Andrie Inc. v. Department of Treasury
296 Mich. App. 355
| Mich. Ct. App. | 2012Background
- Plaintiff, a marine transport/construction business in Muskegon, used three tug-barge units to haul asphalt across Great Lakes; A-410 with Tug Rebecca Lynn, A-390 with Tug Barbara Andrie, A-397 with Tug Karen Andrie, during 1999–2006.
- Each tug is <500 tons; each barge >500 tons; expert testimony says tugs and barges formed dedicated tug-barge units; individual vessels retained names/registrations.
- Tax auditor denied use-tax exemption for tugs under MCL 205.94(1)(j) while recognizing barges’ exemption since barges are 500+ tons; miles apportioned as interstate 93%, intrastate/foreign 7%.
- Court of Claims trial court held tugs qualified for exemption as part of a vessel under MCL 205.94(1)(j), and that the tug-barge units engaged in interstate commerce; ordered exemption for tugs and barges, with nuanced foreign-commerce treatment.
- Appellate court concludes tugs and barges are not a single vessel for exemption purposes; single-vessel reading not supported; remand on apportionment for foreign commerce and on sales/use tax distinctions.
- Trial court’s approach to foreign commerce and sales tax issues is partially reversed/remanded; overall decision affirms in part, reverses in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are tug-barge units a single vessel for use-tax exemption? | Tugs attached to barges create a single vessel for 500+ tons. | Tugs and barges remain two separate vessels with individual tonnage; cannot combine for exemption. | Not a single vessel; tugs not eligible for exemption |
| Does the interstate-commerce exemption apply to barges’ voyages between Michigan ports? | Voyages are interstate because goods move toward other states; broad Daniel Ball standard should apply. | Limitations of exemption apply; arguments misapply commerce concept. | Interstate-commerce applies to Michigan-port-to-Michigan-port movements for apportionment |
| How should foreign-commerce use tax be apportioned? | All foreign-commerce-related property used in Michigan or Michigan waters should be taxed. | Tax only property used in Michigan during foreign commerce; apportionment required. | Remand to apportion use tax for foreign-commerce portions; may be fully taxable if stored in Michigan |
| Are sales-tax-paid transactions subject to use tax rather than exempt as sales tax paid? | Sales tax paid on Michigan purchases should preclude use tax. | Use tax complements sales tax; if sales tax paid, generally exempt from use tax. | Transactions subject to sales tax are not subject to use tax |
Key Cases Cited
- The Daniel Ball, 77 U.S. 557 (1871) (interstate commerce can include intrastate segments in a continuous transport)
- Alvan Motor Freight, Inc v Dep’t of Treasury, 761 NW2d 269 (2008) (interstate commerce meaning in state-use tax context; vessel-type considerations)
- Bob-Lo Co v Dep’t of Treasury, 315 NW2d 902 (1982) (distinguishes interstate/foreign commerce exemption applicability)
- Elias Bros Restaurants, Inc v Treasury Dep’t, 452 Mich 144 (1996) (use tax complements sales tax; exemptions depend on tax type)
- Combustion Engineering, Inc v Dep’t of Treasury, 549 NW2d 364 (1996) (use tax exemptions construed strictly in favor of taxing unit; burden on taxpayer)