Menard Inc. v. Dep't of Treasury. Sears Roebuck & Co.

• Decision Date: 12 September 2013
• Docket Number: Docket Nos. 310399,312168.,311053,311294,311261
• Citation: 302 Mich.App. 467,838 N.W.2d 736
• Parties: MENARD INC. v. DEPARTMENT OF TREASURY. Sears Roebuck and Co. v. State Treasurer. Menard Inc. v. State Treasurer. Art Van Furniture–Conner Inc. v. State Treasurer. Art Van Furniture Inc. v. State Treasurer.
• Court: Court of Appeal of Michigan — District of US

302 Mich.App. 467

838 N.W.2d 736

MENARD INC.

v.DEPARTMENT OF TREASURY.

Sears Roebuck and Co.

v.State Treasurer.

Menard Inc.

v.State Treasurer.

Art Van Furniture–Conner Inc.

v.State Treasurer.

Art Van Furniture Inc.

v.State Treasurer.

Docket Nos. 310399, 311053, 311261, 311294, 312168.

Court of Appeals of Michigan.

Submitted May 7, 2013, at Lansing.

Decided Sept. 12, 2013, at 9:00 a.m.

Bill Schuette, Attorney General, John J. Bursch, Solicitor General, Richard A. Bandstra, Chief Legal Counsel, and Scott L. Damich, Assistant Attorney General, for Department of Treasury, State Treasurer, and State of Michigan.

Bodman PLC, Detroit (by Joseph J. Shannon), and Akerman Senterfitt (by Peter O. Larsen, Michael J. Bowen, and David E. Otero), for Menard, Inc.; Sears, Roebuck and Co., Art Van Furniture–Conner, Inc., and Art Van Furniture, Inc.

Before: FORT HOOD, P.J., and FITZGERALD and O'CONNELL, JJ.

PER CURIAM.

In these consolidated appeals, the issue presented is whether plaintiffs, as retailers,are entitled to a refund pursuant to the bad debt provision, MCL 205.54i, of Michigan's General Sales Tax Act (GSTA), MCL 205.51 et seq., when the losses were incurred by a third-party financing company. We conclude that plaintiffs are not entitled to the refunds under the bad debt provision, and, in each action, summary disposition in favor of defendants is proper.¹

I. BASIC FACTS AND PROCEDURAL HISTORY

In these cases, plaintiffs, as retailers, entered into agreements with financing companies to issue private label credit cards (PLCC).² When a customer made a purchase with a PLCC, the retailer remitted the sales tax to the treasury department. In accordance with the terms of the agreements between the retailer and the financing companies, the retailer received reimbursement for the purchase ³ and the applicable sales tax. When the customers failed to pay the amounts owed on their PLCC, the financing company wrote off the bad debts. However, plaintiffs, as the retailers, also sought a refund from the treasury department of the sales tax attributable to the bad debt amount. Defendants asserted that plaintiffs were not entitled to a refund of the sales tax because they did not fulfill the requirements of MCL 205.54i(1)(a). Plaintiffs argued that their actions, coupled with the actions of the lender, qualified for the bad debt deduction of MCL 205.54i(1)(a) pursuant to the decision in DaimlerChrysler Servs. North America, LLC v. Dep't of Treasury, 271 Mich.App. 625, 723 N.W.2d 569 (2006), superseded by statute as recognized in GMAC LLC v. Dep't of Treasury, 286 Mich.App. 365, 374, 781 N.W.2d 310 (2009).⁴ Pursuant to the plain language of MCL 205.54i, as amended by 2007 PA 105, and the rules governing taxation, we hold that plaintiffs are not entitled to the refund.

II. RULES REGARDING STATUTORY CONSTRUCTION

A trial court's ruling regarding a motion for summary disposition presents a question of law subject to review de novo. Titan Ins. Co. v. Hyten, 491 Mich. 547, 553, 817 N.W.2d 562 (2012). The interpretation and application of a statute presents a question of law that the appellate court reviews de novo. Whitman v. City of Burton, 493 Mich. 303, 311, 831 N.W.2d 223 (2013). The judiciary's objective when interpreting a statute is to discern and give effect to the intent of the Legislature. Id. Once the intent of the Legislature is discovered, it must prevail regardless of any rule of statutory constructionto the contrary. In re Certified Question, 433 Mich. 710, 722, 449 N.W.2d 660 (1989). First, the court examines the most reliable evidence of the Legislature's intent, the language of the statute itself. Whitman, 493 Mich. at 311, 831 N.W.2d 223. “When construing statutory language, [the court] must read the statute as a whole and in its grammatical context, giving each and every word its plain and ordinary meaning unless otherwise defined.” In re Receivership of 11910 South Francis Rd., 492 Mich. 208, 222, 821 N.W.2d 503 (2012). Effect must be given to every word, phrase, and clause in a statute, and the court must avoid a construction that would render part of the statute surplusage or nugatory. Johnson v. Recca, 492 Mich. 169, 177, 821 N.W.2d 520 (2012). “If the language of a statute is clear and unambiguous, the statute must be enforced as written and no further judicial construction is permitted.” Whitman, 493 Mich. at 311, 831 N.W.2d 223. “Generally, when language is included in one section of a statute but omitted from another section, it is presumed that the drafters acted intentionally and purposely in their inclusion or exclusion.” People v. Peltola, 489 Mich. 174, 185, 803 N.W.2d 140 (2011). The courts may not read into the statute a requirement that the Legislature has seen fit to omit. In re Hurd–Marvin Drain, 331 Mich. 504, 509, 50 N.W.2d 143 (1951); Mich. Basic Prop. Ins. Ass'n v. Office of Fin. & Ins. Regulation, 288 Mich.App. 552, 560, 808 N.W.2d 456 (2010). “When the Legislature fails to address a concern in the statute with a specific provision, the courts cannot insert a provision simply because it would have been wise of the Legislature to do so to effect the statute's purpose.” Mich. Basic Prop. Ins. Ass'n, 288 Mich.App. at 560, 808 N.W.2d 456 (quotation marks and citation omitted). Statutes that address the same subject matter or share a common purpose are in pari materia and must be read collectively as one law, even when there is no reference to one another. Maple Grove Twp. v. Misteguay Creek Intercounty Drain Bd., 298 Mich.App. 200, 212, 828 N.W.2d 459 (2012). “The word ‘or’ generally refers to a choice or alternative between two or more things.” Auto–Owners Ins. Co. v. Stenberg Bros., Inc., 227 Mich.App. 45, 50, 575 N.W.2d 79 (1997).

III. RULES REGARDING TAXATION, DEDUCTION, AND EXEMPTION

State legislatures have great discretionary latitude in formulating taxes. The legislature must determine all question of State necessity, discretion or policy in ordering a tax and in apportioning it. And the judicial tribunals of the State have no concern with the policy of State taxation determined by the legislature. [In re Request for Advisory Opinion Regarding Constitutionality of 2011 PA 38, 490 Mich. 295, 308, 806 N.W.2d 683 (2011) (quotation marks and citations omitted).]

When interpreting a tax statute, the power to tax must be expressly stated, not inferred. Mich. Bell Tel. Co. v. Dep't of Treasury, 445 Mich. 470, 477, 518 N.W.2d 808 (1994); Ameritech Publishing, Inc. v. Dep't of Treasury, 281 Mich.App. 132, 136, 761 N.W.2d 470 (2008). “Tax laws will not be extended in scope by implication or forced construction.” Ameritech Publishing, Inc., 281 Mich.App. at 136, 761 N.W.2d 470. “[A]mbiguities in the language of a tax statute are to be resolved in favor of the taxpayer.” Mich. Bell Tel. Co., 445 Mich. at 477, 518 N.W.2d 808. The appellate court “ may not vary the clear and unequivocal meaning of the words used in the statute and determine tax matters solely on the grounds of unwisdom or of public policy.”

Ready–Power Co. v. City of Dearborn, 336 Mich. 519, 525, 58 N.W.2d 904 (1953).

A “tax deduction” is a “subtraction from gross income in arriving at taxable income.” In re Request for Advisory Opinion, 490 Mich. at 333 n. 40, 806 N.W.2d 683 (quotation marks and citation omitted). A “tax exemption” is characterized as “[i]mmunity from the obligation of paying taxes in whole or in part.” Id. Although the two principles differ, the net effect is the same because both reduce gross income when computing taxable income. Id. (quotation marks and citation omitted). Taxation is the rule, and exemptions are the exception. Ladies Literary Club v. City of Grand Rapids, 409 Mich. 748, 754, 298 N.W.2d 422 (1980). Consequently, statutory exemptions are strictly construed against the taxpayer. ANR Pipeline Co. v. Dep't of Treasury, 266 Mich.App. 190, 201, 699 N.W.2d 707 (2005). Similarly, a deduction presents a matter of legislative grace, and a clear provision must be identified to allow for a particular deduction. Id. A deduction must be clearly expressed because the “propriety of a deduction does not turn upon general equitable considerations, such as a demonstration of effective economic and practical equivalence.” Perry Drug Stores, Inc. v. Dep't of Treasury, 229 Mich.App. 453, 461, 582 N.W.2d 533 (1998) (citation and quotation marks omitted). The burden of proving a deduction is on the party seeking the deduction. See Southfield Western, Inc. v. City of Southfield, 146 Mich.App. 585, 590, 382 N.W.2d 187 (1985).

In practice, the rules of construction governing exemptions may be applied to the rules addressing deductions. See Detroit Edison Co. v. Dep't of Revenue, 320 Mich. 506, 514–515, 31 N.W.2d 809 (1948). In GMAC LLC, 286 Mich.App. at 374–375, 781 N.W.2d 310, this Court set forth the following rules regarding tax exemptions:

Moreover, “[a]n exemption will not be inferred from language of a statute if the words admit of any other reasonable construction.” Tax exemptions are disfavored, and the burden of proving an entitlement to an exemption is on the party claiming the right to the exemption. Tax exemptions are in derogation of the principle that all shall bear a proportionate share of the tax burden, and therefore, a tax exemption shall be strictly construed. [Citations omitted.]

With regard to the clarity of the language required to claim an exemption and the burden of proof, our Supreme Court has held:

“An intention on the part of the legislature to grant an exemption from the taxing power of the State will never be implied from language which will admit of any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by necessary implication from the language used, for it is a well-settled principle that, when a specific privilege or exemption is claimed under a statute, charter or act of incorporation, it is to be construed strictly against...