Ammex, Inc. v. Treasury Dep't

• Citation: 726 N.W.2d 755,272 Mich. App. 486
• Decision Date: 19 October 2006
• Docket Number: Docket No. 260049.,Docket No. 265936.
• Parties: AMMEX, INC., Plaintiff-Appellee, v. DEPARTMENT OF TREASURY, Defendant-Appellant. AMMEX, INC., Plaintiff-Appellee, v. DEPARTMENT OF TREASURY, Defendant-Appellant.
• Court: Court of Appeal of Michigan (US)

726 N.W.2d 755

272 Mich. App. 486

AMMEX, INC., Plaintiff-Appellee, v. DEPARTMENT OF TREASURY, Defendant-Appellant.

AMMEX, INC., Plaintiff-Appellee, v. DEPARTMENT OF TREASURY, Defendant-Appellant.

Docket No. 260049.

Docket No. 265936.

Court of Appeals of Michigan.

Submitted May 2, 2006, at Lansing.

Decided October 19, 2006, at 9:00 a.m.

Released for Publication January 29, 2007.

Dykema Gossett P.L.L.C. (by Craig L. John, Mark H. Sutton, Steven E. Grob, and Thomas J. Murray), Bloomfield Hills, for the plaintiff.

Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Glenn R. White and Michael R. Bell, Assistant Attorneys General, for the defendant.

Before: BORRELLO, P.J., and SAAD and WILDER, JJ.

BORRELLO, P.J.

These consolidated cases concern whether plaintiff's sale of duty-free gasoline and diesel fuel from January 1, 2001, through March 31, 2001, at its duty-free retail facility in Detroit, Michigan, adjacent to the Ambassador Bridge, is subject to state taxation under the motor fuel tax act, MCL 207.101 et seq.,¹ and the General Sales Tax Act, MCL 205.51 et seq. In Docket No. 260049, defendant appeals as of right a judgment for plaintiff. In Docket No. 265936, defendant appeals as of right an order granting summary disposition in favor of plaintiff. For the reasons set forth in this opinion, we affirm in both cases.

I. Facts and Procedural History

Plaintiff operates a United States Customs Class 9 bonded warehouse,² also known as a "duty-free sales enterprise"³ or a "duty-free store,"⁴ in Detroit, Michigan. The warehouse is adjacent to the entrance to the Ambassador Bridge, which links the United States and Canada. Although plaintiff's duty-free store is within the United States, it is located beyond the exit point for travelers leaving the United States and is designated as "sterile" by the United States Customs Service because it is physically designed to ensure that anyone who enters the store has no alternative but to depart from the United States and enter Canada. Duty-free products purchased at plaintiff's store are therefore necessarily exported to Canada. The property on which plaintiff's facility is located is privately owned. In addition, all the roads leading from plaintiff's duty-free store to Canada and the Ambassador Bridge are also privately owned.

Plaintiff sells a variety of products from its duty-free store, including alcoholic beverages, tobacco products, perfume, watches, and other items of tangible personal property. In September 2000, the United States Customs Service granted plaintiff permission to expand its Class 9 customs bonded warehouse operation to include its three gasoline storage tanks and three diesel fuel storage tanks at the Ambassador Bridge facility, which allowed plaintiff to sell duty-free gasoline and diesel fuel.⁵ In 2001, plaintiff purchased all the motor fuel sold from its duty-free retail facility in Canada from a Canadian supplier. The motor fuel was then transported to plaintiff's duty-free facility under a United States Customs "in transit" bond and stored in fuel storage tanks at plaintiff's customs bonded warehouse to be sold to customers duty-free. Plaintiff prepaid Michigan gasoline and diesel fuel taxes to its Canadian supplier from January 1, 2001, through March 31, 2001.

Plaintiff filed a claim for a refund from defendant, seeking to recoup $204,158.95 in state gasoline taxes and $178,769.27 in state diesel fuel taxes that it prepaid its Canadian supplier for the period of January 1, 2001, through March 31, 2001. Defendant denied the refund, asserting that the Michigan motor fuel tax act does not exempt the sale of duty-free gasoline and diesel fuel from motor fuel taxes. After defendant denied plaintiff's claim for a refund, plaintiff filed a complaint in the Michigan Court of Claims. In its complaint, plaintiff sought, among other relief, a declaratory judgment that federal law regulating duty-free retail facilities preempted the imposition of taxes under the motor fuel tax act, and a declaratory judgment exempting plaintiff's purchase of gasoline and diesel fuel from its Canadian supplier from state motor fuel taxes. Plaintiff also requested a refund of the state motor fuel taxes that plaintiff prepaid to its Canadian supplier for the period of January 1, 2001, through March 31, 2001.

The case was submitted on stipulated facts to the Court of Claims. The Court of Claims held that the federal government's "extensive statutory and regulatory frameworks . . . preempt[] the operation of Michigan law" and enjoined defendant from assessing and collecting Michigan motor fuel tax on plaintiff's sales of motor fuel designated as duty-free merchandise and from enforcing any agreement requiring pre-payment of such taxes to plaintiff's Canadian supplier. The court also ordered defendant to refund the motor fuel tax prepaid by plaintiff for the period in question, with interest.⁶ Defendant appeals this judgment in Docket No. 260049.⁷

Plaintiff also filed a complaint in the Ingham Circuit Court challenging defendant's imposition of state sales tax on plaintiff's duty-free gasoline and diesel fuel. Plaintiff sought a declaratory ruling that the state sales tax did not apply to plaintiff's duty-free operations, that federal law regulating duty-free facilities preempted the state sales tax, and that application of the state sales tax act violated numerous provisions of the United States Constitution, including the Export Clause, the Import-Export Clause, the Commerce Clause, the Equal Protection Clause, and the Due Process Clause. Plaintiff moved for summary disposition under MCR 2.116(C)(10), arguing that it was entitled to summary disposition because there was no genuine issue of fact that the assessment of state sales tax on plaintiff's duty-free sales, including its sales of gasoline and diesel fuel, was preempted by federal law because of the existence of a comprehensive federal regulatory scheme governing the operation of duty-free stores. The trial court agreed and granted plaintiff's motion for summary disposition. Defendant appeals this order in Docket No. 265936.

II. Analysis

A. Standing

In Docket No. 260049, defendant contends as a preliminary matter that plaintiff lacks standing to pursue an action against defendant because plaintiff did not suffer an injury in fact in light of the fact that, according to defendant, plaintiff shifted the burden of the motor fuel tax to its customers and therefore did not bear the economic burden of the motor fuel tax.⁸ Thus, defendant contends, refunding the motor fuel tax prepaid by plaintiff would result in plaintiff receiving a windfall. Whether a party has standing is a question of law that this Court reviews de novo. Nat'l Wildlife Federation v. Cleveland Cliffs Iron Co., 471 Mich. 608, 612, 684 N.W.2d 800 (2004).

Plaintiff, as the party invoking the court's jurisdiction, had the burden to establish that it had standing to pursue a cause of action for a tax refund against defendant. Lee v. Macomb Co. Bd. of Comm'rs, 464 Mich. 726, 740, 629 N.W.2d 900 (2001). There are three elements to establish standing:

"First, the plaintiff must have suffered an `injury in fact'—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) `actual or imminent', not `conjectural' or `hypothetical.' Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be `fairly . . . trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court.' Third, it must be `likely,' as opposed to merely `speculative,' that the injury will be `redressed by a favorable decision.'" [Id. at 739, 629 N.W.2d 900, quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (citations omitted).]

Defendant's argument concerns the first element of standing: whether plaintiff suffered an injury in fact. The motor fuel tax act, MCL 207.101 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." Ammex, Inc. v. Dep't of Treasury, 237 Mich. App. 455, 459, 603 N.W.2d 308 (1999). "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.'" Id., quoting Roosevelt Oil Co. v. Secretary of State, 339 Mich. 679, 685, 64 N.W.2d 582 (1954). "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." Id.

The parties stipulated that plaintiff prepaid Michigan gasoline and diesel fuel taxes to its supplier from January 1, 2001, through March 31, 2001, and that plaintiff prepaid this tax to comply with defendant's demands that the supplier collect the tax from plaintiff. Defendant suggests that plaintiff shifted this cost to its customers and therefore suffered no injury in fact. In Anniston Mfg. Co. v. Davis, 301 U.S. 337, 348, 57 S.Ct. 816, 81 L.Ed. 1143 (1937), the United States Supreme Court stated, "[w]hile the taxpayer was undoubtedly hurt when he paid the tax, if he has obtained relief through the shifting of its burden, he is no longer in a position to claim an actual injury . . . ." Therefore, the factual inquiry in this case concerns whether plaintiff bore the economic burden of the motor fuel tax itself or whether it shifted this burden to its customers. The parties stipulated that plaintiff posted signs informing its customers that "duty and tax free diesel must be exported without road tax." Furthermore, the parties stipulated that plaintiff's sales receipts stated that "no state, federal duty, sales motor fuel or other taxes are part of the price." In light of the parties' stipulations, we reject defendant's...