A Direct Pay Authorization Did Not Apply to the Purchase of Cleaning Supplies
In Knight Facilities Management Inc. v. Department of Treasury, Michigan Tax Tribunal, No. 319568, October 21, 2010, released February 17, 2011 the sale of cleaning supplies by the taxpayer to General Motors (GM) was subject to Michigan sales tax because GM's direct payment authorization did not apply to tangible personal property consumed by a person performing any service activity for the company.
The taxpayer provided facility maintenance services and supplies to GM, but GM's own janitors consumed the cleaning supplies. As GM's direct payment authorization did not apply, GM could also be found liable for use tax on the cleaning supplies. However, the Tax Tribunal concluded that only the taxpayer should be held liable for sales tax in regards to the cleaning supplies as sales tax is generally imposed first whereas use tax is imposed on transactions not covered by sales tax. Though the taxpayer asserted that it relied on the language in GM's direct pay permit, this language did not negate its sales tax liability.