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Conjunction Junction: Michigan Supreme Court Holds "And" Means "And" for Use Tax Exemption

Nicole D. Boutros
Sutherland Asbill & Brennan LLP - New York Office

Timothy Gustafson
Timothy A. Gustafson
Sutherland Asbill & Brennan LLP - Sacramento Office

July 24, 2014

Previously published on July 21, 2014

The Michigan Supreme Court held that a taxpayer claiming a Michigan use tax exemption for sales tax “due and paid” on its purchases of tangible personal property must demonstrate that it actually paid sales tax on such property. The taxpayer provided a marine transportation service to transport asphalt and other products throughout the Great Lakes. Claiming its purchases of fuel from Michigan sellers were exempt from Michigan use tax pursuant to an exemption for tangible personal property on which sales tax was “due and paid,” the taxpayer provided auditors with invoices to demonstrate it paid sales tax, but the invoices did not separately state sales tax as a line item. The court held that the taxpayer could not claim the use tax exemption for sales tax due and paid because it failed to demonstrate that the price of the fuel included sales tax, notwithstanding that the sale was a taxable transaction. Rather, the use tax exemption for sales tax due and paid required the taxpayer to prove that either the taxpayer or the seller actually paid sales tax on the purchase of fuel. The court rejected the taxpayer’s argument that it was entitled to a presumption that the sale price of the fuel included sales tax on an otherwise taxable transaction merely because the duty to pay the sales tax falls on the seller. The court reasoned that such a presumption would entitle a purchaser to the use tax exemption whenever sales tax was due, without showing it was paid, and it would improperly shift the burden to the Department of Treasury to prove the contrary. Notably, the court acknowledged that both sales tax and use tax could apply to the same property but concluded that any double taxation would be traceable to a taxpayer’s recordkeeping and failure to demand proof that it paid sales tax. Andrie Inc. v Dep’t of Treasury, Docket No. 145557 (Mich. S. Ct. June 23, 2014).


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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