SB 965 closes short-term sales tax loopholes, levels the playing field for Michigan businesses, and strengthens fairness in the digital economy

LANSING, Mich. — Sen. Roger Hauck has sponsored legislation to ensure that marketplace transactions occurring in Michigan are subject to fair and consistent sales tax collection.

“Michigan’s tax laws must keep pace with the modern digital economy. This legislation ensures that large online platforms collecting payments on behalf of sellers are playing by the same rules as every Michigan small business,” said Hauck, R-Mount Pleasant. “It’s about fairness, accountability and protecting our state’s revenue base, all without placing unnecessary burdens on individual sellers or entrepreneurs.”

Under current Michigan law, gaps in the definition of marketplace facilitator have created inconsistencies and confusion about how the state sales tax is collected and remitted on sales of short-term rental accommodations in Michigan. Marketplace facilitators are platforms that connect buyers and sellers in today’s digital economy, such as Airbnb or VRBO.

Senate Bill 965 would address these inconsistencies head-on by:

• Clarifying the definition of “marketplace facilitator” to explicitly include platforms that list short-term rentals. This clarification would mandate the collection of the state sales tax when platforms facilitate rental transactions, ensuring that any platform listing Michigan short-term rentals is responsible for collecting and remitting the state sales tax on all taxable sales facilitated within the state.
• Streamlining tax administration by eliminating monthly tax returns for thousands of Michigan short-term rental hosts who use platforms and reducing the number of returns, payments and audits necessary for the Michigan Department of Treasury to collect these taxes.
• Protecting Michigan consumers and businesses by ensuring all transactions are treated consistently and fairly under existing state law.
• Generating revenue for Michigan by ensuring proper tax collection on marketplace transactions, which means more dollars flowing back into Michigan communities, schools and infrastructure — a point reinforced by the Treasury department’s pursuit of over $18 million in delinquent sales tax from VRBO, highlighting the urgent need for clear legislative standards that hold all short-term rental platforms equally accountable.

Short-term rental marketplaces continue to grow, yet outdated definitions have allowed some to avoid their tax collection responsibilities under Michigan law. Hauck’s bill would close these gaps.

SB 965 has been referred to the Senate Committee on Regulatory Affairs for review.

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