Tercheck v. Department of Treasury, Docket No. 88704

Decision Date10 November 1988
Docket NumberDocket No. 88704
Citation431 N.W.2d 208,171 Mich.App. 508
PartiesThomas TERCHECK, d/b/a Howell Dental Lab, Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee. 171 Mich.App. 508, 431 N.W.2d 208
CourtCourt of Appeal of Michigan — District of US

[171 MICHAPP 508] John S. Lobur, P.C. by John S. Lobur, Howell, for petitioner-appellant.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Richard R. Roesch and Ross H. Bishop, Asst. Attys. Gen., for respondent-appellee.

Before WALSH, P.J., and CYNAR and TAHVONEN, * JJ.

PER CURIAM.

Petitioner appeals as of right from a decision of the Michigan Tax Tribunal upholding a use tax assessment for the taxable period August 1, 1979, through April 30, 1983. We affirm.

On June 13, 1984, the Michigan Department of Treasury issued to Thomas Tercheck a final deficiency assessment of $2,083.66, plus an assessment of penalty of $518.40, and accrued interest (updated to May 1, 1984) of $554.13. On July 3, 1984, [171 MICHAPP 509] Tercheck petitioned for review by the Michigan Tax Tribunal. Tercheck contended that his out-of-state purchases of raw materials were exempt from the use tax. The Tax Tribunal affirmed the final assessment. Tercheck does not dispute the accuracy of the assessment, assuming that the purchases are subject to the use tax.

The facts are not in dispute. Tercheck owns and operates Howell Dental Lab. His business includes the production of dental appliances, such as dentures and crowns, upon order from dentists. With the order, the dentist sends Tercheck an impression of the patient's mouth. Tercheck purchases raw materials from both in-state and out-of-state suppliers. In-state suppliers collect a sales tax from Tercheck. Tercheck charges dentists a flat fee for dental appliances, and the dentists use these appliances in providing services to their patients.

Appellate review of Tax Tribunal decisions is limited to determining whether they are authorized by law and whether the factual findings are supported by competent, material and substantial evidence on the whole record. MCI Telecommunications Corp v. Dep't of Treasury, 136 Mich.App. 28, 355 N.W.2d 627 (1984).

The use tax, M.C.L. Sec. 205.91 et seq.; M.S.A. Sec. 7.555(1) et seq., is intended to cover transactions not covered by the General Sales Tax Act, M.C.L. Sec. 205.51 et seq.; M.S.A. Sec. 7.521 et seq. Master Craft Engineering, Inc. v. Dep't of Treasury, 141 Mich.App. 56, 68, 366 N.W.2d 235 (1985). The use tax is imposed on the privilege of using, storing or consuming tangible personal property in Michigan. M.C.L. Sec. 205.93; M.S.A. Sec. 7.555(3).

Exemptions from the use tax are not favored and the burden rests on the party asserting the right to an exemption to establish the claim. Edison v. Dep't of Revenue, 362 Mich. 158, 162, 106 N.W.2d 802 (1961). Tercheck relies on the "replacement[171 MICHAPP 510] parts" and "industrial processing" exemptions found in M.C.L. Sec. 205.94(r) and (g); M.S.A. Sec. 7.555(4)(r) and (g).

The replacement parts exemption states that the use tax shall not be levied on

"A hearing aid, contact lenses if prescribed for a specific disease which precludes the use of eyeglasses, or any other apparatus, device, or equipment used to replace or substitute for any part of the human body, or used to assist the disabled person to lead a reasonably normal life when the tangible personal property is purchased on a written prescription or order issued by a licensed health professional as defined by section 4 of former Act No. 264 of the Public Acts of 1974, as amended, being section 325.904 of the Michigan Compiled Laws, or section 21005 of Act No. 368 of the Public Acts of 1978, being section 333.21005 of the Michigan Compiled Laws, or eyeglasses prescribed or dispensed to correct the person's vision by an ophthalmologist, optometrist, or optician." M.C.L. Sec. 205.94(r); M.S.A. Sec. 7.555(4)(r).

The Tax Tribunal correctly ruled that the replacement parts exemption is not applicable to Tercheck because Tercheck does not sell replacement parts at retail. A sale at retail to the ultimate consumer is a requirement to qualify for this exemption. 1979 AC, R 205.139, Rule 89, provides:

"(1) Retail sales of hearing aids and replacement parts are exempt from tax.

"(2) Retail sales of any apparatus, device, appliance, or equipment used to replace or substitute for any part of the human body, or used to assist the disabled person to lead a reasonably normal life, are exempt if purchased on a written prescription or order issued by a licensed health professional. Repair and replacement parts for such items are also exempt."

[171 MICHAPP 511] Great deference is given to a state agency's interpretation of a statute or rule. Webster v. Secretary of State, 147 Mich.App. 762, 767, 382 N.W.2d 745 (1985). We find that Rule 89 correctly interprets the replacement parts exception. The Tax Tribunal's decision was authorized by law and supported by substantial evidence.

Tercheck also claims that the industrial processing...

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5 cases
  • Elias Bros. Restaurants, Inc. v. Treasury Dept.
    • United States
    • Michigan Supreme Court
    • July 2, 1996
    ...entitlement to an exemption rests on Elias Brothers, the party asserting the right to the exemption. Tercheck v. Treasury Dep't, 171 Mich.App. 508, 510-511, 431 N.W.2d 208 (1988). While we recognize that tax exemptions are strictly construed against the taxpayer because exemptions represent......
  • Tagliavia v. Barton Malow Co.
    • United States
    • Court of Appeal of Michigan — District of US
    • November 6, 1990
    ...354, 360, 429 N.W.2d 900 (1988). We give great deference to an agency's interpretation of a statute. Tercheck v. Dep't of Treasury, 171 Mich.App. 508, 512, 431 N.W.2d 208 (1988). We cannot say the appellate commission's decision in this case is contrary to Affirmed. * Thomas E. Brennan, for......
  • Beckman Production Services, Inc. v. Department of Treasury
    • United States
    • Court of Appeal of Michigan — District of US
    • November 1, 1993
    ...entitlement to that exemption. Edison v. Dep't of Revenue, 362 Mich. 158, 162, 106 N.W.2d 802 (1961); Tercheck v. Dep't of Treasury, 171 Mich.App. 508, 510, 431 N.W.2d 208 (1988). Tax exemption statutes are strictly construed in favor of the government. Great Lakes Sales, Inc., supra, 194 M......
  • Daguanno v. Department of Treasury, Docket No. 139096
    • United States
    • Court of Appeal of Michigan — District of US
    • December 20, 1993
    ...generally ADVO-Systems, Inc. v. Dep't of Treasury, 186 Mich.App. 419, 421-423, 465 N.W.2d 349 (1990); Tercheck v. Dep't of Treasury, 171 Mich.App. 508, 510-511, 431 N.W.2d 208 (1988). In canceling petitioner's use tax assessment, the Tax Tribunal relied on the "sales tax" exemption found in......
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