Davor Vulic v. Department of Treasury
909 N.W.2d 487
Mich. Ct. App.2017Background
- Petitioner bought 1,799 cartons of cigarettes from an out-of-state seller and shipped them to a friend in Bosnia-Herzegovina; petitioner was reimbursed for costs and took no profit.
- Cigarettes were in Michigan for under 24 hours, cartons remained unopened, and none were smoked in Michigan.
- Neither petitioner nor the out-of-state seller was licensed under the Tobacco Products Tax Act (TPTA); no Michigan tobacco taxes or stamps were applied.
- Respondent assessed taxes and penalties under TPTA, MCL 205.421 et seq.; petitioner challenged personal liability under the TPTA.
- The Michigan Tax Tribunal granted summary disposition for respondent; petitioner appealed.
Issues
| Issue | Petitioner’s Argument | Respondent’s Argument | Held |
|---|---|---|---|
| Whether petitioner is personally liable under MCL 205.428(1) for possession/control of unstamped cigarettes | Petitioner: not liable because he was not a "consumer," cartons were unopened, cigarettes were only transiently in Michigan, and all taxes were paid at destination | Respondent: TPTA imposes liability on non-licensees in possession/control of unstamped packs or who sell/offered for resale without a license; petitioner was an unlicensed transporter or unclassified acquirer | Held: Petitioner personally liable under MCL 205.428(1) as in control/possession of tobacco product contrary to the Act; affirmed on that ground |
| Whether transfer to friend was a "sale" (ownership transferred for consideration) under MCL 205.422(r) | Petitioner: transfer at cost lacked consideration; could be gratuitous bailment; thus not a sale | Respondent: petitioner bought, paid, transferred cigarettes and was reimbursed for costs — a transaction with consideration (or gift/use/exchange fits statutory definition of "sale") | Held: Transaction constituted a sale (or fit alternative statutory categories) so petitioner also liable for selling/offering for resale without a license |
| Whether TPTA taxes apply only to the ultimate consumer per MCL 205.427a | Petitioner: TPTA’s intent is to tax consumers, so non-consumers like petitioner shouldn’t be liable | Respondent: TPTA’s structure imposes tax obligations on licensees and other persons; MCL 205.427(8) allows pass-through but liability may rest on non-consumers | Held: Majority rejects petitioner’s narrow reading; TPTA contemplates liability beyond final consumers |
| Whether petitioner possessed "individual package[s] of cigarettes without a stamp" when cartons were unopened | Petitioner: unopened cartons mean he didn’t possess individual packages; term "individual package" limiting | Respondent: control/possession of cartons that contain unstamped individual packages suffices | Held: Majority finds argument strained and affirms possession-of-individual-package liability; dissent disagrees |
Key Cases Cited
- Value, Inc. v. Dep't of Treasury, 320 Mich. App. 571 (discussing TPTA’s pervasive regulatory and revenue purpose)
- People v. Beydoun, 283 Mich. App. 314 (context on TPTA regulation)
- Paris Meadows, LLC v. Kentwood, 287 Mich. App. 136 (standard of review for Tax Tribunal summary disposition)
- Bechtel Power Corp. v. Dep't of Treasury, 128 Mich. App. 324 (agency statutory interpretation deference)
- Gen. Motors Corp. v. Dep't of Treasury, 466 Mich. 231 (definition of consideration)
- Ally Fin. Inc. v. State Treasurer, 317 Mich. App. 316 (avoid interpreting statute to render language nugatory)
- Ecorse Screw Machine Prod. Co. v. Michigan Corp. & Sec. Comm., 378 Mich. 415 (revenue statutes construed against taxing authority when ambiguous)
- Harris v. Chain Store Realty Bond & Mtg. Corp., 329 Mich. 136 (courts generally do not inquire into sufficiency of consideration)