# Michigan Contractor Taxes and Licensing: Use Tax, LARA Licenses and City Income Tax

Michigan treats a real property contractor as the consumer of its materials, so it owes use tax, generally 6% of the cost of materials used on the job, and doesn't charge customers sales tax. A contractor that makes no retail sales needs a use tax registration, not a sales tax license. Michigan has no local sales tax.

## Key takeaways

- Real property contractors owe use tax, generally 6% of the cost of materials used in the job.
- Contractors that make no retail sales don't need a sales tax license but must keep a use tax registration.
- Contractors acting as retailers must itemize labor and materials, or the whole lump sum is taxable.
- Residential work of $600 or more in labor and materials requires a LARA residential builder or maintenance and alteration license.
- Michigan's individual income tax is 4.25% for 2026, and 24 cities levy their own income taxes.

## How Michigan taxes contractors: use tax, not sales tax

The Michigan Department of Treasury's Contractor Manual describes a real property contractor as a consumer of the materials it installs: "As a consumer, a real property contractor incurs use tax responsibilities. Its use tax obligation is generally 6% of the cost of materials used in the job." The customer doesn't see a sales tax line. If your supplier charged Michigan sales tax at purchase, that covers it; if not, you report use tax.

Michigan also takes a distinctive approach to registration. The manual says "where a contractor is exclusively engaged in the contracting business and makes no sales at retail, the contractor does not need a sales tax license. Non-licensed contractors are required to maintain a use tax registration." If you also work in [Ohio](https://www.brix.so/taxes/ohio) or [Indiana](https://www.brix.so/taxes/indiana), check their registration rules separately; Indiana, for example, treats time-and-material contractors as retail merchants.

## Contractors who also sell: itemize or pay on the total

The manual sorts contractors into categories. Contractor-retailers, such as a company with a showroom that also sells items over the counter, need a sales tax license and accrue use tax on materials they pull from inventory for real property jobs. When a contractor acts as a retailer, it may itemize labor and materials, but "a lump sum billing that does not separately itemize installation labor and materials is subject to sales tax on the total charge." If you sell and install, split the invoice.

**Michigan contractor types under the Treasury Contractor Manual**

| Contractor type | Registration | Tax treatment |
| --- | --- | --- |
| Real property contractor, no retail sales | Use tax registration; no sales tax license | Pays use tax, generally 6% of materials cost; customer not charged |
| Contractor-retailer (showroom, counter sales) | Sales tax license | Collects sales tax on retail sales; accrues use tax on inventory used in real property jobs |
| Contractor acting as a retailer on a sale-and-install job | Sales tax license | Itemize labor and materials, or the whole lump sum is taxable |

_Summarized from the Michigan Treasury Contractor Manual (May 2026), checked 2026-10-19._

> **Example: a railing ordered from out of state (illustrative, based on the manual's example)**
>
> A Michigan contractor buys a $2,000 railing from a Washington vendor that doesn't charge Michigan tax, and installs it on a customer's home.
>
> The manual's guidance: the contractor must report use tax based on the purchase price. At 6%, that's $120.
>
> The homeowner's invoice shows no sales tax.

For more on self-assessing tax on untaxed purchases, see [use tax for contractors](https://www.brix.so/learn/use-tax-for-contractors). For how Michigan's approach compares with states that tax labor, read [sales tax on labor vs. materials](https://www.brix.so/learn/sales-tax-on-labor-vs-materials).

## Michigan's single 6% rate

Treasury says retailers "remit a 6% sales tax on the total price of their taxable retail sales" and that "Michigan does not allow city or local units to impose sales tax." Residential utilities and heating fuels are taxed at 4%. That makes Michigan one of the easier states for rate lookups: the same 6% applies whether the job is in Detroit or the Upper Peninsula.

## Michigan contractor licensing (LARA)

Michigan licenses most building trades at the state level through the Department of Licensing and Regulatory Affairs (LARA), Bureau of Construction Codes. For residential work, the threshold is $600: MCL 339.2403(f) exempts only a person working on one project where "the aggregate contract price for which labor, material, and any other item is less than $600.00," and the exemption doesn't apply if the job is split up or is part of a larger operation. A residential builder license covers building complete homes and remodeling. A maintenance and alteration (M&A) license covers specific crafts: "carpentry; concrete; swimming pool installation; waterproofing a basement; excavation; insulation work; masonry work; roofing; siding and gutters; screen or storm sash installation; tile and marble work; and house wrecking."

**Michigan contractor licensing by trade**

| Trade | Agency | License | Official page |
| --- | --- | --- | --- |
| Residential builder, remodeler | LARA Bureau of Construction Codes | Residential builder (individual or company); 60-hour prelicensure course | [LARA licensing section](https://www.michigan.gov/lara/bureau-list/bcc/sections/licensing-section) |
| Roofing, siding, gutters, concrete, masonry, carpentry and other crafts | LARA Bureau of Construction Codes | Maintenance and alteration contractor, by craft | [LARA licensing section](https://www.michigan.gov/lara/bureau-list/bcc/sections/licensing-section) |
| Electrical | LARA Bureau of Construction Codes | Journeyman, master electrician, electrical contractor | [LARA licensing section](https://www.michigan.gov/lara/bureau-list/bcc/sections/licensing-section) |
| Plumbing | LARA Bureau of Construction Codes | Journey plumber, master plumber, plumbing contractor | [LARA licensing section](https://www.michigan.gov/lara/bureau-list/bcc/sections/licensing-section) |
| HVAC / mechanical | LARA Bureau of Construction Codes | Mechanical contractor | [LARA licensing section](https://www.michigan.gov/lara/bureau-list/bcc/sections/licensing-section) |

_Checked 2026-10-19 and 2026-10-20. Local building departments issue permits and inspections._

More on how licensing works generally: [contractor license](https://www.brix.so/learn/contractor-license).

## Michigan income tax and city income taxes

Michigan's individual income tax rate is set by MCL 206.51 at 4.25%, with a revenue-based trigger that can lower it. For 2026 the rate is 4.25%: the 2026 MI-1040ES estimated tax worksheet tells you to multiply by "4.25% (0.0425)." C corporations pay Michigan's 6% corporate income tax, but businesses "with less than $350,000 in allocated or apportioned gross receipts and/or less than or equal to $100 in annual liability are not required to file or pay."

Cities add their own layer: "Twenty-four Michigan cities levy municipality taxes related to income," and Treasury administers Detroit's and Flint's. If you live or work in one of them, your quarterly estimates may need to cover city tax too. See [quarterly estimated taxes for contractors](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors) and the [quarterly estimated tax calculator](https://www.brix.so/tools/quarterly-estimated-tax-calculator).

## Workers' comp in Michigan

Michigan's Workers' Disability Compensation Agency says coverage is provided "either through an insurance policy or through approved self-insurance." Under MCL 418.115, the Act covers private employers "who regularly employ 3 or more employees at 1 time," and also employers with fewer than 3 "if at least 1 of them has been regularly employed" 35 or more hours a week for 13 weeks or longer during the preceding 52 weeks. One full-time helper for a season can trigger it. Background: [workers' compensation](https://www.brix.so/learn/workers-compensation).

## Local taxes in Michigan

There's no local sales tax to track. The local tax that matters is city income tax in the 24 cities that levy one. Check the Treasury list before taking long jobs in a new city.

> **General information, not tax advice**
>
> Whether you're a real property contractor, a contractor-retailer or both changes your registration and invoicing. Ask a CPA who knows Michigan contractors, and contact Treasury for written guidance on your setup.

BRIX itemizes labor and materials on every quote and invoice and syncs them with QuickBooks, which helps when you both sell and install. BRIX doesn't determine your tax category or file returns.

- [Quotes and estimates](https://www.brix.so/features/quotes-estimates): Builds accurate quotes on site and follows up on every open estimate.
- [Invoicing and payments](https://www.brix.so/features/invoicing-payments): Turns finished jobs into invoices and politely chases unpaid ones until the money is in your account.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.

### Neighboring state guides

- [Ohio](https://www.brix.so/taxes/ohio): Commercial Activity Tax and BWC
- [Indiana](https://www.brix.so/taxes/indiana): Contract type decides sales tax
- [Wisconsin](https://www.brix.so/taxes/wisconsin): Lawn care taxable

## Frequently asked questions

### Do contractors charge sales tax in Michigan?

Real property contractors generally don't. Michigan treats them as consumers of materials, so they owe use tax, generally 6% of the cost of materials used on the job. Contractors who also sell at retail must itemize labor and materials or pay tax on the full lump sum.

### Do Michigan contractors need a sales tax license?

Not if they're exclusively in the contracting business and make no retail sales. Treasury says those contractors must keep a use tax registration instead. Contractors with retail sales need a sales tax license.

### Is labor taxable in Michigan?

Real property contractors don't charge sales tax on their jobs; they pay use tax on materials. When a contractor acts as a retailer, separately itemized installation labor matters, because a lump sum that doesn't itemize labor and materials is taxed on the total.

### Is there local sales tax in Michigan?

No. Michigan doesn't allow cities or local units to impose sales tax, so the rate is 6% statewide. Residential utilities and heating fuels are taxed at 4%.

### When do I need a contractor license in Michigan?

Residential work of $600 or more in labor, materials and other items requires a LARA residential builder or maintenance and alteration license. Splitting a job into smaller contracts to stay under $600 doesn't qualify for the exemption.

### What is Michigan's income tax rate for 2026?

The individual rate is 4.25% for 2026, the same rate used on the 2026 MI-1040ES. Twenty-four Michigan cities levy their own income taxes on top, including Detroit and Flint.

### When does a Michigan employer need workers' comp?

Private employers who regularly employ 3 or more people at one time are covered, and so are smaller employers with at least one employee working 35 or more hours a week for 13 weeks or longer in the past 52 weeks.

## Related

- [Do Contractors Charge Sales Tax on Labor or Materials?](https://www.brix.so/learn/sales-tax-on-labor-vs-materials)
- [What Is Use Tax for Contractors?](https://www.brix.so/learn/use-tax-for-contractors)
- [What Is a Contractor License?](https://www.brix.so/learn/contractor-license)
- [What Is Workers' Compensation Insurance?](https://www.brix.so/learn/workers-compensation)
- [Quarterly Estimated Taxes for Contractors: How They Work in 2026](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors)
- [Quarterly Estimated Tax Calculator for Self-Employed Contractors (2026)](https://www.brix.so/tools/quarterly-estimated-tax-calculator)
- [Ohio Contractor Taxes and Licensing: Taxable Services, the CAT and BWC](https://www.brix.so/taxes/ohio)
- [Indiana Contractor Taxes and Licensing: Lump-Sum vs. Time-and-Material Contracts](https://www.brix.so/taxes/indiana)
- [Wisconsin Contractor Taxes and Licensing: Real Property Work, Lawn Care and DSPS Credentials](https://www.brix.so/taxes/wisconsin)
- [Self-Employment Tax Calculator (2026)](https://www.brix.so/tools/self-employment-tax-calculator)

## Sources

- [Michigan Department of Treasury — Contractor Manual (May 2026)](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Audit/Contractor-Manual.pdf) (checked 2026-10-19)
- [Michigan Department of Treasury — Sales and use tax](https://www.michigan.gov/taxes/business-taxes/sales-use-tax) (checked 2026-10-19)
- [Michigan Department of Treasury — Corporate income tax](https://www.michigan.gov/taxes/business-taxes/cit) (checked 2026-10-19)
- [Michigan Department of Treasury — What cities impose an income tax](https://www.michigan.gov/taxes/citytax/what-cities-impose-an-income-tax) (checked 2026-10-19)
- [Michigan Department of Treasury — 2026 MI-1040ES](https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/IIT/TY2025/MI-1040ES-(2026).pdf) (checked 2026-10-20)
- [Michigan Legislature — MCL 206.51 (income tax rate)](https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-206-51) (checked 2026-10-19)
- [LARA Bureau of Construction Codes — Licensing section](https://www.michigan.gov/lara/bureau-list/bcc/sections/licensing-section) (checked 2026-10-19)
- [LARA — Residential builders FAQ (MCL 339.2403, 339.2404)](https://www.michigan.gov/lara/-/media/Project/Websites/lara/bcc-media/Licensing/Residential-Builders/Builders-FAQ.pdf) (checked 2026-10-20)
- [LEO Workers' Disability Compensation Agency — Insurance requirements](https://www.michigan.gov/leo/bureaus-agencies/wdca/insurance-requirements) (checked 2026-10-19)
- [Michigan Legislature — MCL 418.115 (employers covered)](https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-418-115) (checked 2026-10-19)

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Written by BRIX Editorial Team. Last updated 2026-10-19. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/taxes/michigan