Bed Bath & Beyond Inc v. Department of Treasury
352667
| Mich. Ct. App. | Jul 8, 2021Background
- Plaintiff (Bed Bath & Beyond) contracted with Harte Hanks to produce and mail advertising materials to Michigan residents according to plaintiff’s campaign schedule and customer mailing list.
- Harte Hanks printed and assembled materials in Pennsylvania, bulked them, and (for an agreed rate) freighted packages to USPS facilities in Michigan, where they entered the mail stream.
- The Department of Treasury assessed Michigan use tax under the Michigan Use Tax Act (UTA), arguing the materials were “used” in Michigan; the Court of Claims granted summary disposition for plaintiff.
- Judge Markey (concurring in part, dissenting in part) analyzed whether plaintiff exercised a right or power over the materials ‘‘incident to ownership’’ in Michigan under MCL 205.92(b).
- Key factual dispute: whether plaintiff retained indicia of control (via contract, mailing list, schedule, and freight arrangements) over the materials while they entered Michigan, versus having relinquished control upon delivering materials to the third-party vendor.
- Markey would reverse in part, finding use tax owed for materials freighted into Michigan USPS facilities but not for materials delivered to out-of-state USPS facilities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bed Bath & Beyond "used" tangible advertising materials in Michigan under the UTA | Plaintiff says it relinquished control once materials were sent to a third‑party printer/shipper, so no use occurred in Michigan | Treasury says plaintiff retained contractual control (mailing list, schedule, freight arrangements) and thus used the materials in Michigan | Judge Markey: Plaintiff used the materials in Michigan where Harte Hanks freighted them into Michigan USPS facilities; use tax applies |
| Whether contractual arrangements that delegate physical distribution defeat a finding of "use" in Michigan | Control was surrendered to Harte Hanks; plaintiff had no direct possession or timing control in Michigan | Contractual direction and specified delivery parameters are indicia of ownership control sufficient to establish use in Michigan | Markey: Contractual management of delivery constitutes exercising a right incident to ownership; contractual control supports imposition of use tax |
| Whether materials shipped to out‑of‑state USPS facilities but addressed to Michigan residents are taxed | Plaintiff argues these were not used in Michigan (similar to Sharper Image) | Treasury would treat economic effect and destination as indicating use in Michigan | Markey: No use tax for materials delivered to USPS facilities outside Michigan even if addressed to Michigan homes; those are not used in Michigan |
Key Cases Cited
- Auto-Owners Ins Co v Dep’t of Treasury, 313 Mich App 56 (2015) (control/indicia-of-control test for use tax liability)
- Ameritech Publishing, Inc v Dep’t of Treasury, 281 Mich App 132 (2008) (contractual directions and in‑state distribution support finding of use in Michigan)
- Sharper Image Corp v Dep’t of Treasury, 216 Mich App 698 (1996) (no use tax where control ended upon delivery to out‑of‑state USPS facility)
- WMS Gaming, Inc v Dep’t of Treasury, 274 Mich App 440 (2007) (use tax targets use in Michigan of imported goods, distinguishing sale from in‑state use)
- NACG Leasing v Dep’t of Treasury, 495 Mich 26 (2014) (ownership rights—possession, use, income—inform statutory meaning of "use")