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Michigan Taxes Graphic Design Services

October 1st, 2007

The state of Michigan, in a bid to become the most confusing state to operate a business in, has passed a sales tax on a bizarrely random selection of services. These services include such illustrious professions as astrology services, social escort services, and graphic design services.

The enumerated list of taxable services (sec 3d) (PDF) lists “Specialized design services, as described in NAICS industry group code 5414.” The 5414 designation includes “planning, designing, and managing the production of visual communication in order to convey specific messages or concepts, clarify complex information, or project visual identities. These services can include the design of printed materials, packaging, advertising, signage systems, and corporate identification (logos).”

Custom programming, web design and hosting services are not taxed (they have NCAIS codes outside of the enumerated ranges). However, a service such as logo design would be taxable.

To do the right thing, as I understand it, and I am SO NOT A LAWYER…

A Michigan business offering a mix of services must collect the tax on the graphic design component of their services.

A graphic designer in Michigan must have a sales tax license and collect the tax as appropriate.

A Michigan based consumer of out of state graphic design services must report their graphic design purchases and pay the tax.

Meanwhile, Michigan has the worst unemployment rate in the nation and is the worst state for creating new businesses.

I’m glad 541511: Custom Programming Services was spared from the tax.

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