Michigan: Sales & Use Tax: Taxpayer Required to Pay Tax on Purchased Materials
MICHIGAN: A marine vessel management business (taxpayer) was properly subject to Michigan sales and use tax on its purchase of materials used to maintain and operate tug barges because the taxpayer had the ownership over the material. Generally, the use, storage, or consumption of tangible personal property in Michigan is subject to tax. Further, use is defined as the exercise of a right or power over tangible personal property incident to the ownership of that property. In this matter, the taxpayer purchased fuel, supplies, and equipment for tug barges under its contracts with the vessel owners and was reimbursed for the costs. The Department of Treasury (department) audited the taxpayer and concluded that it was liable for the use tax on its purchases. The taxpayer argued that it never had title to any of the materials and acted merely as a purchasing agent for the vessel owners. However, it was noted that the taxpayer obtained possession and control over the goods it purchased, purchased the goods in its name, and used the materials in its vessel management enterprise. Further, the taxpayer also controlled the nature and quantity of the goods it purchased. Accordingly, the taxpayer had ownership type right or power over the material and it was properly subject to tax.
Andrie Inc. v. Michigan Department of Treasury, Michigan Court of Appeals, No. 351707, May 27, 2021
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