Gen. Motors Corp.. v. Dep't of Treasury.

• Decision Date: 28 October 2010
• Docket Number: Docket No. 291947.
• Parties: GENERAL MOTORS CORPORATIONv.DEPARTMENT OF TREASURY.
• Court: Court of Appeal of Michigan — District of US

290 Mich.App. 355

803 N.W.2d 698

GENERAL MOTORS CORPORATION

v.DEPARTMENT OF TREASURY.

Docket No. 291947.

Court of Appeals of Michigan.

Submitted Aug. 3, 2010, at Lansing.Decided Oct. 28, 2010, at 9:00 a.m.

Honigman Miller Schwartz and Cohn LLP (by Alan M. Valade, June Summers Haas, and John D. Pirich) and Sutherland Asbill & Brennan LLP (by Kent L. Jones, Daniel H. Schlueter, and Jeffrey N. Starkey) for plaintiff.Michael A. Cox, Attorney General, B. Eric Restuccia, Solicitor General, and Bruce C. Johnson, Drew M. Taylor, and Heidi L. Johnson–Mehney, Assistant Attorneys General, for defendant.Before: M.J. KELLY, P.J., and MARKEY and OWENS, JJ.PER CURIAM.

Defendant, the Department of Treasury (Treasury), appeals by leave the order of the Court of Claims granting the motion of plaintiff General Motors Corporation (GM) for partial summary disposition with respect to liability on GM's two claims for refunds of taxes it paid on its employees' use of GM-manufactured “program vehicles” for tax periods from October 1, 1996, to August 31, 2007. GM asserts the use of program vehicles was exempt from taxation because the vehicles were “purchased for resale [or] demonstration purposes” under MCL 205.94(1)(c), as interpreted by Betten Auto Ctr., Inc. v. Dep't of Treasury, 272 Mich.App. 14, 723 N.W.2d 914 (2006), aff'd in part and vacated in part 478 Mich. 864, 731 N.W.2d 424 (2007). GM also asserts that 2007 PA 103, which amended the Use Tax Act, MCL 205.91 et seq. , to obviate the holding of Betten, was improperly enacted special legislation and, if applied retroactively, would violate GM's constitutional right to due process. Finally, GM contends that its employees' use of program vehicles was exempt from taxation under the Use Tax Act, even as amended.

The Court of Claims agreed with GM and ruled that the retroactive effect of 2007 PA 103 violated GM's right to due process because an 11–year period of retroactive application was contrary to the holding of United States v. Carlton, 512 U.S. 26, 114 S.Ct. 2018, 129 L.Ed.2d 22 (1994), which permitted only a “modest” period of retroactivity for economic legislation. The Court of Claims also held that 2007 PA 103, if applied retroactively, would violate Michigan's Constitution regarding special legislation, Const 1963, art 4, § 29, because it was enacted for the sole purpose of preventing GM from receiving use tax refunds. Finally, the Court of Claims ruled that GM's program vehicles were exempt from use tax under MCL 205.94(1)(c), as amended by 2007 PA 103, because “GM manufactured cars for resale and demonstration purposes” and “is not licensed as a new vehicle dealer, and thus, is not limited to the exemption on only 25 vehicles as set forth in MCL 205.94(1)(c)(iii).” We reverse.

I. LEGAL AND FACTUAL BACKGROUND

In its opinion and order, the Court of Claims summarized the factual background that frames the legal issues presented on this appeal:

As part of General Motors' (“GM”) manufacturing and reselling business, it tests, evaluates, demonstrates, and markets its vehicles and vehicles purchased for resale for [sic] GM subsidiaries. All of GM's salaried personnel in the United States in executive, professional, technical, and other positions, with certain limited exceptions are required, to drive a GM inventory vehicle in one of the Vehicle Programs as an integral part of their job assignment. GM's employee evaluations of driving performance assist GM in the marketing, testing, research, and design of vehicles by testing and collecting data from real world vehicle operation. The vehicles are held in inventory for resale and later sold to the final consumer. The employee's family and household members are prohibited from driving program vehicles except in very limited circumstances. During all the years in issue, GM was required by the Michigan Department of Treasury (“Treasury”), through audit enforcement, to self-assess and remit use taxes on its vehicle inventory operated under the Vehicle Program, and on Marketing Vehicles.

In Betten Auto Center v. Dep't of Treasury, 478 Mich. 864

[731 N.W.2d 424]

(2007), the Michigan Supreme Court affirmed a portion of a Court of Appeals decision where cars sold by a new car dealer are exempt from liability for any interim use to which the dealer puts them, pending resale, under the resale exemption. While Betten appeals were pending, GM filed two use tax refund claims. The first was filed on August 25, 2006, asking for a refund of $65,324,061 for October 1, 1996—March 26, 2002. Treasury placed the claim in abeyance. GM filed a second refund claim on September 14, 2007 seeking $51,433,651 for March 26, 2002—August 31, 2007.

On October 1, 2007, House Bill 4882 became law, as 2007 PA 103, amending the Use Tax Act. Treasury denied GM's refund claims on October 25, 2007, basing the denial on the statutory language of 2007 PA 103, which made clear GM's employees' use of the vehicles made the vehicles ineligible for the resale exemption. Enacting Section 2 of 2007 PA 103 made the amendments effective retroactively, beginning September 30, 2002, and for all tax years not barred by the applicable statute of limitations. GM then brought suit, timely filing its initial Complaint in the Court of Claims on December 27, 2007. GM now brings this Motion for Summary Disposition pursuant to MCR 2.116(C)(10), asserting there are no genuine issues with respect to any material fact, and thus, GM is entitled to judgment as a matter of law. Treasury asks that GM's motion to [sic] be denied and summary disposition be entered for Treasury pursuant to MCR 2.116(I)(2) and MCR 2.116(C)(8).

We summarize the legal history regarding the Betten decision, the Use Tax Act, and its amendment by 2007 PA 103 before addressing the parties' arguments.

The use tax is designed to complement the tax imposed under the General Sales Tax Act, MCL 205.51 et seq. People v. Rodriguez, 463 Mich. 466, 467 n. 1, 620 N.W.2d 13 (2000). At all pertinent times, the Use Tax Act imposed “a specific tax for the privilege of using, storing, or consuming tangible personal property in this state at a rate equal to 6% of the price of the property.” MCL 205.93(1). Property is exempt from use taxation if it is “sold in this state on which transaction a tax is paid under the general sales tax act” and “if the tax was due and paid on the retail sale to a consumer.” MCL 205.94(1)(a). Thus, the use tax “applies to certain personal property transactions in which the seller does not collect a sales tax on behalf of the state.” Rodriguez, 463 Mich. at 467 n. 1, 620 N.W.2d 13. Before its 2007 amendment, the Use Tax Act, in general, placed the ultimate responsibility for payment of its levy on the ultimate consumer or purchaser of tangible property. MCL 205.97; World Book, Inc. v. Dep't of Treasury, 459 Mich. 403, 408, 415–416, 590 N.W.2d 293 (1999); Betten, 272 Mich.App. at 19, 723 N.W.2d 914.

At issue in the present case are exemptions from use taxation for property “purchased for resale, demonstration purposes,” which before 2007 PA 103 provided:

(1) The following are exempt from the tax levied under this act, subject to subsection (2):

* * *

(c) Property purchased for resale, demonstration purposes, or lending or leasing to a public or parochial school offering a course in automobile driving except that a vehicle purchased by the school shall be certified for driving education and shall not be reassigned for personal use by the school's administrative personnel. For a dealer selling a new car or truck, exemption for demonstration purposes shall be determined by the number of new cars and trucks sold during the current calendar year or the immediately preceding year without regard to specific make or style according to the following schedule of 0 to 25, 2 units; 26 to 100, 7 units; 101 to 500, 20 units; 501 or more, 25 units; but not to exceed 25 cars and trucks in 1 calendar year for demonstration purposes. Property purchased for resale includes promotional merchandise transferred pursuant to a redemption offer to a person located outside this state or any packaging material, other than promotional merchandise, acquired for use in fulfilling a redemption offer or rebate to a person located outside this state.

* * *

(2) The property or services under subsection (1) are exempt only to the extent that the property or services are used for the exempt purposes if one is stated in subsection (1). The exemption is limited to the percentage of exempt use to total use determined by a reasonable formula or method approved by the department. [MCL 205.94, as amended by 2004 PA 172.]

In Betten, the plaintiffs were “all licensed automobile dealerships selling both new and used automobiles [that] paid [Treasury] a total of $48,449.74 in use taxes on vehicles that plaintiffs purchased for resale, allowed their employees to use, and ultimately resold.” Betten, 272 Mich.App. at 15, 723 N.W.2d 914. The plaintiffs had filed their claims for refunds after this Court decided Crown Motors of Charlevoix, Ltd. v. Dep't of Treasury, unpublished opinion per curiam of the Court of Appeals, issued November 4, 2003 (Docket No. 240555), 2003 WL 22495608.

The Crown case also involved a new and used car dealership and, although the parties agreed that the plaintiff had purchased all vehicles for resale and in fact resold them, Treasury asserted that the interim use of the vehicles was subject to use tax. Relying on Rodriguez, 463 Mich. at 471–472, 620 N.W.2d 13, the Crown Court reasoned that the exemption for property “purchased for resale” in MCL 205.94(1)(c) was clear and unambiguous and that this language “ ‘conveys a legislative intent inconsistent with purchase for another purpose.’ ” Crown, unpub. op. at 3, quoting Rodriguez, 463 Mich. at 472, 620 N.W.2d 13. Thus, the Crown Court held that the plaintiff was not liable for use tax because its inventory vehicles were purchased for resale, and...