Transportation Company Based in Muskegon, Michigan was Determined to be subject to the Single Business Tax
In Andrie, Inc. v. Department of Treasury, Michigan Court of Appeals, No. 291758, February 1, 2011 the Michigan Court of Appeals held that a transportation company was properly subject to the Single Business Tax (SBT). The taxpayer was a shipping company that plied the Great Lakes waters. The parties agreed that the proper apportionment formula was revenue miles in Michigan to revenue miles everywhere.
The court determined that the department did not violate the taxpayer's right to equal protection by applying different apportionment schemes. Under equal protection, persons under similar circumstances must be treated alike, but persons under different circumstances are not required to be treated the same. The rational basis test was used to examine if the challenged statute created a classification scheme that was rationally related to a legitimate governmental purpose. The statute was presumed valid, and the taxpayer did not prove that similarly situated taxpayers were treated differently.
In addition, the court determined that the taxpayer's due process and Commerce Clause rights were not violated. The tax had a rational relationship with the income attributed to the state. The state's power to tax was justified by the protection, opportunities, and benefits the state conferred on the activities. The taxpayer argued that the tax was not fairly apportioned, but the court noted the benefits the state provided to the taxpayer, including the use of its ports and the convenience of inland and port infrastructure. Even though the statute did not define "in Michigan," the court reasoned that the plain, ordinary meaning included anything that occurred within the state boundaries. Because the taxpayer regularly earned business income from the Great Lakes and had its primary location in Muskegon, the taxpayer was subject to the former SBT.