Michigan Corporation Taxes: What S Corps and C Corps Pay
Michigan corporations pay a 6% corporate income tax, a 4.25% personal income tax on pass-through earnings, and a 6% sales tax. Learn what your S Corp or C Corp owes the state.
Bizee Editorial Staff
Editorial Team
Michigan tax quick facts
Filing fee: $50 (Articles of Incorporation)
Processing time: 5–7 business days (standard)
State agency: Michigan Department of Licensing and Regulatory Affairs (LARA)
Annual report due: May 15 each year
State tax rate: Corporate Income Tax: 6% | Personal Income Tax: 4.25% | Sales Tax: 6%
How Michigan taxes corporations
Michigan corporations pay several taxes depending on their structure. C Corps pay the Michigan Corporate Income Tax at a flat 6% rate on apportioned income. S Corps are pass-through entities, so owners pay Michigan's 4.25% personal income tax on their share of earnings. Both entity types may also owe sales tax and federal taxes.
The biggest tax difference between a C Corp and an S Corp in Michigan comes down to who pays the income tax. A C Corp pays corporate income tax at the entity level. An S Corp passes income through to its shareholders, who each report and pay personal income tax on their share. That distinction shapes how you plan and file every year.
C Corps: subject to Michigan Corporate Income Tax at 6%
S Corps: pass-through taxation — owners pay Michigan personal income tax at 4.25% on their share of income
Both: may owe Michigan sales tax (6%) if selling taxable goods or services
Both: no Michigan franchise tax for the privilege of doing business in the state
Both: federal tax obligations apply regardless of state structure
Michigan Corporate Income Tax
C Corps doing business in Michigan pay the Michigan Corporate Income Tax (CIT) at a flat 6% rate. The tax applies to a corporation's apportioned income — meaning Michigan taxes only the portion of income tied to Michigan activity, not total nationwide income.
Michigan uses single-factor sales apportionment to figure out how much of a corporation's income is taxable in the state. That means only the ratio of Michigan sales to total sales everywhere determines the taxable share — not payroll or property. If 40% of your sales come from Michigan customers, 40% of your income is subject to the Michigan CIT.
S Corps are not subject to the Michigan CIT at the entity level. Income passes through to shareholders, who report it on their individual Michigan returns.
Michigan personal income tax for S Corps
Michigan has a flat personal income tax rate of 4.25%. If you run an S Corp, your share of the business's income flows to your personal Michigan return and gets taxed at that rate. There's no graduated bracket — every dollar of pass-through income is taxed at 4.25%.
This applies to any shareholder who takes earnings out of a Michigan S Corp, whether they live in Michigan or another state. Michigan-sourced income is taxable in Michigan regardless of where the shareholder resides. A tax professional can help you figure out how residency affects your specific filing obligations.
Michigan sales and use tax
Michigan's statewide sales tax rate is 6%. If your corporation sells taxable physical goods or certain services, you need to collect sales tax at the point of sale and remit it to the Michigan Department of Treasury. Necessities like groceries and prescription drugs are generally exempt.
Use tax is the counterpart to sales tax. It applies when your corporation buys taxable goods or services from an out-of-state seller who didn't collect Michigan sales tax. The rate is the same — 6%. Both taxes apply to C Corps and S Corps equally.
Federal taxes for Michigan corporations
Federal tax obligations sit on top of Michigan state taxes and differ significantly between C Corps and S Corps. C Corps pay the federal corporate income tax rate of 21% on net income at the entity level. S Corps pass income through to shareholders, who pay federal income tax at their individual rates.
S Corp shareholders who work in the business also pay themselves a reasonable salary, which is subject to federal payroll taxes — Social Security and Medicare. Distributions above that salary are not subject to self-employment tax, which is one reason the S Corp election is popular for profitable small businesses. A tax professional can help you figure out the right salary-to-distribution split for your situation.
Estimated tax payments
Most Michigan corporations need to make estimated tax payments throughout the year rather than paying everything at filing time. C Corps make estimated payments toward their Michigan CIT liability. S Corp shareholders make estimated payments toward their personal income tax on pass-through income.
Federal estimated tax payments follow the same logic. If your corporation or its shareholders expect to owe $500 or more in federal taxes for the year, the IRS generally requires quarterly estimated payments. Missing these can mean underpayment penalties on top of the tax owed. Check the IRS website or talk to a tax professional to confirm your payment schedule.
FAQ
Michigan's Corporate Income Tax rate is 6%, applied to a C Corp's apportioned Michigan income. Michigan uses single-factor sales apportionment, so only the share of sales tied to Michigan customers determines how much income is taxable in the state. S Corps are not subject to this tax at the entity level — income passes through to shareholders, who pay Michigan's 4.25% personal income tax rate on their share.
It depends on the level. At the state level, a Michigan S Corp is a pass-through entity — the business itself doesn't pay Michigan Corporate Income Tax. Instead, each shareholder reports their share of income on their personal Michigan return and pays the 4.25% flat personal income tax rate. At the federal level, shareholders pay income tax at their individual rates and must pay themselves a reasonable salary if they work in the business, which is subject to payroll taxes.
Yes. Michigan has a statewide sales tax rate of 6%. If your corporation sells taxable physical goods or certain services, you need to collect and remit sales tax to the Michigan Department of Treasury. Michigan also has a use tax at the same 6% rate, which applies when you buy taxable goods from an out-of-state seller who didn't collect Michigan sales tax. Both taxes apply to C Corps and S Corps equally.
No. Michigan doesn't levy a franchise tax for the privilege of doing business in the state. You won't owe a separate annual tax just for being incorporated in Michigan, unlike states such as California or Delaware that charge a minimum franchise tax regardless of income.
Yes. Most Michigan corporations need to make estimated tax payments during the year. C Corps make quarterly estimated payments toward their Michigan Corporate Income Tax liability. S Corp shareholders make estimated payments toward their personal income tax on pass-through income. Federal estimated payments are also required if you expect to owe $500 or more for the year. Missing estimated payments can result in underpayment penalties, so talk to a tax professional to set up the right schedule.
A Michigan S Corp must first be formed as a corporation with the Michigan Department of Licensing and Regulatory Affairs (LARA), then file IRS Form 2553 to elect S Corp status at the federal level. Michigan automatically recognizes the federal S Corp election — there's no separate state-level S Corp election form. From there, the S Corp files an annual Michigan informational return, and each shareholder reports their share of income on their personal Michigan income tax return. Annual reports are due to LARA by May 15 each year.
A Michigan C Corp pays the Michigan Corporate Income Tax at 6% on its apportioned Michigan income, plus the federal corporate income tax at 21% on net income. If the business sells taxable goods or services, it also collects and remits Michigan sales tax at 6%. Shareholders who receive dividends pay personal income tax on those distributions separately — this is the double taxation that comes with C Corp status. There's no Michigan franchise tax.
