Advo-Systems, Inc. v. Department of Treasury

• Decision Date: 05 December 1990
• Docket Number: ADVO-SYSTEM,INC,Docket No. 120519
• Citation: 186 Mich.App. 419,465 N.W.2d 349
• Parties: , Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee. 186 Mich.App. 419, 465 N.W.2d 349
• Court: Court of Appeal of Michigan — District of US

Page 349

465 N.W.2d 349

ADVO-SYSTEMS, INC., Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee.

Docket No. 120519.

186 Mich.App. 419, 465 N.W.2d 349

Court of Appeals of Michigan.

Submitted June 4, 1990, at Lansing.

Decided Dec. 5, 1990, at 9:08 a.m.

Released for Publication Feb. 11, 1991.

[186 MICHAPP 420] Mahoney, Walling & Kelley by Jeffrey C. Robbins, Minneapolis, Minn. and Varnum, Riddering, Schmidt & Howlett by Perrin Rynders, Grand Rapids, for petitioner-appellant.

Frank J. Kelley, Atty. Gen., Gay Secor Hardy, Sol. Gen., and Richard R. Roesch and Ross H. Bishop, Asst. Attys. Gen., for respondent-appellee.

Before SAWYER, P.J., and MICHAEL J. KELLY and MURPHY, JJ.

MURPHY, Judge.

Petitioner appeals from a judgment of the Michigan Tax Tribunal affirming a use tax assessment against petitioner in the amount of $153,525 plus penalties and interest. We affirm.

Petitioner is a foreign corporation, with its principal executive offices located in Connecticut, which operates a nationwide direct mail business from nineteen production facilities, including a branch facility located in Livonia, Michigan. Petitioner mails advertising material for national and local businesses by third-class bulk mail using a concept known as a "Marriage Mail" package. Under this method, individual pieces of advertising material are combined loosely inside a larger "wrap" piece, which also typically contains advertising. Petitioner's identification and the date of publication of the particular piece are printed in the margin. Additionally at the top of the wrap piece appears a masthead of sorts identifying the piece by its name of "Mailbox Values." In short, Mailbox Values is a collection of the type of advertising supplements one might find in the Sunday newspaper contained under the outside wrap piece.

Mailbox Values is accompanied by a mailing card, apparently required by the post office. On the back side of the card appears additional advertising[186 MICHAPP 421] . On the front, the return address, the bulk-rate postage paid notice, and a space to affix a mailing label are printed. In the right-hand portion of the front side, an announcement and photograph of a missing child appear, along with a phone number for the recipient to contact if they have any information relating to that child.

Petitioner's customers use its service to save the postage costs of mailing separately their advertisements. The entire collection constitutes one mailing piece and, thus is subject to one postage charge. Petitioner does not print the individual advertising pieces contained within Mailbox Values. Instead, it either utilizes preprinted advertising materials supplied by a customer or arranges for an independent printer to print the customer's advertising piece and deliver the finished product to petitioner for inclusion in Mailbox Values.

Mailbox Values is distributed free of charge on a weekly basis to approximately three million residential mail customers in Michigan and forty-five million households nationwide. Presumably, each week's edition varies in the content of retailers' advertising materials.

At issue in this case is the use tax which respondent claims is due on the printed materials provided to petitioner for inclusion in its mailer on which no sales or use tax was paid. Petitioner claims that it is exempt from the use tax on these materials under M.C.L. Sec. 205.94(n); M.S.A. Sec. 7.555(4)(n), which exempts newspapers and other periodicals and materials consumed in producing such newspapers and periodicals from liability for the use tax. The amount of tax due, along with penalty and interest, is not in dispute, if we determine that petitioner owes the tax. Rather, petitioner and respondent disagree over whether petitioner is subject to the tax. The Tax Tribunal ruled in [186 MICHAPP 422] respondent's favor. The hearing officer concluded "that a 'periodical' is intended to refer to a publication more akin to a magazine or a publication having articles or literary content and being a part of a serial or series and probably has some subscribers rather than the ADVO 'Marriage Mail' advertising package." The Tax Tribunal agreed, finding that the Legislature's use of the word periodical in two of the four use tax exemptions indicated an intent that the term have a consistent meaning throughout Sec. 4(n). "While we agree that a periodical need not necessarily contain a series of articles, we conclude that it is something more than a loose collection of unsolicited advertisements delivered to households by direct mail."

On appeal, petitioner argues that Mailbox Values qualifies as a "periodical" within the scope of the exemption set forth in Sec. 4(n), which provides:

A newspaper or periodical classified under federal postal laws and regulations effective September 1, 1985 as second class mail matter or as a controlled circulation publication or qualified to accept legal notices for publication in this state, as defined by law, or any other newspaper or periodical of general circulation, established at least 2 years, and published at least once a week, and a copyrighted motion picture film. Tangible personal property used or consumed, and not becoming a component part of a newspaper or periodical, except that portion or percentage of tangible personal property used or consumed in producing an advertising supplement that becomes a component part of a newspaper or periodical, and a copyrighted motion picture film is subject to tax. For purposes of this subdivision, tangible personal property that becomes a component part of a newspaper or periodical, and thereby not subject to tax, shall include an advertising supplement inserted into and circulated with a newspaper or periodical which is otherwise exempt from tax under this subdivision, if the advertising supplement is delivered directly to the newspaper or periodical by a person other than the advertiser, or the advertising supplement is printed by the newspaper or periodical.

[186 MICHAPP 423] The statute exempts four classifications of publications, as well as tangible personal property used or consumed in producing an advertising supplement to such newspaper or periodical. Petitioner does not claim that it comes under the first three provisions: as a periodical classified as second-class mail matter, as a controlled circulation publication, or as a publication qualified to accept legal notices. Rather, petitioner maintains that it constitutes "any other newspaper or periodical of general circulation, established at least 2 years, and published at least once a week." Respondent admits that Mailbox Values has been established at least two years and is published at least once a week, but argues that it is not a "periodical of general circulation." We agree.

Tax exemptions are the antithesis of tax equality. Therefore, they are strictly construed against the taxpayer. Town & Country Dodge, Inc. v. Dep't of Treasury, 420 Mich. 226, 243, 362 N.W.2d 618 (1984); Ladies Literary Club v. Grand Rapids, 409 Mich. 748, 753-754, 298 N.W.2d 422 (1980). Exemption statutes are, nevertheless, interpreted according to ordinary rules of statutory construction. Ass'n of Little Friends, Inc. v. Escanaba, 138 Mich.App. 302, 307, 360 N.W.2d 602 (1984).

Common sense should be applied when construing a statute. Panich v. Iron Wood Products Corp., 179 Mich.App. 136, 141, 445 N.W.2d 795 (1989). When a statute is unambiguous, it must be applied as written. Achtenberg v. East Lansing, 421 Mich. 765, 770, 364 N.W.2d 277 (1985). To that end, words [186 MICHAPP 424] and phrases in a statute are construed and understood according to their common and approved usage, unless they are otherwise defined in a statute or the construction is inconsistent with the manifest intent of the Legislature. M.C.L. Sec. 8.3a; M.S.A. Sec. 2.212(1); Town & Country, supra, 420 Mich. at 241-242, 362 N.W.2d 618.

The use of dictionary definitions is appropriate in interpreting undefined statutory terms. Swift v. Kent Co., 171 Mich.App. 390, 393, 429 N.W.2d 605 (1988). However, recourse to the dictionary is unnecessary when the legislative intent may be readily discerned from reading the statute itself. Renown Stove Co. v. Unemployment Compensation Comm., 328 Mich. 436, 440, 44 N.W.2d 1 (1950). Under petitioner's reasoning, we must accept, without question, the dictionary definition to be the plain and ordinary meaning of the term "periodical" as used in Sec. 4(n). The Random House College Dictionary (rev. ed., 1984), p. 987, defines "periodical" as follows:

n. 1. a magazine or other publication that is issued at regularly recurring intervals.--adj. 2. published at regularly recurring intervals. 3. of or pertaining to such publications. 4. periodic.

Additionally, Random House, supra at 1069, defines "publication" and "publish" as follows:

publication ... n. 1. the act of publishing. 2. the act of bringing to public notice. 3. the state or fact of being published. 4. something that is published, esp. a periodical....

* * * * * *

publish ... v.t. 1. to issue (printed or otherwise reproduced textual or graphic material) for sale or distribution to the public. 2. to issue publicly the work of (an author, artist, etc.). 3. to announce formally or officially. 4. to make publicly or generally known.--v.i. 5. to engage in the publishing to textual or graphic material. 6. (of an author) to have work published.

[186 MICHAPP 425] After reviewing these definitions, we conclude that adoption of the dictionary definition of periodical unnecessarily broadens the scope of the exemption granted by the Legislature. Dictionary definitions, while instructive, are not conclusive authority regarding the meaning of statutory terms; they are merely useful tools which may be used as guidance. Under the established rules of statutory construction, the "plain and ordinary" meaning of a statutory term controls. By its very...