National Bank of Detroit v. Department of Revenue of the State of Mich., 43

• Decision Date: 04 October 1954
• Docket Number: No. 43,43
• Citation: 66 N.W.2d 237,340 Mich. 573
• Parties: NATIONAL BANK OF DETROIT, a national banking association, Plaintiff and Appellant, v. DEPARTMENT OF REVENUE OF THE STATE OF MICHIGAN, Defendant and Cross-Appellant.
• Court: Michigan Supreme Court

Page 237

66 N.W.2d 237

340 Mich. 573

NATIONAL BANK OF DETROIT, a national banking association Plaintiff and Appellant, v. DEPARTMENT OF REVENUE OF THE STATE OF MICHIGAN, Defendant and Cross-Appellant.

No. 43.

Supreme Court of Michigan.

Oct. 4, 1954.

Dickinson, Wright, Davis, McKean & Cudlip, Detroit, for plaintiff and appellant.

Frank G. Millard, Atty. Gen., Edmund E. Shepherd, Sol. Gen., Lansing, T. Carl Holbrook, William D. Dexter, Assts. Atty. Gen., for defendant-appellee.

Before the Entire Bench.

CARR, Justice.

The plaintiff is a national banking institution organized under the Federal statute. 12 U.S.C.A. § 21 et seq., U.S.R.S. § 5133 et seq. Its principal office is in the city of Detroit and it maintains 43 branches throughout the metropolitan area. In addition to serving its depositors, it acts as agent for the Federal government in the purchase and sale of securities, the issuance and redemption of United States savings bonds, and in other ways. In the course of its operations it purchases from Michigan retailers furniture, office equipment, and other tangible personal property necessary to the conduct of its business. It also operates a cafeteria for the benefit of its employees, to whom it sells food and service, and from time to time sells repossessed merchandise to other parties. The defendant department of revenue is charged by statute with the administration of the Michigan sales tax act. ¹

Prior to July 1, 1949, the sales tax act was construed as exempting from the tax sales to national banks. Act No. 272 of the Public Acts of that year purported to eliminate such exemption. Thereupon the defendant took the position that the tax was payable on sales made to plaintiff, and retailers added the amount of the tax to their selling price. Plaintiff has also paid the tax on the sales made by it in the course of its operations.

The present suit was instituted for the purpose of obtaining a declaratory decree ² determining whether or not the transactions referred to are subject to the payment of the sales tax imposed on retailers for the privilege of transacting business in this State. Specifically, plaintiff asked in its bill of complaint that the Court declare: 1st, That retail sales of tangible personal property to plaintiff are not subject to the sales tax; and 2nd, That the tax is not applicable to retail sales of tangible personal property made by plaintiff. It is the theory and claim of the plaintiff that since the retailers from whom it makes its purchases in this State habitually include the tax in the selling price the economic burden falls on it, and that, in consequence the tax, in practical effect, is one imposed on it as a result of its purchases. The trial court rejected the contention, pointing out that the Michigan statute does not require, as a matter of law, that any part of the tax shall be passed on by the retailer to the purchaser, and holding that the legal incidence of such tax is on the seller of the merchandise and not on the purchaser. It was further held that sales of merchandise made by plaintiff in the course of its operations are not subject to the tax. A decree was entered accordingly, and both parties have appealed.

The first question raised by plaintiff has been determined by this Court in Federal Reserve Bank of Chicago v. Department of Revenue, 339 Mich. 587, 64 N.W.2d 639. It was there held that sales to a banking association organized under the Federal Reserve Act, 38 Stat. 251, 12 U.S.C.A. § 221 et seq., are subject to the tax even though the economic burden is, in the main, passed on to the consumer. After an analysis and...