Production Steel Strip Corp. v. Detroit

T. M. Burns, J.

Defendants, City of Detroit, County of Wayne, and the Board of Education for the City of Detroit, together with their respective treasurers, appeal from a judgment in favor of the plaintiff, Production Steel Strip Corporation (hereinafter referred to as taxpayer), in an action for a refund of a portion of its personal property taxes which it paid under protest for 1966 and 1967.

Taxpayer, as part of its business, purchases certain hot rolled steel coils. Some of the coil steel is purchased domestically, some is purchased from foreign sources. The domestic and foreign steel is identical and interchangeable.

Defendant taxing authorities levy a property tax on inventories. Thus, any domestic steel in taxpayer’s inventory is subject to said property tax. As to steel purchased in foreign countries, however, it is not so simple due to the prohibition on the taxing of imports by a state contained in US Const, Art I, §10.1

*701Imported goods are not immune forever from such taxes, however. In Knight Newspapers, Inc v Detroit, 16 Mich App 438, 442 (1969), this Court held that once imported goods become part of the "current operational needs” of the business in question, the immunity is lost and local taxes may be levied thereon. The current operational needs are determined in the following manner:

"In City and County of Denver v Denver Publishing Company, 153 Colo 539; 387 P2d 48 (1963), the Supreme Court of Colorado recognized the distinction between newsprint for current operational needs and the stock on hand dictated by good business management. The Court upheld the trial judge’s formula which used the number of days needed by the newspaper to replenish its stock, multiplied by the daily average amount of newsprint used by the company to determine current operational needs. The rule and formula in the Denver case are realistic and are adopted.”

Thus, in most cases applying the above formula, the assessors need only multiply the number of days needed to replenish a taxpayer’s stock by the quantity of goods which are used daily on the average to determine how much of the goods have lost their immunity for tax purposes.

In the instant case, however, the taxpayer purchases from both domestic and foreign sources. Delivery from domestic sources takes two weeks. Delivery from foreign sources takes 2-1/2 months. Therefore, the quantity of steel subject to the property tax depends upon which period of time is used to multiply by the taxpayer’s daily needs.

The taxpayer argues that his daily needs should be multiplied by 14 days, since all of its inventory *702can be replenished in that length of time. The taxing authorities argue, however, that the longer period should be used which would result, of course, in a greater quantity of steel upon which the taxing authorities could levy their property taxes.

Therefore the question we are called upon to decide is whether or not replenishment time for the application of the "current operational needs” formula is to be measured by the replenishment time from foreign sources or by the actual replenishment time immediately after the tax date.

The trial court held that replenishment time is to be computed immediately after the tax date. We agree.

Although the cases relied upon by the taxing authorities applied the Colorado’s "current operational needs” formula in terms of the replenishment time from a foreign source,2 those cases do not stand for the proposition that the definition of replenishment time is the replenishment time from a foreign source. A foreign source was the only source involved in those cases. Those cases did not touch upon the question presented in the instant case, namely, whether the foreign source in the actual source replenishment time was to be used where the taxpayer obtains goods from both foreign and domestic sources. Therefore, the cases cited by the taxing authorities are distinguishable from the present case and are not controlling on this issue.

Moreover, MCLA 211.2; MSA 7.2 provided:

"The taxable status of persons and real and personal *703property shall be determined as of each December 31, which shall be deemed the tax day for the immediately succeeding calendar year, which is also the tax year, any provisions in the charter of any city or village to the contrary notwithstanding.”

We interpret this provision to mean that the inventory on hand on the tax date is taxable. However, an inventory of foreign imports is not taxable because of the import immunity clause of the United States Constitution3 unless such inventory can be classified within the realm of current operational needs on the tax date. It follows then that in order to determine what are a taxpayer’s current operational needs on the tax date, it is necessary to compute what the replenishment time is as of that date.

Here, since the Great Lakes navigation season was closed, the taxpayer’s replenishment time was 14 days on the tax date. Therefore, 14 days was the correct replenishment time, to be used in computing the taxpayer’s current operational needs.

In addition, the taxing authorities contend that since MCLA 211.13; MSA 7.13 (average monthly inventory provision) and MCLA 211.2; MSA 7.24 *704allow the assessing officer to "survey, examine or review properties at any time prior to or after said tax day”, the assessor is not limited to using the replenishment time immediately after the tax date. We cannot agree.

The mere fact that the assessor may examine property prior to or after the tax date for assessment purposes does not affect the time that the assessment of current operational needs is to be made. Regardless of the time the assessor looks to determine the amount of inventory a taxpayer has on hand, it is necessary for the assessor to determine current operational needs as of the tax date by computing the replenishment time as of that date. See Knight Newspapers, Inc v Detroit, 16 Mich App 438 (1969).

Moreover if there is any doubt as to the meaning of MCLA 211.13; MSA 7.13 or MCLA 211.2; MSA 7.2, they must be construed against the government and in favor of the taxpayer. Ecorse Screw Machine Products Co v Corporation & Securities Commission, 378 Mich 415 (1966); Consumers Power Co v Corporation & Securities Commission, 326 Mich 643 (1950).

We hold, therefore, that 14 days was the correct replenishment time to be used in computing the taxpayer’s current operational needs.

The parties next ask this Court to rule on who has the burden of proof. We can only say in regard to this issue that there are no proofs when, as here, all of the facts have been stipulated. In such cases our only duty is to apply the law to the factual situation as the parties have stipulated *705them to be. There is, therefore, no burden of proof problem.

Affirmed.

Holbrook, P. J., concurred.

"No state shall, without the consent of Congress, lay any imposts *701or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws.”

Beall Pipe & Tank Corp v State Tax Commission, 254 Or 195; 458 P2d 420 (1969); Knight Newspapers, Inc v Detroit, 16 Mich App 438 (1969); Orr Felt & Blanket Co v Schneider, 3 Ohio St 2d 14; 209 NE2d 150 (1965).

US Const, Art I, § 10.

MCLA 211.13; MSA 7.13: "Inventories of goods, wares, materials, merchandise and supplies such as are commonly used in trade or commerce or manufacture shall, upon the filing by the owner thereof of a sworn statement with the assessing officer showing the total of such inventories for each of the preceding 12 months ending December 31, be assessed on the basis of the average monthly inventory for such 12-month period. The average monthly inventory shall be computed on the basis of the number of months during which said inventories of goods, wares, merchandise and supplies had a taxable situs in the assessing district. No assessing officer shall be restricted to any particular period in the preparation of the assessment roll but may survey, examine or review properties at any time prior to or after said tax day. "(Emphasis supplied.)

MCLA 211.2; MSA 7.2: "Taxable status of persons and real and personal property shall be determined as of each December 31, which shall be deemed the tax day for the immediately succeeding calendar *704year which is also the tax year, any provisions in the charter of any city or village to the contrary notwithstanding. No assessing officer shall be restricted to any particular period in the preparation of the assessment roll but may survey, examine, or review properties at any time prior to or after the tax day. "(Emphasis supplied.)