Since business purchases are not taxable, how does the MI FairTax keep individuals from pretending to have a business so they can buy things tax-free?

All the laws in place today to prevent such tax evasion will still be in place after the MI FairTax is enacted. In addition, the MI FairTax has several features that make it difficult and very risky for persons to have a scam business in order to purchase items tax free. First, in order for any person to purchase items tax free for business purposes, the business has to be a registered seller and possess a registered seller certificate issued by the Michigan Treasury Department.

Registered sellers are expected to file monthly or quarterly sales tax returns with the state (depending on sales volume). The certificate enables the business to purchase tax-free from wholesale vendors, but the vendor must retain a copy of the registration certificate to justify not having collected tax on the sale. When a business purchases items for business use from a retail vendor, the business has to pay the tax on the purchase and take a credit against the tax due on their monthly sales tax return.

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