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A long-standing tax dispute has existed in Michigan regarding what constitutes a taxable ‘use’ of direct mail shipped from outside the state. The state has often asserted that the act of directing mailings into the state or the ability to recall an item from the US Postal Service (USPS) would constitute sufficient ‘control’ over the mailings to create a use tax consequence.

The Michigan Court of Appeals on July 8, in an unpublished opinion, affirmed that a corporation did not have ‘sufficient retention of control’ of advertising materials printed out-of-state and delivered by a third party vendor to Michigan customers to constitute ‘use’ of such materials in-state. Consequently, the directing or controlling of when materials were placed in the mail was not considered an exercise of control subjecting the distribution to use tax.

Action item: Businesses that produce advertising materials out-of-state that are mailed to Michigan customers may not be subject to use tax if control over the materials is not exercised in-state.