the roll call as 11 yeas, 0 nays.
Votes at a glance: SB 229 reported to the floor, 11-0.
Notes: Testimony included claims by an Instacart witness that the platform helped Michigan grocers increase sales by more than $150,000,000 and supported job creation; those company figures were presented by the witness as research and were not independently verified in the committee record.
