897 N.W.2d 761
Mich. Ct. App.2016Background
- Treasury and Michigan State Police inspected Sam Molasses, LLC (a Dearborn hookah/tobacco retail store) on May 1, 2013; the LLC held tobacco licenses in the name of defendant’s wife, but defendant ran day-to-day operations.
- Inspectors found invoices from distributor El Tahan were not kept at the retail location and some inventory labels did not match invoices; defendant admitted repackaging and mixing flavors and selling under his own label.
- Treasury records showed monthly returns with reported zero or underreported purchases from April 2011–March 2013, yielding ~$451,000 in unpaid tobacco taxes.
- District court bound defendant over on two TPTA charges: possessing tobacco without proper invoices (MCL 205.426(1), 205.428(3)) and manufacturing without a license (MCL 205.423(1), 205.428(3)); it dismissed false-return counts as lacking proof defendant filed them.
- Circuit court quashed the bindover and dismissed the two charges, concluding defendant (1) wasn’t individually liable as a non-licensee for invoice violations and (2) blending tobacco did not constitute ‘‘manufacturing.’’
- Court of Appeals reversed: held evidence supported bindover for invoice violation and that repackaging/mixing constituted manufacturing; defendant could be a ‘‘retailer’’ based on control of day-to-day operations and thus individually liable under the TPTA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether required invoices were kept at the retail location as required by MCL 205.426(1) | Invoices were not kept at the place of sale for the required 4 months; El Tahan had to send invoices after inspection, so recordkeeping violated the TPTA | Invoices from El Tahan adequately described the product and therefore complied | Held: invoices were not kept at the location for the required period; evidence supported bindover for improper invoice keeping |
| Whether an individual who operates a store but is not the licensee can be criminally liable for TPTA recordkeeping violations | Person who directs/manages day-to-day operations qualifies as a "retailer" and thus is obligated to comply and may be criminally liable | Defendant argued he was not the licensee or named filer and therefore not individually liable | Held: an individual who manages day-to-day operations is a "retailer" under the TPTA and can be held criminally liable for recordkeeping violations |
| Whether mixing/repackaging/flavor‑blending constitutes "manufacturing" under the TPTA | Any change in form or delivery (e.g., mixing, repackaging, labeling under own brand) constitutes manufacturing requiring a license | Blending is not "manufacturing;" manufacturing requires transformation of raw materials into a new and different article | Held: mixing and repackaging changed form/delivery and constituted manufacturing/producing under the statute; bindover was proper |
Key Cases Cited
- People v Crippen, 242 Mich App 278 (2000) (district court bindover reviewed for abuse of discretion)
- People v Hampton, 194 Mich App 593 (1992) (trial court quash-of-bindover reversal guidance)
- People v Gardner, 482 Mich 41 (2008) (de novo review for statutory interpretation)
- People v Williams, 491 Mich 164 (2012) (give plain meaning to statutory words)
- People v Schultz, 246 Mich App 695 (2001) (statutory definitions govern interpretation)
- People v Hardy, 494 Mich 430 (2013) (presume ordinary meaning of undefined statutory terms)
- People v Denio, 454 Mich 691 (1997) (use dictionaries to ascertain ordinary meaning)