When claiming an exemption, ensure Michigan Form 3372 (Sales and Use Tax Certificate of Exemption) is correctly executed.

Out-of-state vendors must collect tax if they have a physical presence or meet economic thresholds ($100,000 in annual sales or 200+ transactions in Michigan).

If an optional agreement for prewritten software includes future updates or "tangible deliverables" (like new code versions), it may become subject to tax .

Specific charges for technical support or for adapting prewritten software to a user's needs are exempt if they are separately stated and identified on the invoice.

Maintenance contracts for custom software (designed for a specific user's needs) are generally considered non-taxable services. Critical Factors and Exemptions

Software delivered via physical media or downloaded in full is taxable as tangible property. Conversely, Software as a Service (SaaS) accessed purely via a web browser (with no downloaded code) is typically exempt .

Always break out installation, support, and training charges from the software license fee to preserve exemptions.

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