Lead Opinion
This сase requires us to construe the provision of the Single Business Tax Act (SBTA) found at MCL 208.53 that explicates how to allocate sales of intangible personal property so as to determine whether they can be taxed by Michigan. Specifically, we must decide whether receipts for plaintiffs services, performed entirely outside Michigan for construction projects located in Michigan, are deemed taxable sales under the statute and, if they are, whether that interpretation of the statute results in the statute’s being unconstitutional as a violation of the Commerce Clause, US Const, art I, § 8, cl 3. The Court of Appeals held that the services were taxable but that this section of the statute violates the Commerce Clause of the constitution and thus is unenforceable. Fluor Enterprises, Inc v Dep’t of Treasury,
i
The Court of Appeals accurately summarized the facts in this case:
The facts in this case are undisputed. The receipts at issue were received by plaintiff for engineering and architectural services related to real estate improvement projects constructed in Michigan. The services were performed by plaintiffs employees at out-of-state facilities. Plaintiff timely filed single business tax (SBT) returns for the years at issue. However, plaintiff did not report the receipts at issue as Michigan receipts. Following an audit, defendant issued three bills for taxes due (intents to assess) totaling $182,312.
Plaintiff requested an informal conference with defendant’s Hearings Division. Following an informal conference, the depаrtment referee issued a recommendation to the Commissioner of Revenue. The hearing referee agreed with plaintiffs interpretation of § 53(c). However, the Commissioner of Revenue disagreed with the referee’s analysis and directed that the taxes be assessed as originally determined. Following the commissioner’s order, defendant issued three bills for taxes due (final assessments) for total tax and interest of $343,340.96, which plaintiff then paid under protest. Plaintiff subsequently paid an additional $3,077.35 in interest.
Plaintiff filed this action in the Court of Claims to recover $346,618.31 paid under protest plus additional statutory interest, costs, and attorney fees. The parties both filed motions for summary disposition. Plaintiff moved for summary disposition pursuant to MCR 2.116(A) (judgment on stipulated facts). Defendant moved for summary disposition pursuant to MCR 2.116(C)(8) and (10). The Court of Claims concluded that the plain language of the statute supported plaintiffs position and entered judgment in favor of plaintiff, ordering defendant to pay $346,418.31 and interest. [Id. at 713-714.]
On appeal, the Court of Appeals reversed with regard to the Court of Claims construction of § 53 of the SBTA and held that the receipts for services performed for a construction project located in Michigan, even if the services were performed in
Defendant sought leave to appeal in this Court, seeking to have the ruling of unconstitutionality reversed. Plaintiff sought leave to cross-appeal, arguing that the Court of Appeals construction of the statute was erroneous. We granted the parties’ applications for leave to appeal and cross-appeal.
II
This Court reviews de novo a trial court’s decision to grant or deny a motion for summary disposition. City of Taylor v Detroit Edison Co,
ill
The SBTA, MCL 208.1 et seq., is a business activity tax that was enacted “to provide for the imposition, levy, computation, collection, assessment and enforcement ... of taxes on certain commercial, business, and financial activities____”
“Business activity” means a transfer of legal or equitable title to or rental of property, whether real, personal, or mixed, tangible or intangible, or the performance of services, or a combination thereof, made or engaged in, оr caused to be made or engaged in, within this state, whether in intrastate, interstate, or foreign commerce, with the object of gain, benefit, or advantage, whether direct or indirect, to the taxpayer or to others .... [MCL 208.3(2).]
Thus, the act by definition encompasses taxation of services that are performed not only within the state (“engaged in ... within this state”) but also some that are performed out of state, as long as the reason those services are engaged in has its source within this state (“caused to be ... engaged in [] within this state”). When business activity is partially performed out of state, the statute establishes a system of apportionment, MCL 208.40 et seq., so that only those receipts appropriate to be taxed in Michigan are taxed here. Apportioning is based on a formula whereby a fraction reflecting the ratio of Michigan аctivity to out-of-state activity, i.e., Michigan sales/total sales, is established. Jefferson Smurfit Corp v Dep’t of Treasury,
To ascertain whether receipts for intangible property, such as services, comprise “Michigan sales,” we turn to MCL 208.53. It provides:
Sales, other than sales of tangible personal property, are in this state if:
(a) The business activity is performed in this state.
Ob) The business activity is performed both in and outside this state and, based on costs of performance, a greater proportion of the business activity is performed in this state than is performed outside this state.
(c) Receipts derived from services performed for planning, design, or construction activities within this state shall be deemed Michigan receipts.
Plaintiff asserts, and the Court of Claims agreed, that § 53(c) deеms receipts for services taxable as Michigan receipts only if the services are performed within this state. That is, the phrase “within this state” modifies not just “activities” but also “planning,” “design,” and “construction.” Because plaintiffs planning and design services were not performed within this state, plaintiff argues, its receipts for those servives should not be taxable. We respectfully disagree with this approach. Plaintiff is essentially rewriting the statute so that “within this state” modifies “services performed.” This is not how the statute reads.
The subject of § 53(c) is “receipts”; the statute states that certain “receipts” “shall be deemed Michigan receipts.” Section 53(c) then narrows the category of receipts that will be “deemed Michigan receipts.” The term “receipts” is modified by the phrase “derived from services performed.” Thus, the statute speсifies that to be “deemed Michigan receipts,” “receipts” must be “derived from services performed.” Section 53(c) further specifies which “services performed” will allow “receipts” to be “deemed Michigan receipts,” namely, services performed “for planning, design, or construction activities within this state.” The prepositional phrase “for planning, design, or construction activities” modifies “performed,” and indicates the purpose for which the services must be performed. The phrase “within this state” modifies the term “activities.” The term “activities” is the object of the preposition “for,” and is modified by the preceding phrase “planning, design, or construction.” The use of the term “or” in the phrase “planning, design, or construction” indicates that all three terms are correlative to each other. The term “construсtion” is clearly an adjective modifying the term “activities.” Consequently, the terms “planning” and “design” are also adjectives that modify the term “activities.” Parsing the grammar otherwise would make “construction” an adjective, and “planning” and “design” nouns, and a grammatical construction that would make correlative terms unequal in this way should be avoided. Therefore, “activities” is modified by each of the terms “planning,” “design,” and “construction.” As a result, the statute indicates that “[r]eeeipts derived from” “services performed for planning activities within this state,” “services performed for design activities within this state,” and “services performed for construction activities within this state” are to be “deemed Michigan receipts.” The statute thus subjects to taxation receipts for “services performed” in support of planning activities, design activities, or construction activities, as long as those activities take place “within this state.” The statute does not state that the “services performed” must themselves be performed “within this state” in order for “[r]eceipts derived from” such services to be deemed Michigan receipts.
The statute thus establishes a two-part analysis. First, it must be determined whether the actions sought to be taxed were “services performed” for “planning activities,” “design activities,” or “construction activities.” Second, if the actions are “services performed” for such activities, it must be dеtermined whether the activities occurred “within this state.” If the activities occurred “within this state,” then the actions are taxable under MCL 208.53(c). If the activities did not occur in Michigan, then the actions are not taxable under MCL 208.53(c).
In this case, plaintiff engaged in architectural and engineering services performed for various Michigan construction activities. Because these actions constitute “services performed” for “construction activities,” and those “construction activities” took place “within this state,” the state may tax plaintiffs architectural and engineering services. Although plaintiff attempts to describe what it did as performing design and planning activities, and that those activities took place in California, this ignores language in the statute that indicates receipts are paid for services, and services are engaged in for activities. It is undisputed that plaintiff performed its architectural and engineering services in support of “construction activities” that occurred in Michigan. Consequently, plaintiffs services fall within the language of MCL 208.53(c), and plaintiffs receipts for such services are taxable in Michigan. Plaintiffs attempt to construe its services as “planning or design activities” fails to recognize that plaintiff performed its services for “construction activities” within the state of Michigan. The receipts, pursuant to MCL 208.53(c), are therefore deemed Michigan receipts.
IV
Having determined that the statute allows plaintiffs receipts for services to be taxed as Michigan receipts, we turn to the question whether such a construction results in a tax that violates the Commerce Clause, US Const, art I, § 8, cl 3. As we have explained before, a state tax withstands scrutiny under a Commerce Clause challenge and will bе found constitutionally valid if it meets the four-pronged test articulated in Complete Auto Transit, Inc v Brady,
Plaintiff first argues that it does not have a sufficient nexus with this state to be subject to the tax. “The requisite ‘nexus’ is supplied if the corporation avails itself of the ‘substantial privilege of carrying on business’ within the State . . . .” Mobil Oil Corp v Comm’r of Taxes of Vermont,
Also at issue in this case is whether the tax imposed by MCL 208.53(c) is fairly apportioned. That is, the tax is not fairly apportioned if it allows Michigan to tax more than its fair share of interstate business activity. Caterpillar, supra at 417. A tax is not fairly apportioned if it is not internally consistent. “ ‘To be internally consistent, a tax must be structured so that if every State were to impose an identical tax, no multiple taxation would result,’ ... or, in other words, no more than one hundred percent of the taxpayer’s business activity would be taxed.” Id. at 419, quoting Goldberg v Sweet,
simply looks to the structure of the tax at issue to see whether its identical application by every State in the Union would place interstate commerce at a disadvantage as compared with commerce intrastate. A failure of internal consistency shows as a matter of law that a State is attempting to take more than its fair share of taxes from the interstate transaction, since allowing such a tax in one State would place interstate commerce at the mercy of those remaining States that might impose an identical tax. [Oklahoma Tax Comm v Jefferson Lines, Inc,514 US 175 , 185;115 S Ct 1331 ;131 L Ed 2d 261 (1995).]
In applying the “internal consistency” test, the United States Supreme Court has considered the entire taxing scheme, and not simply the individual tax provision at issue in a specific case. See, e.g., D H Holmes Co, Ltd v McNamara,
v
We conclude that MCL 208.53 is not ambiguous and that plaintiffs receipts for the services are taxable, regardless of where the services occurred, beсause they were performed for construction projects located in Michigan. We also hold that this interpretation does not violate the “fair apportionment” prong of the Commerce Clause because the statute is internally consistent. Likewise, we hold that plaintiff and its taxed activity have a substantial nexus with this state. We therefore affirm in part the Court of Appeals judgment but reverse it in part with regard to the analysis of fair apportionment, and we remand the case to the Court of Claims for further proceedings not inconsistent with this opinion.
Notes
See MCL 208.51:
(1) The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the tax year, and the denominator of which is the total sales of the taxpayer everywhere during the tax year.
(2) For а foreign person, the sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the tax year, and the denominator of which is the total sales of the taxpayer in the United States during the tax year.
The concurrence finds the statute ambiguous because other interpretations have been proposed, citing People v Adair,
We note that the phrase “deemed Michigan receipts” itself reinforces the extraterritoriality of this provision, because this phrase suggests that receipts for activities that would not ordinarily be considered Michigan receipts will be considered, or treated as, Michigan receipts for purposes of the statute. Because receipts for Michigan activities would ordinarily be considered Michigan receipts, this implies that receipts that are “deemed Michigan receipts” are for activities that take place outside the state.
A taxing statute must also be externally consistent, Caterpillar, Inc, supra at 419, but because plaintiff does not challenge this, we examine only its internal consistency.
Concurrence Opinion
(concurring). This case involves the Michigan single business tax (the SBT). There are two issues. The first is whether the Single Business Tax Act (SBTA), at MCL 208.53(c), allows the defendant Department of Treasury to characterize receipts from planning and design services rendered entirely outside Michigan as Michigan sales. If it does, we must also address whether this interpretation renders the statute unconstitutional as violative of the Commerce Clause. US Const, art I, § 8, cl 3.1 conclude that MCL 208.53 is ambiguous and that plaintiffs receipts for services are taxable. I conclude, also, that the statute does not violate the Commerce Clause.
Although I agree with the majority’s decision to affirm in part and reverse in part the judgment of the Court of Appeals, I write separately because I disagree with the majority’s statutory interpretation. In addition, I see flaws in its analysis of the constitutional issue.
FACTS AND PROCEDURAL HISTORY
This case concerns the SBT imposed on plaintiff for the fiscal years ending October 31,1989, through October 31, 1994. Plaintiff is a multinational engineering, construction, and technical service company having its principal place of business in Irvine, California. At issue are services plaintiff undertook for Michigan construction projects.
Plaintiff timely filed its SBT annual returns for the years in issue. However, it did not attribute to Michigan, as Michigan sales, the receipts for engineering and architectural services that occurred outside the state but were performed for Michigan projects. Following an audit, defendant issued plaintiff three bills, called “intents to assess,” for taxes due for the years in issue. The intents to assess were based on defendant’s position that the receipts for the engineering and architectural services should have been reported as having come from Michigan sales.
Plaintiff requested and was granted a departmental informal conference on its objections to the intents to assess. Following the informal conference, the hearing referee recommended that all three bills be canceled in their entirety. The referee determined that the receipts should not be considered as coming from Michigan sales for SBT apportionment purposes. The Commissioner of Revenue disagreed with the referee’s recommendation and ordered the intents to assеss made final as originally prepared. The commissioner affirmed the assessment in conformity with the department’s long-held interpretation of § 53 of the SBTA.
Plaintiff paid the taxes under protest and filed an appeal in the Court of Claims. When the parties filed cross-motions for summary disposition, the Court of Claims denied the defendant’s motion and granted plaintiffs. The court adopted plaintiffs construction of § 53 of the SBTA that limited Michigan sales to services performed in Michigan for construction projects in Michigan.
Defendant appealed as of right in the Court of Appeals, which reversed the judgment of the Court of Claims in a published opinion. It held that the Court of Claims incorrectly determined that § 53 of the SBTA limits Michigan sales to services performed in Michigan, but that the statute was unconstitutional. The Court of Appeals decided that the tax violаted the Commerce Clause because it was not fairly apportioned. After holding that summary disposition had been erroneously granted, the Court of Appeals remanded for reconsideration of the tax calculations.
Defendant applied for leave to appeal in this Court, seeking to reverse the ruling of unconstitutionality. Plaintiff applied for leave to cross-appeal, seeking to reinstate the Court of Claims statutory interpretation. This Court granted both parties’ applications.
STANDARD OF REVIEW
An interpretation of a statute is a question of law that this Court reviews de novo. Lincoln v Gen Motors Corp,
When interpreting a statute, this Court must give effect to the intent of the Legislature. Ford Motor Co v Woodhaven,
THE SINGLE BUSINESS TAX ACT
The SBT is a value-added tax imposed on any person undertaking business activity in the state of Michigan. MCL 208.31. This includes companies that do all their business in Michigan as well as companies, like plaintiff, whose business activity is predominantly outside Michigan. A value-added tax measures a firm’s total business activity. Trinova Corp v Michigan Dep’t of Treasury,
In order to determine the proper SBT for a multi-state taxpayer, the tax base must be apportioned to Michigan. MCL 208.41. The formula used for apportioning the tax base consists of the sum of the sales factor, the payroll factor, and the property factor, divided by three.
Section 52 of the SBTA, MCL 208.52, dictates when the sale of tangible personal property is in Michigan, while § 53 covers other sales, such as the sale of services. This case involves the application of § 53, which provides as follows:
Sales, other than sales of tangible personal property, are in this state if:
(a) The business activity is performed in this state.
(b) The business activity is performed both in and outside this state and, based on costs of performance, a greater proportion of the business activity is performed in this state than is performed outside this state.
(c) Receipts derived from services performed for planning, design, or construction activities within this state shall be deemed Michigan receipts. [MCL 208.53.]
It is subsection c that controls the disposition of this case.
INTERPRETING THE STATUTE
The first task is to decide whether subsection c of MCL 208.53 allows defendant to characterize receipts from planning and design services rendered entirely outside Michigan as Michigan sales. Four separate entities have interpreted this provision in the course of these proceedings.
The hearing referee and the Court of Claims adopted the interpretation advocated by plaintiff and found that § 53(c) does not allow defendant to characterize the out-of-state services as Michigan sales. The Commissioner of Revenue and the Court of Appeals agreed with defendant’s interpretatiоn and determined that § 53(c) does allow defendant to characterize the out-of-state services performed for Michigan construction projects as Michigan sales. The nonuniformity of these conclusions signals that the correct construction of this statute is not obvious.
When the correct construction of a statute is unclear and reasonable minds differ about its interpretation, it is necessary to engage in judicial construction to ascertain the Legislature’s intent.
According to plaintiff, receipts derived from planning activities, design activities, or construction activities are deemed Michigan
By finding that services performed for construction projects located in Michigan are Michigan sales, each provision of the statute is given effect. When the statute is interpreted in this fashion, § 53(a) provides that when the business activity is in Michigan, the sales of other than tangible personal property are Michigan sales. Section 53(b) covers the situation where business activities are both in Michigan and outside Michigan. If a greater proportion of the business аctivity is in Michigan, then the sales of other than tangible personal property are characterized as Michigan sales. Section 53(c) addresses the situation where services are performed for planning, design, or construction projects in Michigan.
Another consideration that weighs in my determination is that a construction that nullifies the effectiveness of a statute should be avoided if possible. In re Petition of State Hwy Comm,
Apparently, the Legislature added subsection c in response to a concern advanced by Michigan-based engineering and architeсtural firms that, without it, they would be at a competitive disadvantage with out-of-state firms. They feared that out-of-state architects and engineers would gain a competitive advantage when bidding on Michigan construction projects if their services for in-state projects were not treated as Michigan sales.
Finally, we defer to the construction given a statute by the agency chosen to enforce it. Breuhan v Plymouth-Canton Community Schools,
ANALYZING the commerce clause
The decision that the statute allows the revenues at issue to be taxed is not the end of the inquiry. It is also necessary to decide whether the tax violates the Commerce Clause of the United State
The Commerce Clause provides that “Congress shall have Power ... [t]o Regulate Commerce ... among the several States ....” US Const, art I, § 8, els 1 and 3. “Though phrased as a grant of regulatory power to Congress, the Clause has long been understood to have a ‘negative’ aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce.” Oregon Waste Systems, Inc v Oregon Dep’t of Environmental Quality,
The United States Supreme Court has held that a state tax will survive a Commerce Clause challenge when the tax (1) is applied to an activity having a substantial nexus to the taxing state, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly relatеd to the services provided by the state. Complete Auto Transit, Inc v Brady,
Several principles should be kept in mind when analyzing the constitutionality of a tax. States have great latitude when enacting tax provisions. See Trinova Corp,
Plaintiff argues that the construction defendant gives to this statutory provision permits the imposition of a tax on activities that do not have a substantial nexus with Michigan. It claims that no substantial nexus exists in this case because plaintiffs activities occurred outside Michigan, and a state cannot tax activities that occur outside that state. I find that plaintiff misconstrues the connection necessary for a state to have a substantial nexus with the taxpayer and the activity being taxed.
“[I]n the case of a tax on an activity, there must be a connection to the activity itself, [and] a connection . .. to the actor the State seeks to tax ....” Allied-Signal, Inc v Director, Div of Taxation,
In this case, the parties stipulated that plaintiff performed construction management and material procurement activities in Michigan. On the basis of this presence, the stаte clearly has the power to tax plaintiff. The question becomes whether
A taxpayer arguing that a tax lacks a substantial nexus to the activity taxed cannot rely on the argument that the source of the income is attributable to another state. Mobil Oil Corp v Vermont Comm’r of Taxes,
Plaintiff cannot make this showing. Because the receipts at issue arose from services that plaintiff provided for Michigan construction projects, there is a substantial nexus between the state and the activity being taxed. As long as plaintiff has some physical presence in the state, the state may tax services that plaintiff performs out of state but that are generally consumed within Michigan. Seе Trinova Corp,
Plaintiff also claims that the interpretation advocated by defendant violates the Commerce Clause requirement of fair apportionment. According to plaintiff, the tax is not internally consistent. It reasons that, under this interpretation, every state with a similar statute could tax all of a business’s receipts for planning and design activities. The result would be duplicative taxation, unconstitutionally putting interstate commerce at a competitive disadvantage.
In 1992, this Court ruled that “[f]air apportionment requires that each state tax only its fair share of interstate business activity.” Caterpillar, Inc v Dep’t of Treasury,
The United States Supreme Court discussed internal consistency in Oklahoma Tax Comm v Jefferson Lines, Inc,
Internal consistency is preserved when the imposition of a tax identical to the one in question by every other State would add no burden to interstate commerce that intrastate commerce would not also bear. This test asks nothing about the degree of economic reality reflected by the tax, but simply looks to the structure of the tax at issue to see whether its identical application by every State in the Union would place interstate commerce at a disadvantage as compared with commerce intrastate. A failure of internal consistency shows as a matter of law that a State is attempting to take more than its fair share of taxes from the interstate transaction, since allowing such a tax in one State would place interstate commerce at the mercy of those remaining States that might impose an identical tax. [Id. at 185.]
Applying these principles to MCL 208.53,1 conclude that the tax is internally consistent. Subsection c of the statute specifically deals with construction projects. When a construction project is involved, subsection c, being the more specific provision, applies and subsections a and b do not. Subsection c ascribes the business activity
An example is helpful to illustrate why there is no internal-consistency problem. Consider thе situation where a company performed services both in Michigan and Ohio for a construction project in Michigan. If Ohio adopted the same tax apportionment formula as Michigan, both states would ascribe all the business activity to the state where the construction occurs. Because the construction occurred in Michigan, only Michigan would tax the services. As a result, only one state would tax the business activity and there would be no internal-consistency problem.
CONCLUSION
MCL 208.53(c) allows defendant to characterize receipts from services performed for construction projects in Michigan as Michigan sales. Accordingly, defendant properly assessed taxes on the revenue for the engineering and design services plaintiff provided for construction projects in Michigan, regardless of which servicеs occurred outside Michigan. Because a substantial nexus exists between Michigan and the activity of plaintiff that is being taxed, and because the tax is fairly apportioned, the tax is constitutional. As a result, I concur in affirming in part and reversing in part the judgment of the Court of Appeals.
The Michigan projects for which plaintiff performed services include the cogeneration plant in Midland, a refinery modification for Marathon Oil Company in Detroit, and a steam building expansion for what was then the Upjohn Company in Kalamazoo.
The apportionment factor for the tax years beginning before January 1991 was the average of three factors each weighted at 33V3 percent. See Corning, Inc v Dep’t of Treasury,
(a) The property factor multiplied by 30%.
(b) The payroll factor multiplied by 30%.
(c) The sales factor multiplied by 40%. [MCL 208.45(2), as amended by1991 PA 77 , § 1.]
And for the years at issue beginning after December 31, 1992:
(a) The property factor multiplied by 25%.
(b) The payroll factor multiplied by 25%.
(c) The sales factor multiplied by 50%. [MCL 208.45(4), as amended by1991 PA 77 , § 1.]
The drafting of this statute is awkward and renders the meaning of subsection c less dear than it might be if it stood alone. The statute’s parallel structure is flawed. Subsection c was grafted onto a standard provision from the Uniform Division of Income for Tax Purposes Act, § 1 et seq. (UDITPA). 7A, part I, ULA, p 141. However, its wording does not conform to the structure of the UDITPA provision. The introduction to all three subsections is a conditional definition of sales receipts as Michigan receipts, using the word “if.” The wording of subsections a and b naturally completes the conditional phrase. However, subsection c does not.
The majority proceeds as if the statutory provision is unambiguous and needs no interprеtation. It is a bizarre notion that the language of a statute can have only one reasonable meaning when four separate independent entities have split on its correct interpretation.
The majority claims that my definition of ambiguity is inconsistent with current law. The majority is within its rights to disagree with the definition I use for that word. But it is off base in suggesting that its definition of “ambiguity” is the current law of the state. It appears that the majority believes that only the definition of “ambiguity” that it favors may be used for statutory interpretation. I know of no legal authority that supports that position. The majority appears to confuse the binding effect of a legal holding necessary for the determination of a case with the nonbinding effect of the statutory analysis used to reach it. The justices who comprise the majority are entitled to favor one form of analysis or one definition of a word used in analysis over another. But they cannot mandate that all other justices use only their chosen approach or definitions for these words. “Ambiguous” is one such word. Differing modes of analysis and definitions may be considered disfavored in the sense that the majority prefers others. But, the minority’s definitions, when acceptable in current dictionaries, cannot be banned.
A July 17, 1975, letter from the Consulting Engineers Council of Michigan, Inc., to Senator John Bowman proposed the addition of § 53(c). The letter and circumstances surrounding the adoption of the subsection demonstrate the intent in enacting it. It was enacted so that all the services performed for construction projects would be attributed to the state where the services are consumed.
Defendant instructs its audit staff that services related to Michigan construction activities are by statute Michigan receipts. Defendant does not attribute to Michigan similar receipts received by a Michigan-based company for construction activities in other states.
I cannot join the majority’s constitutional analysis because I find it to be incomplete and conclusory.
Plaintiff also claims that the tax discriminates against interstate commerce because the tax is not fairly apportioned. Because this argument is based on the tax violating fair apportionment, plaintiff really argues only that the tax violates the first two prongs of the test.
When I speak of business activity, I refer not just to the physical labor that goes into building the project but also to the planning and design that take place beforehand.
The Court of Appeals applied the internal-consistеncy test as if other states that adopted the same statute would ascribe construction activities under subsections a or b. This was error. When a construction project is involved, Michigan ascribes all business activity to the state where construction occurs. Therefore, for purposes of the test, other states that adopt the same statute would also ascribe all business activity to the state where construction occurs. Subsections a and b would be inapplicable. Admittedly, it is possible that another state could enact a statute that would allow for double taxation, which seems to be what the Court of Appeals was concerned about. However, the internal-consistency test does not say a taxpayer shall never be subject to double taxation. It says that, if every state emulates the state tax at issue, a taxpayer shall not be subject to double taxation.