Sourcing of Sales Were to the Ultimate Destination
In Uniloy Milacron USA, Inc. v. Department of Treasury, Michigan Court of Appeals, No. 300749, January 26, 2012, 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 Department of Treasury was incorrect in determining that all of the manufacturer's sales were Michigan sales for purposes of the sales apportionment factor and, therefore, should not have assessed additional single business tax and interest.
Under a distributor agreement, the manufacturer and an affiliate corporation agreed that the affiliate corporation would both market the manufacturer's products and purchase the manufacturer's products for resale. The affiliate corporation, however, never obtained possession of the products. Moreover, the distributor agreement was silent as to the transfer of title.
For purposes of the repealed single business tax, a sale by the manufacturer was only sourced to Michigan for purposes of the sales apportionment factor if the manufacturer's product was shipped or delivered to a customer within Michigan. However, there was no documentary evidence to support the assertion that the products were shipped or delivered by the manufacturer to its affiliate. Neither the affiliate corporation nor its employees took possession of the products, and they were not involved in the packaging, loading, and shipping of the products. Rather, the manufacturer's employees loaded the products onto common carriers for delivery to the affiliate's customers.
The Michigan Court of Appeals held that just because the manufacturer sold the products to its affiliate corporation, this did not necessarily mean that the manufacturer delivered the products to its affiliate. The manufacturer's sales were not sourced to Michigan merely because the manufacturer sold its products to its affiliate in Michigan for resale.