UNITED PARCEL SERVICE INC V DEPT OF TREASURY
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STATE OF MICHIGAN
COURT OF APPEALS
ALVAN MOTOR FREIGHT, INC,
FOR PUBLICATION
September 23, 2008
9:10 a.m.
Petitioner-Appellant,
v
No. 276511
Tax Tribunal
LC No. 00-314574
DEPARTMENT OF TREASURY,
Defendant-Appellee.
UNITED PARCEL SERVICE, INC,
Plaintiff-Appellee,
v
No. 276736
Court of Claims
LC No. 06-000098-MT
DEPARTMENT OF TREASURY,
Defendant-Appellant.
Advance Sheets Version
Before: Markey, P.J., and Whitbeck and Gleicher, JJ.
PER CURIAM.
In Docket No. 276511, petitioner Alvan Motor Freight, Inc. (AMF), appeals by right the
decision of the Tax Tribunal upholding the position of the Department of Treasury that AMF
was not entitled to an exemption from taxation under § 4k of the Use Tax Act, MCL 205.91 et
seq., because the AMF trucks operated wholly within Michigan and so were not “used in
interstate commerce” within the meaning of the exemption even though carrying freight
originating from or destined for locations outside the state. MCL 205.94k(4), formerly MCL
205.94k(2) (See 1996 PA 477 and 1999 PA 70). We reverse.
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In Docket No. 276736, the department appeals by right the order of the Court of Claims
granting summary disposition to plaintiff United Parcel Service, Inc. (UPS), under MCR
2.116(C)(10) on its claim for a refund of use taxes paid for the years 1998 through 2000 on
brown delivery vans purchased outside Michigan but used wholly within the state to carry
packages from or destined for other states.1 On the basis of United States Supreme Court
precedent, the Court of Claims rejected the department’s position that UPS was not entitled to
the exemption because its brown delivery vans did not cross state lines. We affirm.
The common issue in these consolidated appeals is whether the “rolling stock” of AMF
and UPS that never leaves the state of Michigan, but does carry freight originating from or
destined for locations outside the state, is “used in interstate commerce” so as to qualify for tax
exempt status under MCL 205.94k. Statutory construction presents a question of law, which this
Court reviews de novo. General Motors Corp v Dep’t of Treasury, 466 Mich 231, 236; 644
NW2d 734 (2002). This Court also reviews de novo a lower court’s grant or denial of summary
disposition. Id. Because the facts are not disputed, our review of the Tax Tribunal’s
interpretation and application of the statute to those facts is also de novo. Id.; Danse Corp v
Madison Hts, 466 Mich 175, 178; 644 NW2d 721 (2002). Moreover, our review is de novo even
though we give respectful consideration to the department’s interpretation of the statute. In re
Complaint of Rovas Against SBC Michigan, 482 Mich 90; 754 NW2d 259 (2008).
For the tax years relevant to these cases, MCL 205.94k provided, in part:
(2) For taxes levied after December 31, 1992 and before May 1, 1999, the
tax levied under this act does not apply to the storage, use, or consumption of
rolling stock used in interstate commerce and purchased, rented, or leased outside
of this state by an interstate motor carrier. . . .
***
(4) As used in this section:
***
(b) “Interstate motor carrier” means a person engaged in the business of
carrying persons or property, other than themselves, their employees, or their own
property, for hire across state lines, whose fleet mileage was driven at least 10%
outside of this state in the immediately preceding tax year.
(c) “Out-of state usage percentage” is a fraction, the numerator of which is
the number of miles driven outside of this state in the immediately preceding tax
year by qualified trucks used by the taxpayer and the denominator of which is the
1
UPS also claimed a partial refund of sales tax paid on four brown vans purchased in Michigan
during 1999. The partial sales tax exemption employed the same pertinent language as the use
tax exemption at issue and has since been repealed. See 1996 PA 576, repealed by 1999 PA 116.
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total miles driven in the immediately preceding tax year by qualified trucks used
by the taxpayer. Miles driven by qualified trucks used solely in intrastate
commerce shall not be included in calculating the out-of-state usage percentage.
(d) “Qualified truck” means a commercial motor vehicle power unit that
has 2 axles and a gross vehicle weight rating in excess of 10,000 pounds or a
commercial motor vehicle power unit that has 3 or more axles.
(e) “Rolling stock” means a qualified truck, a trailer designed to be drawn
behind a qualified truck, and parts affixed to either a qualified truck or a trailer
designed to be drawn behind a qualified truck. [1996 PA 477, amended effective
June 25, by 1999 PA 70 (deleting the italicized language).]
No material facts are disputed in either of the cases at bar. Both UPS and AMF are
“interstate motor carriers” that operate “rolling stock” in the state of Michigan. Thus, the sole
issue on appeal is whether, as a matter of law, the “rolling stock” of UPS and AMF is “used in
interstate commerce” so as to be exempt from use tax under MCL 205.94k.
The main goal of judicial construction of a statute is to “ascertain and to give effect to the
intent of the Legislature.” United Parcel Service, Inc v Bureau of Safety & Regulation, 277
Mich App 192, 202; 745 NW2d 125 (2007). The first step in doing this is to review the language
of the statute. Id. If the statutory language of the statute is unambiguous, then we assume that
the Legislature intended its plain meaning, and the statute must be enforced as written. Roberts v
Mecosta Co Gen Hosp, 466 Mich 57, 63; 642 NW2d 663 (2002). “A necessary corollary of
these principles is that a court may read nothing into an unambiguous statute that is not within
the manifest intent of the Legislature as derived from the words of the statute itself.” Id.; see
also Lash v Traverse City, 479 Mich 180, 194; 735 NW2d 628 (2007) (The judiciary may not
speculate regarding the Legislature’s intent beyond those words expressed in the statute.) A
provision in a statute “is ambiguous only if it irreconcilably conflicts with another provision, or
when it is equally susceptible to more than a single meaning.” Lansing Mayor v Pub Service
Comm, 470 Mich 154, 166; 680 NW2d 840 (2004) (citation and internal punctuation omitted;
emphasis in original).
When reading a statute, we must assign to every word or phrase its plain and ordinary
meaning unless otherwise defined in the statute, or unless the Legislature has used “technical
words and phrases . . . [that] may have acquired a peculiar and appropriate meaning in the law.”
MCL 8.3a; Ford Motor Co v Woodhaven, 475 Mich 425, 438-439; 716 NW2d 247 (2006);
Village of Holly v Holly Twp, 267 Mich App 461, 470; 705 NW2d 532 (2005). Furthermore, we
must not read a word or phrase of a statute in isolation; rather, each word or phrase and its
placement must be read in the context of the whole act. Lansing Mayor, supra at 167-168;
Village of Holly, supra at 470. Consequently, this Court must consider “both the plain meaning
of the critical word or phrase as well as ‘its placement and purpose in the statutory scheme.’”
Sun Valley Foods Co v Ward, 460 Mich 230, 237; 596 NW2d 119 (1999), quoting Bailey v
United States, 516 US 137, 145; 116 S Ct 501; 133 L Ed 2d 472 (1995).
We read the words “interstate commerce” in the phrase “used in interstate commerce” in
the context of its placement and part of the whole of 1996 PA 477, as amended. Specifically, the
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Legislature enacted a use tax exemption applicable only to an “interstate motor carrier,” defined
as “a person engaged in the business of carrying persons or property, other than themselves, their
employees, or their own property, for hire across state lines.” Further, the act recognizes that
such interstate motor carriers will likely engage in business activities that occur both within and
without the state of Michigan and establishes a percentage requirement for business outside the
state for the exemption to apply. In other words, the Legislature was clearly cognizant of, and
capable of crafting, requirements regarding the crossing of state lines with respect to the phrase,
“used in interstate commerce,” but it did not. Moreover, when enacting legislation, the
Legislature is presumed to be fully aware of existing laws, including judicial decisions. See
Walen v Dep’t of Corrections, 443 Mich 240, 248; 505 NW2d 519 (1993), and Gordon Sel-Way,
Inc v Spence Bros, Inc, 438 Mich 488, 505-506; 475 NW2d 704 (1991). Thus, in light of this
context, we hold that the only reasonable reading of the words “interstate commerce” as used in
1996 PA 477, as amended, is that the Legislature intended them to have the “peculiar and
appropriate meaning in the law” that those words have acquired in over a century of judicial
decisions applying the Commerce Clause of the United States Constitution.2 MCL 8.3a; Ford
Motor Co, supra at 439; Van Buren Charter Twp v Garter Belt, Inc, 258 Mich App 594, 606607; 673 NW2d 111 (2003).
Caselaw spanning over 100 years establishes that the term “interstate commerce” has
acquired a technical meaning in the law such that the phrase “used in interstate commerce” refers
to trade in goods or services between different states. See The Daniel Ball, 77 US (10 Wall)
557, 565; 19 L Ed 999 (1871) (steamer engaged in interstate commerce, even if it never left the
confines of the state, so long as it carried goods destined for, or originating from, another state);
Northern Pacific R Co v Washington ex rel Atkinson, 222 US 370, 375; 32 S Ct 160; 56 L Ed
237 (1912) (train moving solely within a single state was engaged in interstate commerce
because it hauled goods originating from, or destined for, locations outside the state, “despite the
fact that it may also have been carrying some local freight”); United States v Yellow Cab Co, 332
US 218, 228; 67 S Ct 1560; 91 L Ed 2010 (1947) (“When persons or goods move from a point of
origin in one state to a point of destination in another, the fact that a part of that journey consists
of transportation by an independent agency solely within the boundaries of one state does not
make that portion of the trip any less interstate in character.”); Martin v Airborne Express, 16 F
Supp 2d 623, 628 (ED NC, 1996) (carrier moving goods solely within a state is moving interstate
commerce if part of a larger travel scheme evincing continuity of movement between states).
Courts have consistently found that even if a vessel or vehicle never leaves a state, it is “used in
interstate commerce” if it carries goods moving in a continuous stream from an origin in one
2
The United States Constitution grants Congress the power: “To regulate Commerce with
foreign Nations, and among the several States, and with the Indian Tribes.” US Const, art I, § 8,
cl 3. “The Commerce Clause ‘prohibits discrimination against interstate commerce . . . and bars
state regulations that unduly burden interstate commerce.’” Rayovac Corp v Dep’t of Treasury,
264 Mich App 441, 443; 691 NW2d 57 (2004), quoting Quill Corp v North Dakota, 504 US 298,
312; 112 S Ct 1904; 119 L Ed 2d 91 (1992). This, of course, is all the more reason for the
Legislature to be mindful of the meaning that the words “interstate commerce” have acquired
through Commerce Clause litigation.
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state to a destination in another. See The Daniel Ball, supra at 565; Northern Pacific R Co,
supra at 375; Yellow Cab Co, supra 228; Auclair Transportation, Inc v State, 113 NH 231, 233;
305 A2d 662 (1973) (motor transportation conducted solely within one state may be interstate
commerce if it is part of a continuous movement in interstate commerce).
On the basis of the foregoing, we conclude that the Court of Claims did not err by relying
on The Daniel Ball and its progeny to rule that the “rolling stock” of UPS was “used in interstate
commerce” within the meaning of the use tax exemption of MCL 205.94k. Moreover, we would
reach the same conclusion were we not to ascribe to the Legislature the well-established meaning
of “interstate commerce” utilized in over a century of judicial decisions.
The statute does not define the phrase “used in interstate commerce.” When the
Legislature does not define terms in a statute, courts may consult a dictionary to learn their
“common and approved usage.” MCL 8.3a; Halloran v Bhan, 470 Mich 572, 578; 683 NW2d
129 (2004). The Random House Webster’s College Dictionary (1997) defines the adjectival
form of “interstate” as “connecting or involving different states.” The word “interstate”
describes “commerce.” The Random House Webster’s College Dictionary defines “commerce”
as “an interchange of goods or commodities between different countries or between areas of the
same country; trade.” Giving the phrase its plain and ordinary meaning, the words “used in
interstate commerce” in MCL 205.94K(2) mean rolling stock used in the trade of goods
(commerce) between different states (interstate). Accordingly, we conclude that the phrase
“used in interstate commerce” is unambiguous. Any rolling stock that is used to carry the
persons or property that are the objects of commerce from a point outside the state to a point
inside the state or from a point inside the state to a point outside the state is “used in interstate
commerce.” The plain language of the statute contains no requirement that the implements of
moving the objects of commerce from point to point, i.e., the rolling stock, must also cross state
lines. Consequently, we must reject the department’s argument to the contrary because “a court
may read nothing into an unambiguous statute that is not within the manifest intent of the
Legislature as derived from the words of the statute itself.” Roberts, supra at 63. Both UPS and
AMF qualify for the use tax exemption because their rolling stock, despite not leaving the state,
is used in the trade of goods between different states: both the UPS brown vans and the AMF
delivery trucks transport freight originating from or destined for locations outside Michigan.3
The department’s other arguments also fail. The department argues that while tax
statutes are generally construed against the government, tax exemptions are to be strictly
construed in favor of the taxing unit. See JW Hobbs Corp v Dep’t of Treasury, 268 Mich App
38, 43; 706 NW2d 460 (2005). Applying this principle, the department argues that its
construction of the statute must be accepted because otherwise the exception will swallow the
rule. But as we have discussed, whether we employ the plain ordinary meaning of the terms
used in the statute or the peculiar meaning in the law of the term “interstate commerce,” there is
3
Because the pertinent language is identical, our reasoning applies equally to the partial sales tax
exemption at issue in Docket No. 276736. MCL 205.54g; 1996 PA 576, repealed 1999 PA 116.
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no basis for a “strict” or “liberal” construction of the statute; rather, we enforce its unambiguous
terms as we must. Roberts, supra at 63; United Parcel Service, Inc, supra at 202-203.
We also find misplaced the department’s reliance on American Trucking Ass’ns, Inc v
Michigan Pub Service Comm, 545 US 429; 125 S Ct 2419; 162 L Ed 2d 407 (2005) (ATA), to
suggest that the Court has altered the meaning of “interstate commerce” developed in The Daniel
Ball and its progeny. In ATA, the Court rejected a Commerce Clause challenge to a flat fee
levied on trucks that “engage in intrastate commercial operations—that is, on trucks that
undertake point-to-point hauls between Michigan cities.” ATA, supra at 431. Specifically, the
two petitioners engaged in both interstate and intrastate shipments and argued that they engaged
in proportionately less intrastate business than trucks that confined operations to the state of
Michigan. Id. at 432. Thus, the petitioners argued that Michigan’s flat fee discriminated against
interstate carriers and imposed an unconstitutional burden upon interstate trade. Id. Ultimately,
the Court determined that nothing about the flat assessment on intrastate activity unfairly
discriminated against interstate truckers. Id. at 434-438. No issue was raised and decided in
ATA regarding the meaning of “interstate commerce” or whether trucks hauling both interstate
freight and intrastate freight are “used in interstate commerce.” Instead, ATA addressed a fee on
intrastate activity, hauling freight originating in Michigan and staying in this state: “Michigan
imposes the flat $100 fee only upon intrastate transactions—that is, upon activities taking place
exclusively within the State’s borders.” Id. at 434 (emphasis added). Nothing in ATA casts doubt
on the meaning of “interstate commerce” as stated in The Daniel Ball and its progeny.
The department also argues that its interpretation of the statute is correct because the
construction advanced by UPS and AMF would render part of MCL 205.94k nugatory.
Specifically, the department contends that the words “rolling stock used in interstate commerce”
are superfluous if all they mean is that a party claiming the exemption must be part of an
interstate freight business. We disagree. In order to qualify for the exemption, a party must be
an “interstate motor carrier” as defined in subsection b. The department misinterprets the effect
of our reading of the statute. The phrase “rolling stock used in interstate commerce” does not
mean that a carrier needs only to be part of an interstate freight business to obtain exempt status.
Rather, it is possible that a vehicle is part of an interstate freight business but does not qualify for
the exemption because it is not used in interstate commerce, i.e., it carries no interstate goods or
services. To qualify for the use tax exemption the rolling stock must be both used in interstate
commerce and purchased, leased, or rented by an interstate motor carrier, as defined in
subsection b. Thus, no part of the statute is rendered nugatory.
Although the department does not adopt the Tax Tribunal’s analysis, we review the
tribunal’s reasoning in Docket No. 276511. First, the tribunal erred by relying on Bob-Lo Co v
Dep’t of Treasury, 112 Mich App 231; 315 NW2d 902 (1982), to accept the department’s
position that the phrase “used in interstate commerce” requires the crossing of state lines. BobLo is inapposite because it considered a use tax exemption related to vessels engaged exclusively
in interstate commerce, not rolling stock used in interstate commerce. The exemption at issue in
Bob-Lo, adopted by 1978 PA 262, provides:
A vessel designed for commercial use of registered tonnage of 500 tons or
more, when produced upon special order of the purchaser, and bunker and galley
fuel, provisions, supplies, maintenance, and repairs for the exclusive use of a
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vessel of 500 tons or more engaged in interstate commerce. [MCL 205.94(k),
now MCL 205.94(j).]
The plaintiff corporation in Bob-Lo operated two pleasure steamers between points in
Michigan and in Canada. The plaintiff contended that it qualified for the exemption. But a
previous Michigan Supreme Court decision, affirmed by the United States Supreme Court, held
that the plaintiff was engaging in foreign commerce.4 Bob-Lo Co, supra at 242. The plaintiff
argued, however, that it was also engaged in interstate commerce. The Bob-Lo Court disagreed
for two reasons: (1) given the prior decision, the plaintiff’s activity constituted foreign commerce
and (2) the exemption was intended to include vessels that were engaged exclusively in interstate
commerce. Id. at 244. Although the Court’s opinion incorrectly refers to The Daniel Ball as
involving intrastate activity, which the tribunal quotes, the opinion also correctly states the facts
and holding of that case in the prior paragraph. Bob-Lo Co, supra at 244. At any rate, the BobLo decision is inapposite because the Court could not and did not alter United States Supreme
Court precedent, interpreted a different statutory provision with substantially different language
from the exemption involved in the present cases, and was decided on the basis that the activity
in Bob-Lo was foreign commerce, not interstate commerce.
We also conclude that the tribunal improperly relied on the department’s Internal Policy
Directive (IPD) 2003-1 in ruling that trucks must cross state lines to be deemed being used in
interstate commerce.
Generally, courts give respectful consideration to an agency’s
interpretation of a statute it executes and will not overturn that interpretation without cogent
reasons. In re Complaint of Rovas, supra at 130; By Lo Oil Co v Dep’t of Treasury, 267 Mich
App 19, 50; 703 NW2d 822 (2005). Nevertheless, an agency’s interpretation that is contrary to
the statute’s plain meaning is not controlling. Id.; Catalina Marketing Sales Corp v Dep’t of
Treasury, 470 Mich 13, 23-24; 678 NW2d 619 (2004). In this case, the department’s IPD states,
“If a truck or trailer operates only in Michigan, it is not being used in interstate commerce.” In
support of this interpretation, the IPD cites the statutory definition of “interstate motor carrier.”
The IPD reasons that the definition does not depend on the percentage of freight that the carrier
may ship outside the state, but on whether the carrier’s “fleet mileage was driven at least 10%
outside” of Michigan. According to the IPD, it follows that the rolling stock must also be used
out of state in order to be used in interstate commerce. This reasoning is flawed because it
conflates two distinct requirements of the statute: (1) that rolling stock must be “used in
interstate commerce” and (2) that the party claiming the exemption must be an “interstate motor
carrier” that satisfies the 10 percent criterion. The IPD improperly imports the definition of
“interstate motor carrier” to the definition of “interstate commerce” to reach the incorrect
conclusion that in order for rolling stock to be used in interstate commerce, it must cross state
lines. As discussed already, the plain language of the statute does not contemplate this result.
Because the department’s IPD is contrary to the plain meaning of the statue, we have the most
cogent of reasons to reject it. In re Complaint of Rovas, supra; Catalina Marketing Sales Corp,
supra at 23-24.
4
People v Bob-Lo Excursion Co, 317 Mich 686, 691; 27 NW2d 139 (1947), aff'd 333 US 28
(1948).
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We reverse in Docket No. 276511; we affirm in Docket No. 276736. We remand each
case to the lower court for further proceedings not inconsistent with this opinion. We do not
retain jurisdiction.
/s/ Jane E. Markey
/s/ William C. Whitbeck
/s/ Elizabeth L. Gleicher
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