Ammex, Inc. v. Department of Treasury, Docket No. 206740.

Decision Date21 December 1999
Docket NumberDocket No. 206740.
Citation237 Mich. App. 455,603 N.W.2d 308
PartiesAMMEX, INC., Plaintiff-Appellant, v. DEPARTMENT OF TREASURY, Defendant-Appellee.
CourtCourt of Appeal of Michigan — District of US

Foster, Swift, Collins & Smith, P.C. (by Robert E. McFarland), Farmington Hills, and Clark Hill P.L.C. (by George N. Bashara, Jr.), Detroit, for the plaintiff.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, and Tracy A. Sonneborn, Assistant Attorney General, for the defendant.

Before: SAWYER, P.J., and MURPHY and TALBOT, JJ.

TALBOT, J.

This case involves the state's imposition of motor fuel taxes and sales taxes on the gasoline and diesel fuel sold by plaintiffs to end-use consumers. Plaintiff is a Michigan corporation that owns a "duty-free" retail facility in the city of Detroit immediately adjacent to the Ambassador Bridge, which links the United States to Canada. Plaintiff's facility sells a variety of goods in "personal use" quantities, including gasoline and diesel fuel dispensed directly into the fuel tanks of its customers' vehicles. Every customer entering plaintiff's facility must exit the facility over the Ambassador Bridge into Canada. The fuel dispensing tanks on plaintiff's property are located less than two miles from the border between the United States and Canada. All of the roads from plaintiff's facility to Canada, including the Ambassador Bridge, are privately owned.

Since January 1, 1994, plaintiff has paid sales taxes and motor fuel taxes on its sales of motor fuel under protest. Plaintiff filed this action seeking a refund of the sales taxes and motor fuel taxes it paid under protest. In its complaint, plaintiff pleaded a variety of statutory and constitutional grounds. The case was submitted on stipulated facts to the Court of Claims, which entered an order of judgment in favor of the state. Plaintiff appeals as of right, and we affirm.

I

The motor fuel tax act, M.C.L. § 207.101 et seq.; MSA 7.291 et seq., imposes a tax at a specific rate per gallon on all gasoline and diesel fuel sold in Michigan or used in propelling motor vehicles on the public roads and highways of Michigan. See M.C.L. § 207.102; MSA 7.292; Roosevelt Oil Co. v. Secretary of State, 339 Mich. 679, 685-686, 64 N.W.2d 582 (1954). The purpose of the act is to "prescribe a privilege tax for the use of the public highways by owners and drivers of motor vehicles." See Roosevelt, supra at 685, 64 N.W.2d 582. Although the tax is intended to be imposed on the ultimate consumer of gasoline or diesel fuel, it is collected by the supplier at the time of distribution. See M.C.L. § 207.108a; MSA 7.298(1); Roosevelt, supra at 686, 64 N.W.2d 582. In this case, plaintiff paid the motor fuel taxes "up front" when it purchased the gasoline and diesel fuel from its suppliers. The suppliers were required to remit the tax to the state, and plaintiff, in turn, had the ability to pass on the economic burden of the tax by including the amount of the tax in the price of the gasoline and diesel fuel sold to its customers. Finally, the motor fuel tax act provides that the "purchaser" of gasoline or diesel fuel used for a purpose other than the operation of a motor vehicle on Michigan's public roads and highways may file a claim for a refund of the taxes paid. See M.C.L. § 207.112(2); MSA 7.302(2), M.C.L. § 207.122(3); MSA 7.316(2)(3).

The General Sales Tax Act, M.C.L. § 205.51 et seq.; MSA 7.521 et seq., imposes a tax measured by a percentage of the gross proceeds of a business. See M.C.L. § 205.52; MSA 7.522. The sales tax is imposed on the seller for the privilege of engaging in the business of making retail sales of tangible personal property in Michigan. E.g., Univ of Michigan Bd. of Regents v. Dep't of Treasury, 217 Mich. App. 665, 669, 553 N.W.2d 349 (1996). Although the legal incidence of the sales tax falls on the retailer, the retailer is authorized to pass the economic burden of the tax onto the purchaser by collecting an equal amount at the point of sale. See World Book, Inc. v. Dep't of Treasury, 459 Mich. 403, 408, 590 N.W.2d 293 (1999); Nat'l Bank of Detroit v. Dep't of Revenue, 334 Mich. 132, 138, 54 N.W.2d 278 (1952). When the property sold at retail is gasoline, the sales tax is collected from the retailer before the sale in much the same manner as motor fuel taxes are collected. See M.C.L. § 205.56a; MSA 7.527(1).

II

Plaintiff argues that the state's imposition of the taxes at issue in this case constituted a violation of the Import-Export Clause of the United States Constitution, which provides as follows:

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws.... [U.S. Const., art. I, § 10, cl. 2.]

Under the "modern" approach to the Import-Export Clause, first announced in Michelin Tire Corp. v. Wages, 423 U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495 (1976), the primary focus is on the nature of the tax itself (i.e., whether it was an "impost" or "duty" within the meaning of the constitution) rather than on the nature of the item taxed (i.e., whether it was an "import" or "export" within the meaning of the constitution). See Itel Containers Int'l Corp. v. Huddleston, 507 U.S. 60, 76, 113 S.Ct. 1095, 122 L.Ed.2d 421 (1993); Limbach v. Hooven & Allison Co., 466 U.S. 353, 359-360, 104 S.Ct. 1837, 80 L.Ed.2d 356 (1984); Washington Dep't of Revenue v. Ass'n of Washington Stevedoring Cos., 435 U.S. 734, 751-753, 98 S.Ct. 1388, 55 L.Ed.2d 682 (1978). The Supreme Court has identified three policy considerations underlying the clause:

[T]he Federal Government must speak with one voice when regulating commercial relations with foreign governments, and tariffs, which might affect foreign relations, could not be implemented by the States consistently with that exclusive power; [2] import revenues were to be the major source of revenue of the Federal Government and should not be diverted to the States; and [3] harmony among the States might be disturbed unless seaboard States, with their crucial ports of entry, were prohibited from levying taxes on citizens of other States by taxing goods merely flowing through their ports to the other States not situated as favorably geographically. [Michelin, supra at 285-286, 96 S.Ct. 535.]

A tax is considered an "impost" or "duty" if its imposition offends one of these policy considerations. See, e.g., Washington Stevedoring, supra at 752, 98 S.Ct. 1388. Before Michelin, it was simply assumed that all taxes on imports and exports were prohibited. The issue in those cases was merely whether the item taxed was an import or export. See Washington Stevedoring, supra at 751-752, 98 S.Ct. 1388 (citing cases). This view was espoused by the United States Supreme Court in Richfield Oil Corp. v. State Bd. of Equalization, 329 U.S. 69, 77-78, 67 S.Ct. 156, 91 L.Ed. 80 (1946), which held that the imposition of a nondiscriminatory state sales tax on the sale of oil intended for exportation from California to New Zealand ran afoul of the Import-Export Clause.

Plaintiff relies on Richfield Oil for the proposition that Michigan cannot constitutionally impose sales or motor fuel taxes on the gasoline and diesel fuel sold at its facility. The state, on the other hand, contends that the Supreme Court's holding in Richfield Oil has been undermined by the post-Michelin approach to Import-Export Clause jurisprudence. The Richfield Oil case, which has never been expressly overruled, involved a tax imposed directly on goods in export transit.1 See Richfield Oil, supra at 84, 67 S.Ct. 156. The same cannot be said of Michelin or Washington Stevedoring. See United States v. Int'l Business Machines Corp., 517 U.S. 843, 861, 116 S.Ct. 1793, 135 L.Ed.2d 124 (1996). In Washington Stevedoring, supra at 757, n. 23, 98 S.Ct. 1388, the Court specifically noted that it "did not reach the question of the applicability of the Michelin approach when a State directly taxes imports or exports in transit." More recently, in Int'l Business Machines, supra at 862, 116 S.Ct. 1793, the Court explained that it "has never upheld a state tax assessed directly on goods in import or export transit." Accordingly, we must conclude that Richfield Oil has precedential value. See Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989) ("If a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the [lower court] should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions."); see also Virginia Indonesia Co. v. Harris Co. Appraisal Dist., 910 S.W.2d 905, 911-912 (Tex., 1995).

Despite our determination that Richfield Oil has precedential value, we are not persuaded that it requires reversal in this case. The California sales tax at issue in Richfield Oil was imposed on the sale of oil placed in the storage tanks of a ship bound for New Zealand. Richfield Oil, supra at 71, 67 S.Ct. 156. The Court determined that the oil was an "export" within the meaning of the Import-Export Clause because at the time it was taxed it had already begun its movement toward an intended foreign destination. See id. at 82-83, 67 S.Ct. 156. Under the "stream of export" doctrine, exportation commences when an article begins its physical entry into the export stream, which is its final, continuous journey out of the country. See Washington Stevedoring, supra at 752, 98 S.Ct. 1388; Kosydar v. Nat'l Cash Register Co., 417 U.S. 62, 66-71, 94 S.Ct. 2108, 40 L.Ed.2d 660 (1974); Coe v. Errol, 116 U.S. 517, 527, 6 S.Ct. 475, 29 L.Ed. 715 (1886). The word "export" means the transportation of goods from the United States to a foreign country. Swan & Finch...

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