What taxes apply to a new small business?

Michigan Taxes for New Small Businesses

When starting a small business in Michigan, understanding the applicable taxes is essential for smooth operations and compliance. As of 2026, here are the primary taxes you should plan for:

1. Michigan Business Income Tax

Michigan imposes a Corporate Income Tax (CIT) on C-corporations. However, many small businesses structured as LLCs, S-corporations, or sole proprietorships may not pay CIT directly but instead report income on personal returns. Check your business structure to determine applicability.

2. Michigan Sales and Use Tax

If your business sells tangible personal property or certain services, you must collect and remit Michigan’s 6% sales tax. Register for a sales tax license with the Michigan Department of Treasury and maintain accurate sales records for reporting.

3. Employer Payroll Taxes

• State Unemployment Insurance (SUI): If you hire employees, register with the Michigan Unemployment Insurance Agency and pay SUI taxes based on your payroll.
• Withholding Taxes: You must withhold Michigan income tax from employees’ wages and remit it regularly to the state.

4. Local Taxes

Some cities in Michigan may impose additional business taxes or fees. Check with your local city or county government for any applicable local business taxes or licenses.

5. Other Considerations

• Business Registration: Register your business with the Michigan Department of Licensing and Regulatory Affairs (LARA) to ensure proper tax reporting.
• Recordkeeping: Maintain detailed financial records to support tax filings and simplify bookkeeping.
• Tax Automation: Consider using accounting software that integrates with Michigan tax systems to automate filings and payments.

Planning for these taxes from the start will help your Michigan small business remain compliant and avoid penalties. Consult with a tax professional familiar with Michigan operations to optimize your tax strategy.