Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh
Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED JUNE 4, 2002
GENERAL MOTORS CORPORATION,
Plaintiff-Appellant,
v No. 116984
DEPARTMENT OF TREASURY,
REVENUE DIVISION,
Defendant-Appellee.
____________________________________
BEFORE THE ENTIRE BENCH
WEAVER, J.
Plaintiff, General Motors Corporation (GM), appeals from
the Court of Appeals decision that defendant, Department of
Treasury, could impose use tax1 on the vehicle components and
parts plaintiff provided to customers as part of plaintiff’s
goodwill adjustments policy. We reverse the decision of the
Court of Appeals and hold that assessment of use tax on the
goodwill adjustments was improper because they were taxed
1
Use Tax Act, 1937 PA 94, MCL 205.91 et seq.
pursuant to the General Sales Tax Act2 when customers
purchased vehicles at retail.
I
When customers purchase new GM automobiles, they are
provided with a GM limited manufacturer’s warranty. These
limited manufacturer’s warranties provide, in pertinent part,
for the replacement of defective parts of the automobile under
certain circumstances. They also generally provide coverage
for an expressly stated length of time, subject to earlier
expiration, if the vehicle is driven for a certain number of
miles. The department acknowledges that parts provided under
these limited warranties are not subject to use tax because
the customers paid for the right to replacement parts under
the warranties at the time of the retail sale.
In addition to the limited warranties, GM provides a more
open-ended “goodwill” adjustment policy under which GM will,
on a discretionary basis, pay for replacement parts for GM
vehicles even after the limited warranty period has expired.
Although not referred to by name as a “goodwill adjustment
policy,” notice of this policy is contained in the General
Motors warranty manual provided to customers at the time of
sale. In this regard, the manual provides:
2
1933 PA 167 as amended, MCL 205.51 et seq.
2
Should you ever encounter a problem during or
after the warranty periods that is not resolved,
talk to a member of dealer management. If the
problem persists, follow the additional procedure
outlined in “Owner Assistance,” on page 16 of this
booklet. [Emphasis added.]
The Owner Assistance section of the manual outlines a
“Customer Satisfaction Procedure.” It states that problems
will “normally” be resolved by the dealer’s sales or service
departments.3 However, if a concern is not resolved at that
level, the manual recommends first discussing the problem with
the dealership management. If the problem is not resolved by
the dealer management, customers are told to contact GM
directly. A customer dissatisfied with the outcome of the
procedure may elect arbitration. The manual states that,
while a customer is not bound to accept the result of the
3
General Motors, in a bulletin to its dealers, directs
them to make goodwill adjustments case by case “where special
consideration is in order to enhance customer satisfaction and
loyalty.” GM provides the dealers with a recommended set of
guidelines for goodwill policy adjustments to help them
distinguish defects in materials and workmanship from defects
caused by aging, physical damage, lack of proper maintenance,
or owner abuse.
Testimony revealed that GM estimates the cost of, and
establishes a budget reserve for, both warranty repairs and
goodwill adjustments for the lifetime of every make and model
of vehicle. Twice annually, GM internally audits both the
cost of warranty repairs and that of the goodwill policy for
each make and model of vehicle. A GM representative explained
that the vehicle sales price is designed to recover all costs,
including those associated with the goodwill adjustment
policy, as well as to maintain profitability.
3
arbitration proceeding, GM will “generally” agree to be bound
by it even though it reserves the right to terminate its
participation in the arbitration program.4
The department conducted an audit of GM’s compliance with
Michigan tax laws for the period of January 1, 1986, through
December 31, 1992. As a result of the audit, the department
assessed against GM use taxes and interest of $5.5 million on
the vehicle components and parts provided by GM to customers
as goodwill adjustments. The department had not previously
assessed such a tax. During the audit period, GM customers in
Michigan obtained $82 million in components and parts under
the goodwill policy.
GM appealed the assessment to the Court of Claims. In
pertinent part, GM alleged that the department lacked the
statutory authority to impose use tax on goodwill adjustments
because sales tax was imposed on the cost of the goodwill
adjustments when vehicles were sold at retail. However, the
Court of Claims disagreed with GM’s position and granted
summary disposition in favor of the department pursuant to MCR
2.116(C)(10), holding, in relevant part, that the transfer of
4
We note the possibility of arbitration merely to
provide a comprehensive outline of the complaint resolution
procedure. In light of our analysis, it is not necessary to
consider whether the possibility of arbitration is a form of
“consideration” in this case.
4
parts under the goodwill program is subject to use tax. The
Court of Appeals affirmed regarding this issue5, concluding
that “plaintiff’s dealers were not obligated to provide all
customers with goodwill adjustments” and, therefore, that the
“value of the goodwill program was not included in the gross
proceeds arising from the retail sales of plaintiff’s
vehicles.”6 The Court of Appeals also emphasized its view
that the purchasers of GM vehicles did not obtain “any
enforceable rights in the goodwill program.” We granted leave
to appeal.
II
Because the essential facts are not in dispute, we are
presented with a question of law: whether replacement parts
provided to customers at GM’s expense through the goodwill
program are independently subject to Michigan’s use tax in
connection with the transfer of the parts. We review
questions of law de novo. Kelly v Builders Square, Inc, 465
5
However, the Court of Appeals would have reversed the
Court of Claims in part and remanded for further proceedings
with regard to GM’s constitutionally based arguments that it
was denied equal protection of the laws and the benefit of
uniformity of taxation because the department did not apply
the use tax in the same way to other similarly situated
parties. In light of our conclusion that the transactions at
issue are not subject to the use tax as a matter of statutory
law, it is unnecessary to reach these constitutional issues.
6
Unpublished opinion per curiam, issued May 9, 2000
(Docket No. 213186).
5
Mich 29, 34; 632 NW2d 912 (2001). This is the same standard
of review applicable to the grant of a motion for summary
disposition. MacDonald v PKT, Inc, 464 Mich 322, 332; 628
NW2d 33 (2001).
III
The sales tax and the use tax are interrelated. Sales
tax is imposed by the General Sales Tax Act (GTA) on the gross
proceeds of a business. MCL 205.52(1). The GTA defines
“[g]ross proceeds” as the “amount received in money, credits,
subsidies, property, or other money’s worth in consideration
of a sale at retail . . . .” MCL 205.51(1)(i). In contrast,
pursuant to the Michigan Use Tax Act (UTA), use tax is
generally imposed on the privilege of “using, storing, or
consuming tangible personal property.” MCL 205.93(1).
GM contends that the cost of its goodwill adjustments is
exempt from use tax under § 4(1)(a) of the UTA. MCL
205.94(1)(a) provides that “[p]roperty sold in this state on
which transaction a tax is paid under the general sales tax
act” is exempt from the use tax “if the tax was due and paid
on the retail sale to a consumer.” Thus, our inquiry is
whether “tax was due and paid” pursuant to the GTA on the cost
of the goodwill adjustments when vehicles were sold at retail.
The sales and use taxes, while imposed in different ways,
do not operate in isolation. Rather, provisions of the UTA
6
and the GTA are supplementary and complementary. World Book,
Inc v Treasury Dep’t, 459 Mich 403, 408; 590 NW2d 293 (1999);
Elias Bros Restaurants, Inc v Treasury Dep’t, 452 Mich 144,
153; 549 NW2d 837 (1996). UTA § 4(1)(a)’s exemption is an
expression of a legislative intent to avoid pyramiding of
sales and use tax. Elias Bros, supra. In other words, a
transfer of property that has already been subjected to
Michigan’s sales tax is not subject to this state’s use tax.
As directed by § 4(1)(a), we examine the provisions of the GTA
to determine whether tax was paid on the goodwill adjustment
at the retail sale to a customer or whether the department’s
assessment of use tax was appropriate.
The GTA defines a “sale at retail” as “a transaction by
which the ownership of tangible personal property is
transferred for consideration, if the transfer is made in the
ordinary course of the transferor’s business and is made to
the transferee for consumption or use, or for any purpose
other than for resale . . . .” MCL 205.51(1)(b). The
question is thus whether the goodwill adjustment policy is
consideration flowing to customers when they purchase a GM
vehicle or merely an illusory promise. Stated otherwise, we
examine whether the cost of the goodwill adjustment policy is
included in the retail price of GM vehicles as something that
7
is purchased by customers.
At the time of retail sale, GM customers receive an
owner’s manual. The manual invites customers to initiate a
dialogue with the dealership when a defect arises, “during or
after the warranty periods.” The manual states the goal of
resolving the defect to the “customer’s satisfaction.” GM
admits that its customers are not guaranteed that requested
after-warranty goodwill adjustments will be made. Indeed, GM
suggests its dealers negotiate with customers for copayment on
goodwill adjustments case by case.7 Nevertheless, GM’s
goodwill policy is a promise to hear and address customer
complaints even after the written warranty expires.
To have consideration there must be a bargained-for
exchange. Higgins v Monroe Evening News, 404 Mich 1, 20-21;
272 NW2d 537 (1978). There must be “‘a benefit on one side,
or a detriment suffered, or service done on the other.’”
Plastray Corp v Cole, 324 Mich 433, 440; 37 NW2d 162 (1949).
Courts do not generally inquire into the sufficiency of
consideration, Harris v Bond & Mtg Corp, 329 Mich 136, 145; 45
NW2d 5 (1950). It has been said “[a] cent or a pepper corn,
in legal estimation, would constitute a valuable
consideration.” Whitney v Stearns, 16 Me 394 (1839). The
7
GM Service Bulletin No. 57-05-01, April 1995.
8
owner’s manual provided at the time of sale invites customers
to voice complaints even after the warranty period ends, with
the goal of resolving the complaint to the customer’s
satisfaction. We hold that this opportunity for dialogue and
possible resolution of complaints—even outside the warranty
period–is a benefit flowing to purchasers of GM vehicles at
the time of retail sale and, therefore, is consideration for
the sale.8 Therefore, replacement parts provided pursuant to
the goodwill program are subject to the sales tax at the time
of retail sale and are exempt from the use tax under § 4(1)(a)
of the UTA.9
8
While acknowledging that a customer pays for the
goodwill program, the dissent “cannot fathom” that a customer
would bargain for the opportunity to have postwarranty
complaints addressed. This skepticism is inconsistent with
this Court’s traditional reluctance to question the
sufficiency of consideration and is not justification to
override the Legislature’s expression of intent in UTA §
4(1)(a) to avoid the pyramiding of the sales and use taxes.
9
While not part of our dispositive analysis, it is
noteworthy that GM audits the cost of the goodwill adjustment
policy twice annually with the goal of recovering costs and
maintaining profitability. A witness for the department
acknowledged that GM uses the same method to account for the
cost of warranty repairs and goodwill policy adjustments. It
is evident that GM attempts to effectively include the cost of
warranty repairs in the retail price of its vehicles. The
record reflects that the cost of the goodwill adjustment
policy is likewise included in the retail price of GM
vehicles. A GM witness testified that “implicit in the price
is the fact that we need to cover all the costs, and both
policy and warranty are costs that are included . . . .”
9
GM’s promise pursuant to its goodwill adjustments
policy, while discretionary with respect to whether there will
be any “adjustment,” is not discretionary regarding GM’s
obligation to act reasonably and in good faith in response to
a customer complaint.10 Reinforcing this contractual
undertaking to act in good faith is MCL 440.1203, part of
Michigan’s version of the Uniform Commercial Code. MCL
440.1203 provides that “[e]very contract or duty within this
act imposes an obligation of good faith in its performance or
enforcement.”11 This means that, should GM not consider
complaints under the goodwill adjustment policy in good faith,
it can be sued.
The dissent agrees that a unilateral or discretionary
promise could “constitute valid consideration.” Post, p 4.
However, the dissent would decline to rule that GM’s promise
10
As stated by Professor Arthur Corbin:
Promissory words are not nullified by making
the promise conditional on some event within the
promisor’s own power, if at the same time the
promisor impliedly promises to make a reasonable
effort to bring the event about or to use good
faith and honest judgment in determining whether or
not it has in fact occurred. [2 Corbin, Contracts,
§ 5.32, p 177.]
11
Because the sale of a vehicle is the sale of a good,
a contract for such a sale is subject to the Uniform
Commercial Code. See MCL 440.2102 (providing generally that
the UCC “applies to transactions in goods”).
10
is valid consideration in part because GM’s customers have
“little if any” knowledge of the scope of GM’s discretion.
Id. That it is unknown how liberally GM will exercise its
discretion does not mean there is no discretion. In fact, it
means there is discretion, i.e., a benefit to the consumer.12
The dissent has fallen into the error of considering not
merely if there is consideration, but its sufficiency. As we
have stated, courts do not inquire into the adequacy of
consideration to support a contract. Higgins, supra.13 Thus,
we conclude that the duty the goodwill policy imposes on GM to
12
We note that this is a greater right than the inherent
ability to complain possessed by consumers generally. While
a customer would typically have the practical ability to bring
a complaint to the attention of a manufacturer, absent a
contractual or other legal duty, the manufacturer would be
free to simply ignore such complaints without giving them any
consideration. However, because of its contractual
undertaking for the goodwill policy, GM has a duty to consider
such complaints in good faith.
13
This point is reinforced by Professor Samuel Williston:
It is an elementary and oft quoted principle
that the law will not inquire into the adequacy of
consideration so long as the consideration is
otherwise valid to support a promise. By this is
meant that so long as the requirement of a
bargained-for benefit or detriment is satisfied,
the fact that the relative value or worth of the
exchange is unequal is irrelevant so that anything
which fulfills the requirement of consideration
will support a promise, regardless of the
comparative value of the consideration and of the
thing promised. The rule is almost as old as the
doctrine of consideration itself. [3 Williston,
Contracts (4th ed), § 7:21, pp 383-386.]
11
consider requests for redress in good faith is a valuable
consideration that is worth far more than the legendary
peppercorn.14
Moreover, the evidence indicates that for the period
1986-1992, plaintiff provided “goodwill” parts to customers of
General Motors cars having an estimated value of $82 million.
As the dissent itself recognizes, “the cost of . . . [these]
parts has been factored into the retail cost of the
car . . . .” Post, p 5. If this is so, then such costs have
been necessarily paid by the consumer at sale, i.e., a car
otherwise valued at $9975 has been increased in price to
$10,000 and the consumer has paid an additional $25 for the
goodwill policy. Plaintiff, not being a charitable
institution, must necessarily have factored the cost of the
goodwill policy into the cost of the car, and such cost must
necessarily have been paid by the consumer. Further, it can
be presumed that the consumer paid $25 because something of
value passed. The automobile industry is sufficiently
competitive that few companies can afford to tack costs onto
14
In concluding that the goodwill program amounted to an
illusory promise, the Court of Appeals referenced Barbat v M
E Arden Co, 74 Mich App 540, 543-544; 254 NW2d 779 (1977), for
the proposition that “[a]n unenforceable promise cannot
constitute consideration.” However, that case is inapplicable
because it involved a promised performance that was
“unenforceable” because it was void as illegal.
12
their products for parts or services that are perceived as
valueless by their consumers. Contrary to the dissent, we can
easily envision a “rational, self-interested market
participant” paying something for a benefit estimated to
provide more than $13 million in annual benefits to consumers.
Our interpretation of MCL 205.94(1)(a) does not constitute a
“lax” interpretation of consideration as the dissent asserts.
Post, p 7. Rather, our interpretation is based on fundamental
contract principles and reflects the realities of the
marketplace.15
IV
Because the goodwill adjustment policy provides an
opportunity for GM customers to seek redress of vehicle
defects and because the policy is included in the retail price
of GM vehicles and purchased at the time of retail sale, it is
part of the consideration flowing to GM customers when they
purchase a GM vehicle that is taxed pursuant to the GTA at
15
The dissent asserts that “[m]erely because plaintiff
proves through its accounting methods that it charges all
consumers for costs associated with a program . . . , I cannot
conclude that ‘consideration’ was paid by purchasers . . . .”
Post, p 6, n 4. If this statement does not set forth the very
essence of “consideration,” it is hard to know what the term
means. Of course, we recognize that not every cost factored
into the price of a manufacturer’s product is exempt from use
tax as a form of “consideration” to a customer. Costs that do
not provide a benefit to a customer could not be
consideration.
13
retail sale. We reverse the decision of the Court of Appeals
and remand this case to the Court of Claims for entry of
judgment in favor of GM.
CORRIGAN , C.J., and TAYLOR , YOUNG, and MARKMAN , JJ.,
concurred with WEAVER , J.
14
S T A T E O F M I C H I G A N
SUPREME COURT
GENERAL MOTORS CORPORATION,
Plaintiff-Appellant,
v No. 116984
DEPARTMENT OF TREASURY,
REVENUE DIVISION,
Defendant-Appellee.
___________________________________
CAVANAGH, J. (dissenting).
I write separately to express my disagreement with the
majority’s conclusion that retail new car customers exchange
consideration for goodwill policy parts when purchasing
vehicles manufactured by plaintiff. Plaintiff has claimed its
goodwill repair parts should not be subject to use tax because
the costs are included in the price of the vehicle, which is
subject to sales tax. Under MCL 205.94(1)(a), no use tax is
owed on retail sales subject to sales tax. However, this
exemption applies only if the parts are included in a “sale at
retail,” i.e., “a transaction by which the ownership of
tangible personal property is transferred for
consideration. . . .” MCL 205.51(1)(b). Because I cannot
agree that the goodwill parts are transferred for
consideration, I must respectfully dissent.
I
Plaintiff directs its dealers to make goodwill
adjustments case by case “where special consideration is in
order to enhance customer satisfaction and loyalty.”1 Most
dealers have the discretion to provide repair parts free or at
a reduced rate to consumers after the original warranty
expires.2 These repairs are provided to select customers who
1
GM Service Bulletin No. 57-05-01, April 1995.
2
Plaintiff provides specific negotiation tactics:
In situations beyond the warranty period, but
within your claim authorization empowerment,
customers have received a value from use of the
vehicle. It would be reasonable to consider
partial payment by the customer. The judgment
belongs to you.
* * *
In those cases which warrant a Policy
Adjustment, there is seldom a reason for Buick to
pay the entire amount. Never lose sight of the
fact that the owner has driven the vehicle for the
life of the warranty, and then some.
Unquestionably, the customer has received some
value from the investment. Do not hesitate to
bring this up during the negotiation.
Dealers are also advised to “determine what the owner
expects . . . evaluate the . . . complaint . . . [and]
(continued...)
2
are unsatisfied with defective parts after the manufacturer’s
warranty expires.
Consumers are not given any general or specific
information concerning the goodwill program and are informed
in the warranty manual of their right to contact plaintiff
after the manufacturer’s warranty expires if they are
dissatisfied with the dealer’s offered resolution. The
written warranty also indicates that arbitration proceedings
may be an option.3 In essence, the consumer is given an
opportunity to ask for free repair parts, but has no legal
right to any specific repair and knows nothing of the goodwill
policy program in general, or of its specific terms. Though
plaintiff may agree to subject itself to arbitration
proceedings, consumers gain no legally enforceable right as a
result of this program, a program purportedly “purchased” at
the retail sale.
Consideration requires bargained-for legal detriment.
2
(...continued)
[d]etermine if the customer will be satisfied with any offer
you might make.”
3
Contrary to the implication by the majority,
plaintiff’s participation in arbitration is in no way
guaranteed. While a consumer may always request arbitration,
plaintiff reserves the right to refuse to participate. See
1990 Warranty and Owner Assistance Information for Buick New
Cars (“GM will generally agree to be bound by the arbitrator’s
decision . . . . [GM] reserves the right to change eligibility
limitations and/or to discontinue its participation in the
program” [emphasis added]).
3
Higgins v Monroe Evening News, 404 Mich 1, 20-21; 272 NW2d 537
(1982) (opinion by Blair Moody, Jr., J.). I agree with the
majority that a discretionary promise must be exercised in
good faith and that the reasonable execution of such a promise
may constitute valid consideration. J R Watkins Co v Rich, 254
Mich 82, 84-85; 235 NW 845 (1931); Wood v Lucy, Lady Duff-
Gordon, 222 NY 88; 118 NE 214 (1917). However, I am not
convinced that plaintiff’s good-faith exercise of its
discretionary power is sufficient to permit a finding of
bargained-for consideration in this instance. A party relying
on the good-faith exercise of another’s unilateral discretion
generally has some knowledge of the scope of discretion
involved and the potential benefits that might accrue. In
this case, customers have little if any knowledge of what they
allegedly bargained and paid for at the retail sale. I cannot
fathom what rational, self-interested market participant would
actually bargain for and purchase such a promise. If it came
free with the purchase price, most would accept it, but almost
no one would buy it.
Further, I am not sure that an arbitrator would have any
reason to rule in favor of a customer if dissatisfaction
actually resulted in an arbitration hearing. On the basis of
the contract between the parties, the express warranty would
have expired if a customer requested parts under the goodwill
4
policy. The simple failure to purchase a supplemental
warranty suggests plaintiff has absolutely no legal or good
faith duty to repair defective parts after the warranty
expires. The presence of express promises (original warranty)
and the opportunity to purchase supplemental promises
(extended warranty) evidence the parties’ intention that
plaintiff escape liability for defects after the original
warranty period expires. Because information concerning the
terms of the goodwill policy is generally kept secret, I am
not sure that a consumer could adequately plead his case to
the arbitrator, assuming plaintiff agreed to participate. All
a consumer is left with is the right to complain to plaintiff,
and I believe it is a stretch to consider that sufficient
consideration where such a right exists regardless of the
goodwill policy. Therefore, I would hold that the goodwill
policy adjustment program does not constitute valid
consideration.4
4
Like the majority, I respect the doctrine that generally
prohibits courts from questioning the adequacy of
consideration. Unfortunately, that doctrine is inapplicable
here because absolutely no consideration for the goodwill
parts passed between the parties at the retail sale. Merely
because plaintiff proved through its accounting methods that
it charges all consumers for costs associated with a program
that results in free or discounted parts to some, I cannot
conclude that “consideration” was paid by purchasers at the
retail sale for goodwill parts. GM’s $82 million dollars
worth of repairs, while certainly of value, simply cannot be
regarded as legal consideration.
(continued...)
5
Even so, I agree that the cost of the goodwill policy
parts has been factored into the retail cost of the car, and
to that extent the goodwill parts are subject both to use and
sales tax. Unfortunately, because the use tax statute exempts
only costs transferred for consideration in a retail sale, the
Legislature essentially failed to avoid pyramiding taxes where
costs are factored into a product, but are not actually part
of the consideration paid. MCL 205.51, 205.94(1)(e).5
(...continued)
Further, the majority implies that any cost factored into
the price of the car by GM should be exempt from use tax. If
that were the case, no manufacturer would ever pay use tax
because generally all costs work their way into the price of
products. The statute as currently drafted does not provide
an exclusion per se for all costs factored into product
prices, only those for which consideration has passed at a
retail sale. See MCL 205.94(1)(a), 205.51(1)(b).
The majority also presumes that a customer can pinpoint
the costs associated with a program it knows nothing of and
buy the car in part on the basis of the promised value
associated with the goodwill policy. The error lies in that
assumption. We cannot assume market participants are making
rationale choices when they lack sufficient knowledge of the
goodwill policy. Neither GM nor the dealer bargains over this
product with the consumer. GM keeps the terms and scope of
the program confidential, thereby making it impossible for a
consumer to pay for such a program with consideration. The
majority’s attempt to rebut my position ignores the
foundational principles of consideration, i.e., bargained-for
consideration is absent where “the action that the promisee
took was not induced by the promise.” Farnsworth, Contracts,
(2d ed), § 2.6, p 52 (emphasis in original). In this case,
plaintiff simply fails to give consumers an opportunity to be
induced by the alleged benefit.
5
In an attempt to refute my position, the majority
erroneously infers the following:
(continued...)
6
II
I suspect the most appropriate and forthright method to
analyze the goodwill program for tax purposes would be to
conceive of the parts as promotional or gratuitous items.
Plaintiff grants adjustments “in order to enhance customer
satisfaction and loyalty.” In essence, the goodwill policy is
a select form of advertising, i.e., a large scale version of
the distribution of free pens and cups to conference
participants or the provision of free pharmaceutical samples
to physicians. Dealers probably grant the benefits of the
discretionary goodwill program to those customers most likely
to experience enhanced manufacturer loyalty. Because the
program most resembles a marketing or customer satisfaction
5
(...continued)
[T]he dissent would decline to rule that GM’s
promise is valid consideration in part because GM’s
customers have “little if any” knowledge of the
scope of GM’s discretion. Id. That it is unknown
how liberally GM will exercise its discretion does
not mean there is no discretion. In fact, it means
there is discretion, i.e., a benefit to the
consumer. [Ante at 10-11.]
To clarify, I conclude that GM’s parts cannot constitute valid
consideration because the consumers did not bargain for, and
were not induced to act because of, the goodwill policy in
general or the parts in particular. Moreover, I agree that GM
has discretion. In fact, GM has so much discretion that it
would be impossible for consumers to bring an action claiming
that discretion was exercised without good faith. The majority
errs by inferring from my statement that describes a
consumer’s lack of knowledge concerning the scope of GM’s
discretion that the existence of discretion is itself
dispositive of the inquiry.
7
offer, and because there is no general statutory exemption for
promotional items from use tax in Michigan,6 I would permit
defendant to assess use taxes, assuming it does so in a
uniform fashion. See Virginia Dep’t of Taxation v Miller-
Morton Co, 220 Va 852, 859; 263 SE2d 413 (1980) (when a
distributor of products withdrew products from inventory
within the state for free disposition to customers also within
the state, the distributor exercised a power incident to
ownership of the products, and this use of products previously
held for resale was not within the exemption from use tax).
III
The majority permits a lax interpretation of
consideration in order to bridge the gap between the text of
the statute and the general desire to avoid duplicate
taxation. While the end might be worthwhile, the method
arguably creates an empty definition of consideration that
could affect future bargainers. Rather than compensate for
the legislative failure to exempt all product costs from use
tax by watering down our understanding of consideration, I
6
MCL 205.94(1)(c) exempts from use tax certain
promotional items, which include:
[P]romotional merchandise transferred pursuant
to a redemption offer to a person located outside
this state or any packaging material, other than
promotional merchandise, acquired for use in
fulfilling a redemption offer or rebate to a person
located outside this state. [Emphasis added.]
8
would hold that the repair parts are not included in the
retail sale for which consideration is paid.
KELLY , J., concurred with CAVANAGH , J.
9