Issues: The Use Tax Act (UTA) (MCL 205.91 et seq.); MCL 205.93(1); "Storage" defined; MCL 205.92(c); "Use" defined; MCL 205.92(b); MCL 205.94(1)(c)(i) & (2); Burden of proof as to the right to an exemption; Evanston YMCA Camp v. State Tax Comm'n; Distinguihsing RCA Serv. Co. Div., RCA Corp. v. Department of Treasury, Natural Aggregates Corp. v. Department of Treasury, & Kal-Aero v. Department of Treasury; Plaintiff's claim that it was not liable for use tax because it served as a purchasing agent for its clients; Breighner v. Michigan High Sch. Athletic Ass'n; Van Pelt v. Paull; Briggs Tax Serv., LLC v. Detroit Pub. Schs.; The incidental-to-services test; Catalina Mktg. Sales Corp. v. Department of Treasury
Court: Michigan Court of Appeals (Unpublished)
Case Name: Morley Cos., Inc. v. Department of Treasury
e-Journal Number: 59598
Judge(s): Per Curiam – Jansen, Meter, and Beckering
The Court of Claims properly denied the plaintiff's motion for summary disposition and granted defendant's motion for summary disposition in this case involving the UTA. Defendant audited plaintiff (a Michigan business operating as an event management service company). The audit revealed that plaintiff "had not paid sales tax or use tax on the goods it purchased from third-party vendors and had not collected use tax for the goods from its clients." Because the value of the total services plaintiff provided was never less than 80% of the total charges, defendant deemed it "a service provider rather than a seller of goods, and assessed a use tax against plaintiff in the amount of $213,958, plus statutory interest," as to these goods. Plaintiff paid the assessment under protest and sued for a refund. Under the UTA, a "person who purchases property for resale is exempt from paying use tax as long as the purchaser does in fact resell the property." On appeal, plaintiff claimed that while the Court of Claims "recognized that sales of tangible personal property were itemized separately from the sale of services, it erred when it failed to treat these sales as separate taxable transactions." Plaintiff argued that it "should have found that each separately stated sale of program gifts and giveaways was a separate transaction constituting a taxable sale at retail to plaintiff's customers, and thus exempt." The court noted that the "'burden is on a claimant to establish clearly his right to exemption, and an alleged grant of exemption will be strictly construed and cannot be made out by inference or implication but must be beyond reasonable doubt.'" Plaintiff cited RCA, Natural Aggregates, and Kal-Aero, but its reliance on these three cases was misplaced. What distinguished the facts here from those cases was that the plaintiff in each of those cases "sold, rented, or leased goods at retail, while also selling services that were entirely distinct from the goods." Because their "charges for the services sold were separately identifiable from charges for the goods sold, the income earned from the services was distinct and not subject to taxation." Here, plaintiff did not sell, and clients could not purchase from it, "the tangible personal property at issue apart from plaintiff's event management services." Plaintiff's clients could opt out of giving room gifts to its attendees, but they could not "purchase, rent, or lease gifts and giveaways from plaintiff apart from engaging plaintiff's services." Affirmed.
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