Retroactive Amendment Makes Temporary Business Use of Inventory Taxable
An automobile manufacturer (General Motors Corp. v. Michigan Department of Treasury, U.S. Supreme Court, Dkt. 11-532, petition for certiorari filed October 20, 2011) has asked the U.S. Supreme Court whether an eleven-year retroactive application of a Michigan use tax amendment unconstitutionally impairs the manufacturer's rights in violation of the Takings and Due Process Clauses of the U.S. Constitution.
The manufacturer sought a refund of use tax it had paid on the interim business use of vehicles held for resale after the Michigan Supreme Court held that the vehicles were exempt from use tax under the resale exemption. However, while the refund request was pending, the Michigan Legislature amended the use tax statute to make the temporary business use of inventory taxable on a retroactive basis for any open tax year. Subsequently, the Michigan Court of Appeals denied the refund request.
It held that the period of retroactivity of the amendment did not violate the manufacturer's constitutional rights because the amendment was rationally related to a legitimate legislative purpose: limiting an interpretation of the use tax statutes that might have caused significant and unanticipated loss of tax revenue that had been collected in good faith. The Michigan Supreme Court denied review.