Production Steel Strip Corp. v. City of Detroit
| Decision Date | 26 September 1972 |
| Docket Number | No. 1,Docket Nos. 11047,11048,1 |
| Citation | 202 N.W.2d 719,42 Mich.App. 698 |
| Parties | PRODUCTION STEEL STRIP CORPORATION, a Michigan corporation, Plaintiff-Appellee, v. CITY OF DETROIT, a municipal corporation, et al., Defendants-Appellants |
| Court | Court of Appeal of Michigan — District of US |
Michael M. Glusac, Corporation Counsel, Julius C. Pliskow and Lawrence W. Morgan, Asst. Corp. Counsels, Detroit, for City of Detroit.
William L. Cahalan, Pros. Atty., Aloysius J. Suchy and William F. Koney, Asst. Pros. Attys., Detroit, for Wayne County.
John L. Belanger, Ostrowski, Wilson, Belanger & Boman, Detroit, for Board of Education.
Shapero, Shapero & Cohn, Detroit, for plaintiff-appellee.
Before HOLBROOK, P.J., and DANHOF and T. M. BURNS, JJ.
Defendants, City of Detroit, County of Wayne, and the Board of Education for the City of Detroit, together with their respective treasurers, appeal from a judgment in favor of the plaintiff, Production Steel Strip Corporation (hereinafter referred to as taxpayer), in an action for a refund of a portion of its personal property taxes which it paid under protest for 1966 and 1967.
Taxpayer, as part of its business, purchases certain hot rolled steel coils. Some of the coil steel is purchased domestically, some is purchased from foreign sources. The domestic and foreign steel is identical and interchangeable.
Defendant taxing authorities levy a property tax on inventories. Thus, any domestic steel in taxpayer's inventory is subject to said property tax. As to steel purchased in foreign countries, however, it is not so simple due to the prohibition on the taxing of imports by a state contained in U.S.Const., Art. I, § 10. 1
Imported goods are not immune forever from such taxes, however. In Knight Newspapers, Inc. v. Detroit, 16 Mich.App. 438, 442, 168 N.W.2d 318, 319 (1969), this Court held that once imported goods become part of the 'current operational needs' of the business in question, the immunity is lost and local taxes may be levied thereon. The current operational needs are determined in the following manner:
Thus, in most cases applying the above formula, the assessors and need only multiply the number of days needed to replenish a taxpayer's stock by the quantity of goods which are used daily on the average to determine how much of the goods have lost their immunity for tax purposes.
In the instant case, however, the taxpayer purchases from both domestic and foreign sources. Delivery from domestic sources takes two weeks. Delivery from foreign sources takes two and one-half months. Therefore, the quantity of steel subject to the property tax depends upon which period of time is used to multiply by the taxpayer's daily needs.
The taxpayer argues that his daily needs should be multiplied by fourteen days, since all of its inventory can be replenished in that length of time. The taxing authorities argue, however, that the longer period should be used which would result, of course, in a greater quantity of steel upon which the taxing authorities could levy their property taxes.
Therefore the question we are called upon to decide is whether or not replenishment time for the application of the 'current operational needs' formula is to be measured by the replenishment time from foreign sources or by the actual replenishment time immediately after the tax date.
The trial court held that replenishment time is to be computed immediately after the tax date. We agree.
Although the cases relied upon by the taxing authorities applied the Colorado's 'current operational needs' formula in terms of the replenishment time from a foreign source, 2 those cases do not stand for the proposition that the definition of replenishment time is the replenishment time from a foreign source. A foreign source was the only source involved in those cases. Those cases did not touch upon the question presented in the instant case, namely, whether the foreign source in the actual source replenishment time was to be used where the taxpayer obtains goods from both foreign and domestic sources. Therefore, the cases cited by the taxing authorities are distinguishable from the present case and are not controlling on this issue.
Moreover, M.C.L.A. § 211.2; M.S.A. § 7.2 provided:
'The taxable status of persons and real and personal property shall be determined as of each December 31, which shall be deemed the tax day for the immediately succeeding calendar year, which is also the tax year, any provisions in the charter of any city or village to the contrary notwithstanding.'
We interpret this provision to mean that the inventory on hand on the tax date is taxable. However, an inventory of foreign imports is not taxable because of the import immunity clause of the U.S. Constitution 3 unless such inventory can be classified within the realm of current operational needs on the tax date. It follows then that in order to determine what are a taxpayer's current operational needs on the tax date, it is necessary to compute what the replenishment time is as of that date.
Here, since the Great Lakes navigation season was closed, the taxpayer's replenishment time was fouteen days on the tax date. Therefore, fourteen days was the correct replenishment time to be used in computing the taxpayer's current operational needs.
In addition, the taxing authorities contend that since M.C.L.A. § 211.13; M.S.A. § 7.13 () and M.C.L.A. § 211.2; M.S.A. § 7.2 4 allow the assessing officer to 'survey, examine or review properties at any time prior to or after said tax day', the assessor is not limited to using the replenishment time immediately after the date. We time immediately after the tax date. We
The mere fact that the assessor may examine property prior to or after the tax date for assessment purposes does not affect the time that the assessment of current operational needs is to be made. Regardless of the time the assessor looks to determine the amount of inventory a taxpayer has on hand, it is necessary for the assessor to determine current operational needs as of the tax date by computing the replenishment time as of that date. See Knight Newspapers, Inc. v. Detroit, 16 Mich.App. 438, 168 N.W.2d 318 (1969).
Moreover if there is any doubt as to the meaning of M.C.L.A. § 211.13; M.S.A. § 7.13 or M.C.L.A. § 211.2; M.S.A. § 7.2, they must be construed against the government and in favor of the taxpayer. Ecorse Screw Machine Products Co. v. Michigan Corporation & Securities Commission, 378 Mich. 415, 145 N.W.2d 46 (1966); Consumers Power Co. v. Corporation & Securities Commission, 326 Mich. 643, 40 N.W.2d 756 (1950).
We hold, therefore, that fourteen days was the correct replenishment time to be used in computing the taxpayer's current operational needs.
The parties next ask this Court to rule on who has the burden of proof. We can only say in regard to this issue that there are no proofs when, as here, all of the facts have been stipulated. In such cases our only duty is to apply the law to the factual situation as the parties have stipulated them to be. There is, therefore, no burden of proof problem.
Affirmed.
I agree with the majority that on the facts the rule of City & County of Denver v. Denver Publishing Co., 153 Colo. 539, 387 P.2d 48 (1963) should be applied. However, I must dissent from the way in which the majority applies that rule.
The majority purports to distinguish Beall Pipe & Tank Corp. v. State Tax Commission, 254 Or. 195, 458 P.2d 420 (1969), Knight Newspapers, Inc. v. Detroit, 16 Mich.App. 438, 168 N.W.2d 318 (1969), and Orr Felt & Blanket Co. v. Schneider, 3 Ohio St.2d 14, 209 N.E.2d 150 (1965), on the ground that those cases involved manufacturers whose sole source of supply was foreign....
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Production Steel Strip Corp. v. City of Detroit
...holding that 14 days was the correct replenishment time to be used in computing the taxpayer's current operational needs. 42 Mich.App. 698, 703, 202 N.W.2d 719. The minority opinion 'We are here considering the taxable status of the plaintiff's foreign inventory, and I cannot see why the fa......