Andrie Inc v. Department of Treasury
496 Mich. 161
Mich.2014Background
- Andrie Inc., a Michigan marine transportation company, purchased fuel and supplies in Michigan; the Department of Treasury audited Andrie for Nov. 1, 1999–July 31, 2006 and assessed use tax where receipts did not separately show sales tax.
- The Department applied MCL 205.94(1)(a) (use-tax exemption where sales tax "was due and paid on the retail sale to a consumer") and required proof of actual sales-tax payment to exempt use tax.
- Andrie paid the assessments under protest and sued in the Court of Claims claiming it should be exempted because the transactions were subject to sales tax or because sales tax is presumed included in the price.
- The Court of Claims and the Court of Appeals ruled for Andrie, holding that transactions subject to sales tax are not subject to use tax and that purchasers need not prove retailer remittance.
- The Michigan Supreme Court reversed in part, holding the purchaser seeking the exemption must prove the sales tax was actually paid (either paid to the seller or remitted by the seller to the state); mere subjectivity to sales tax is insufficient.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether property merely "subject to" sales tax is exempt from use tax | Andrie: if a sale is subject to sales tax, use tax cannot be imposed; purchaser need not prove payment | Treasury: purchaser must prove sales tax was actually paid to claim MCL 205.94(1)(a) exemption | Held for Treasury: exemption requires sales tax to have been "due and paid"; mere subjectivity is not enough |
| Who bears burden of proof for the use-tax exemption | Andrie: burden should not require purchaser to show retailer remitted tax; a presumption that tax is included should apply | Treasury: burden rests on party asserting exemption (purchaser) per Elias Bros rule | Held: burden on claimant (purchaser) to prove tax was paid; no presumption of payment |
| Whether MCL 205.73(1) creates a presumption that sales tax is included in price | Andrie: §205.73(1) (advertising rule) implies sales tax is part of price and grants a presumption to purchasers | Treasury: §205.73(1) regulates retailer representations but does not establish who actually paid tax | Held: §205.73(1) is an advertising provision and does not create a presumption that tax was paid; statute's "due and paid" language is dispositive |
| Whether applying purchaser-proof rule risks double taxation or contradicts legislative scheme | Andrie: requiring proof forces consumers into impossible evidentiary tasks and risks double taxation; recordkeeping duties rest with retailers | Treasury: purchaser can obtain receipts or affidavits; statutory text controls | Held: Court acknowledges double-taxation concerns but enforces plain statutory text — purchaser must show sales tax was paid; remedies (receipts/affidavits) available to purchaser |
Key Cases Cited
- Elias Bros Restaurants, Inc v Treasury Dep’t, 452 Mich 144 (1996) (tax-exemption claimants bear burden of proof)
- World Book, Inc v Treasury Dep’t, 459 Mich 403 (1999) (presumption that an in-state transaction is a sales, not a use, tax event to avoid double taxation)
- Sun Valley Foods Co v Ward, 460 Mich 230 (1999) (canons of statutory interpretation: avoid surplusage)
- Swain Lumber Co v Newman Dev Co, 314 Mich 437 (1946) (advertising/price-incorporation rule does not create purchaser liability absent agreement)
- Combustion Engineering v Dep’t of Treasury, 216 Mich App 465 (1996) (Court of Appeals discussion of presumptions re: purchaser receipts showing tax value)
- Terco, Inc v Dep’t of Treasury, 127 Mich App 220 (1983) (discussing sales/use tax responsibilities)