Friday, April 20 2012
Accuracy-Related Penalties Assessed Were Upheld
In Anderson v. Department of Treasury, Michigan Tax Tribunal, No. 359228, March 28, 2012, the operators of a Western tack shop, were liable for an assessment of Michigan sales tax because they could not substantiate their nontaxable sales. The petitioners engaged in four lines of business: a retail tack shop, "gypsy sales" (flea market and carnival sales), vehicle and horse trailer sales, and horse sales. Petitioners' tax records were allegedly destroyed in a fire. Though circumstantial evidence is generally accepted in this instance, the Tax Tribunal found that neither petitioner was able to recall relevant transactional details to substantiate their claims. In regards to their sales of horses and vehicles, the petitioners could not determine the number of sales made to out-of-state customers that were consummated outside of Michigan. The petitioners claimed that use tax must have been paid by the buyers on the in-state vehicle sales, or else registration and titling of the vehicles could not have occurred. However, the Tax Tribunal refused to accept the unsubstantiated inference. Overall, the Department of Treasury was reasonable in basing its assessment on the information obtained from petitioners and their CPA.
Furthermore, the accuracy-related penalties assessed against the petitioners were upheld, as they could not demonstrate reasonable cause for their failure to collect and remit sales tax. Though the petitioners relied on representations made by an employee of the Secretary of State's office and a state veterinarian, reliance on non-tax professionals does not constitute reasonable cause.
Thursday, April 19 2012
Officer Could Not Delegate Responsibility
In Klecha v. Department of Treasury, Michigan Tax Tribunal, No. 357723, March 28, 2012, the Michigan Tax Tribunal held that a petitioner was liable for the corporate taxpayer's sales tax assessments based on his status as a responsible corporate officer. Evidence showed that the petitioner served as the president of the taxpayer during the periods at issue and never resigned as an officer of the corporation. Furthermore, as the petitioner prepared the corporation's tax returns in prior years and failed to affirmatively surrender this responsibility, it could be inferred that he was the officer with control over making the returns and payments during the periods in question. The delegation of tax responsibilities to non-officers does not extinguish the responsibility of a corporate officer.
Wednesday, April 18 2012
Lessor Entitled to Elect to Remit Use Tax on Lease Payments
In Caledesi Holdings, LLC v. Department of Treasury, Michigan Tax Tribunal, No. 358183, March 13, 2012, a lessor of an aircraft was not liable for Michigan use tax based on the aircraft's purchase price because it was entitled to make an election to remit use tax on the lease payments received. The Tax Tribunal found that the taxpayer was engaged in the business of leasing tangible personal property to others for purposes of the Rule 82 election. There was no evidence that the rental rate charged by the taxpayer was inconsistent with the leasing market. Furthermore, the evidence showed that the aircraft was not used by the taxpayer, thereby indicating an absence of a personal motive for the aircraft's purchase. Though the aircraft was only in use for six months before it fell into disrepair, the amount of flight time and low rental receipts did not necessarily mean that the business was not entered into with the purpose of generating a profit.
Tuesday, April 17 2012
Sales Were Sourced Out-Of-Michigan
In Uniloy Milacron USA, Inc. v. Department of Treasury, Michigan Court of Appeals, No. 300749, Unpublished January 26, 2012, Approved for Publication March 29, 2012 (a published opinion), the Michigan Court of Appeals held that a manufacturer of molds used in blow-molding machines was entitled to a refund of single business tax because all of the manufacturer's sales could not be apportioned to Michigan as a matter of law. The case was issued earlier as an unpublished decision.
Monday, April 16 2012
Separate Return Allowed to Claim Certificated Credits
Public Act 70 of 2012 (PA 70-2012), effective March 29, 2012 allows Michigan business taxpayers that are part of a unitary business group to elect to file a separate MBT return as opposed to a combined return provided that the taxpayers have certain certificated credits. The certificated credits that qualify taxpayers for this election are MEGA employment, manufacturing of plug-in traction battery packs, and construction of a cell manufacturing facility.
Wednesday, April 04 2012
Property Owner Failed to Show Tax Tribunal Determination Was Unsupported by Competent, Material, and Substantial Evidence
In Scopel v. City of Grosse Pointe Park, Michigan Court of Appeals, No. 301045, March 27, 2012, the Michigan Tax Tribunal's determination of true cash value (TCV) and taxable value of a taxpayer's home for local property tax assessment purposes was valid because the taxpayer failed to show that the tribunal's decision to reduce the agreed-upon 2008 TCV by the city's percentage of the market decline of 5.4% in 2009 and 5.6% in 2010 was unsupported by competent, material, and substantial evidence or represented an error of law or the adoption of wrong principles. With regard to the 2009 and 2010 tax years, the tribunal found that the taxpayer met his burden of proving that the city's assessments were too high in light of the reduction in TCV for 2008. However, the tribunal also found that the taxpayer failed to present evidence to adequately substantiate his contention that the percentage decline in market values was likely higher than the declines as presented by the city.
Tuesday, April 03 2012
Deferment Also Available for Limited Liability Companies
Public Act 57 of 2012, effective March 22, 2012, provides that a partnership is allowed to defer local Michigan summer property taxes on agricultural property it owns if the gross receipts of the agricultural or horticultural operations in the previous year or the average gross receipts of the operations in the previous three years are not less than the household income of the owner in the previous year or the combined household incomes in the previous year of the partners of the partnership that owns the agricultural real property. In addition, the individual partners must have qualified for deferment before the partnership was formed. This deferment is also available for limited liability companies.
Monday, April 02 2012
Property Was Not Owned, Used, and Occupied In Michigan
In City of Port Huron v. State Tax Commission, Michigan Court of Appeals, Nos. 301058 and 301062, March 20, 2012; the Court of Appeals reversed the Tax Tribunal in ruling that two parcels of real property that were leased by a Michigan telephone company were not subject to state rather than local property taxation. In order for the property to be considered as having a situs in the state, it had to be owned, used, and occupied by a telephone company within the state.
The Michigan Court of Appeals held that every word or phrase in the applicable statutory provision that defined "property having a situs in this state" had to be given its plain and ordinary meaning unless specifically defined in the statute. The question in this case was one of statutory interpretation.
The court noted that the phrase "owned, used, and occupied" in the applicable provision modified "tangible property, real and personal." Because there was no reason not to apply the literal meaning of "and," the court concluded that all three conditions of "owned, used, and occupied" had to be satisfied.
In this case, the telephone company was the lessee, rather than the owner in fee, of the disputed properties. Therefore, the leased parcels did not fit the statutory definition of "only the tangible property, real and personal, owned, used, and occupied by a telephone company within this state." Accordingly, the Michigan Tax Tribunal erred in holding that the property was subject to state and not local assessment.