Order Michigan Supreme Court
Lansing, Michigan
May 16, 2014 Robert P. Young, Jr.,
Chief Justice
147883-7 Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
MENARD, INC., Brian K. Zahra
Plaintiff-Appellant, Bridget M. McCormack
v SC: 147883 David F. Viviano,
COA: 310399 Justices
Ct of Claims: 10-000082-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee,
and
STATE TREASURER and
STATE OF MICHIGAN,
Defendants.
_________________________________________/
SEARS ROEBUCK AND CO.,
Plaintiff-Appellant,
v SC: 147884
COA: 311053
Ct of Claims: 09-000068-MT
STATE TREASURER, STATE OF
MICHIGAN, and DEPARTMENT OF
TREASURY,
Defendants-Appellees.
_________________________________________/
MENARD, INC.,
Plaintiff-Appellant,
v SC: 147885
COA: 311261
Ct of Claims: 09-000057-MT
STATE TREASURER, STATE OF
MICHIGAN, and DEPARTMENT OF
TREASURY,
Defendants-Appellees.
_________________________________________/
ART VAN FURNITURE-CONNER, INC.,
Plaintiff-Appellant,
v SC: 147886
COA: 311294
Ct of Claims: 09-000059-MT
STATE TREASURER, STATE OF
MICHIGAN, and DEPARTMENT OF
TREASURY,
Defendants-Appellees.
_________________________________________/
ART VAN FURNITURE, INC.,
Plaintiff-Appellant,
2
v SC: 147887
COA: 312168
Ct of Claims: 09-000058-MT
STATE TREASURER, STATE OF
MICHIGAN, and DEPARTMENT OF
TREASURY,
Defendants-Appellees.
_________________________________________/
On order of the Court, the application for leave to appeal the September 12, 2013
judgment of the Court of Appeals is considered, and it is DENIED, because we are not
persuaded that the questions presented should be reviewed by this Court.
ZAHRA, J. (dissenting).
I respectfully dissent and would grant leave to appeal to consider whether
plaintiffs are entitled to bad-debt deductions under MCL 205.54i from their sales tax
remittances to the state based on credit sales to customers who defaulted on their credit
card payments. MCL 205.54i provides that a “taxpayer” may deduct from its monthly
sales tax remittance “the amount of bad debts.” In DaimlerChrysler Servs North America
LLC v Dep’t of Treasury, 271 Mich App 625 (2006), the Court of Appeals held that
DaimlerChrysler Services North America LLC, which had overpaid tax revenue to the
Department of Treasury for motor vehicles sold to consumers by its affiliated dealers,
was entitled to relief under MCL 205.54i in part because a nexus existed between the bad
debt, DaimlerChrysler, and the retail sales. Specifically, the Court of Appeals reasoned
that DaimlerChrysler was a “taxpayer” as defined under MCL 205.51(1)(m) as “ ‘a
person subject to a tax under this act.’ ” Id. at 635, quoting MCL 205.51(1)(m). In turn,
“person” was defined as “ ‘an individual, firm, partnership, joint venture . . . or any other
group or combination acting as a unit . . . .’ ” DaimlerChrysler, 271 Mich App at 635,
quoting MCL 205.51(1)(a) as amended by 2000 PA 390 (emphasis added). Having
concluded that the plain language of the statute contemplated a broad array of
taxpayers—including DaimlerChrysler and its affiliated dealers acting as a single, taxable
entity for the purpose of the retail sale of automobiles—the Court of Appeals held that
Chrysler was entitled under MCL 205.54i to recover overpayment. DaimlerChrysler,
271 Mich App at 635-636.
3
The Legislature enacted 2007 PA 105 shortly after the DaimlerChrysler decision,
adding to MCL 205.54i a definition of “taxpayer” as
a person that has remitted sales tax directly to the department on the
specific sales at retail transaction for which the bad debt is recognized for
federal income tax purposes or, after September 30, 2009, a lender holding
the account receivable for which the bad debt is recognized, or would be
recognized if the claimant were a corporation, for federal income tax
purposes. [MCL 205.54i(1)(e).]
The enacting language of 2007 PA 105 provides that the amendatory act is, in part, meant
to “correct[] any misinterpretation of the meaning of the term ‘taxpayer’ that may have
been caused by the Michigan Court of Appeals decision in Daimler Chrysler . . . .”
MCL 205.54i, enacting §1. Significantly, the amendatory act did not change the
definition of “person” on which the DaimlerChrysler Court relied.
In the instant case, the retailer-plaintiffs sold goods that consumers purchased by
using private label credit cards bearing the retailers’ names but issued by independent
financial institutions. The plaintiffs contend that their actions, in conjunction with the
actions of the respective financial institutions, qualified for the bad-debt deduction under
MCL 205.54i. Relying on 2007 PA 105 and the new definition of “taxpayer” in
MCL 205.54i(1)(e), the Court of Appeals disagreed. But again, the new definition of
“taxpayer” added by 2007 PA 105 relies on the definition of “person” provided in
MCL 205.51(1)(a), which remains unchanged from when the Court of Appeals decided
DaimlerChrysler. Thus, plaintiffs’ contention that they are taxpayers under
MCL 205.54(1)(e) is at least plausible given that their actions, in conjunction with those
of the respective lenders, presumably constitute those of “any other group or combination
acting as a unit,” thereby making each plaintiff a “person” under MCL 205.54(1)(a).
The Court of Appeals in this case failed to address the relevant definition of “person”
when it omitted the phrase “any other group or combination acting as a unit” from its
analysis of MCL 205.54(1)(a). Menard Inc v Dept of Treasury, 302 Mich App 467, 481-
482 (2013). Rather, the Court of Appeals stated that “MCL 205.51(1)(a) defines ‘person’
to include ‘[a] municipal or private corporation[,] whether organized for profit or not,
[and a] company,’ ” and stated that “[t]herefore, the payment of the bad debt by a third
party lender, an organized corporation, does not entitle retailers to a bad debt refund.” Id.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
May 16, 2014
p0513
Clerk