450 B.R. 699
Bankr. E.D. Mich.2011Background
- Quiroz owned Industrial Waste Cleanup, Inc.; the company ceased operations in 2006.
- Michigan assessed Quiroz personally as corporate officer for failing to remit SBT for 2005 and 2006, totaling about $25,450.
- Quiroz and spouse filed Chapter 7 bankruptcy on January 8, 2008, resulting in a discharge on April 17, 2008; it was a no asset case.
- After discharge, the Department of Treasury pursued collection; Quiroz filed an adversary proceeding to determine dischargeability of the debt.
- Treasury moved to dismiss; a hearing was held on April 4, 2011, with the court taking the matter under advisement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SBT is an excise tax entitled to priority under § 507(a)(8)(E). | Quiroz argues SBT is not a transaction-based excise tax or priority. | Treasury contends SBT is an excise tax on a transaction and qualifies for priority. | SBT is an excise tax on a transaction; it has priority under § 507(a)(8)(E). |
| Whether SBT is a tax on a transaction for Quiroz personally. | SBT as to Quiroz lacks 'for which the debtor is liable' language; argues personal liability doesn’t make it a transaction tax for him. | Tax liability can extend to corporate officers; personal liability does not remove transaction-character or priority. | SBT constitutes an excise tax as to Quiroz individually; personal liability does not defeat the transaction-based nature. |
Key Cases Cited
- In re Groetken, 843 F.2d 1007 (7th Cir. 1988) (broad definition of 'transaction' in excise tax context)
- Nat'l Steel Corp., 321 B.R. 901 (Bankr.N.D. Ill. 2005) (franchise tax as excise tax on transactions)
- Albion Health Servs., 339 B.R. 171 (Bankr.W.D. Mich. 2006) (rejects narrow 'transaction' interpretation)
- Trinova Corp. v. Dep't of Treasury, 433 Mich. 141, 445 N.W.2d 428 (Mich. 1989) (SBT described as value-added tax; excise on privilege of business)
- Midwest Bus. Corp. v. Dep't of Treasury, 288 Mich.App. 334, 793 N.W.2d 246 (Mich. Ct. App. 2010) (tax base computation for SBT as economic size contribution)
- In re DeRoche, 287 F.3d 751 (9th Cir. 2002) (broad notion of transaction in excise tax context)
- In re Nat'l Steel Corp., 321 B.R. 901 (Bankr.N.D. Ill. 2005) (Texas franchise tax as tax on transactions)
- In re McAdam, 402 B.R. 473 (Bankr. D. N. H. 2009) (priority for personal liabilities under § 507(a)(8))
- Mueller v. State of Wisconsin, 243 B.R. 346 (Bankr. W.D. Wis. 1999) (unemployment premiums priority under § 507(a)(8))