ACCO BRANDS V DEPT OF TREASURY
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STATE OF MICHIGAN
COURT OF APPEALS
ACCO BRANDS, INC., f/k/a ACCO USA, INC.,
UNPUBLISHED
November 20, 2003
Plaintiff-Appellee,
v
No. 242430
Court of Claims
LC No. 01-018021-CM
DEPARTMENT OF TREASURY,
Defendant-Appellant.
Before: Owens, P.J., and Fitzgerald and Saad, JJ.
PER CURIAM.
Defendant, Department of Treasury, appeals by leave granted the portion of the Court of
Claims’ May 20, 2002, opinion and order denying defendant’s motion for summary disposition
with regard to two of plaintiff’s claims in this Single Business Tax [SBT] case involving tax
years 1992 through 1996. We reverse.
Plaintiff is a Delaware corporation with its principal place of business in Illinois.
Plaintiff markets office supplies, and employed two Michigan residents as sales representatives
to call on customers in Michigan and other states. The orders were sent to plaintiff’s home office
in Illinois.
Before 1993, defendant published tax bulletin 1980-1 and revenue administrative bulletin
89-46, both of which indicated that businesses like plaintiff’s would not be subject to the SBT.
However, in 1993, this Court held in Gillette v Dep’t of Treasury, 198 Mich App 303; 497
NW2d 505 (1993), that the bulletins were not determinative of whether a business was subject to
the SBT. In September 1994, defendant sent plaintiff a notice of inquiry regarding plaintiff’s
liability for the SBT. Plaintiff responded by stating that it did not believe that it was liable for
the tax or to file a return.
In February 1998 defendant audited plaintiff for the years in question, and determined
that plaintiff was liable for approximately $167,269.40 in unpaid taxes and interest. Plaintiff
paid the amount under protest, and later paid an additional $945.68 in interest based on
defendant’s final assessment. Plaintiff then brought suit in the Court of Claims seeking a refund
of the entire $168,215.08 paid, plus interest, costs, and attorney fees.
Defendant moved for summary disposition pursuant to MCR 2.116(C)(8) with regard to
all seven claims raised in plaintiff’s complaint. On May 20, 2002, the court issued an opinion
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and order denying defendant’s motion with regard to plaintiff’s Commerce Clause claim and
laches claim. With regard to plaintiff’s claim that defendant violated the Commerce Clause of
the United States Constitution by imposing the SBT on plaintiff (Count IV), the court found that
“2 part-time sales people do not constitute a substantial nexus for meeting the Commerce Clause
standard.” With regard to plaintiff’s claim that defendant was barred by the doctrine of laches
from changing its practices regarding the SBT because plaintiff did not formally change its
bulletins regarding the SBT until February 1998 (Count VI), the court determined, without
explanation, that plaintiff’s laches claim was sufficient to withstand a motion for summary
disposition pursuant to MCR 2.116(C)(8).
Defendant first contends that the trial court erred in finding that two employees
conducting economic activity in the state is insufficient as a matter of law to satisfy the
substantial nexus requirement of the Commerce Clause.
This Court reviews a grant or denial of summary disposition based upon a failure to state
a claim de novo on appeal. Beaty v Hertzberg & Golden, PC, 456 Mich 247, 253; 571 NW2d
716 (1997); Trost v Buckstop Lure Co, 249 Mich App 580, 583; 644 NW2d 54 (2002).
Summary disposition against a claim may be granted on the ground that the opposing party has
failed to state a claim on which relief can be granted. MCR 2.116(C)(8), Horace v City of
Pontiac, 456 Mich 744, 749; 575 NW2d 762 (1998). A motion under MCR 2.116(C)(8) tests the
legal sufficiency of a claim by the pleadings alone. Beaudrie v Henderson, 465 Mich 124, 129;
631 NW2d 308 (2001); Ormsby v Capital Welding, Inc, 255 Mich App 165, 172-173; 660 NW2d
730 (2003). All factual allegations in support of the claim are accepted as true, as well as any
reasonable inferences or conclusions that can be drawn from the facts, and construed in the light
most favorable to the nonmoving party. Maiden v Rozwood, 461 Mich 109, 119; 597 NW2d 817
(1999).
In Magnetek Controls, Inc v Dep’t of Treasury, 221 Mich App 400, 411; 562 NW2d 219
(1991), this Court held that a sufficient nexus “may be manifested by the presence in the taxing
State of the vendor’s property or the conduct of economic activities in the taxing State performed
by the vendor’s personnel or on its behalf.” Id., quoting Orvis Co, Inc v Tax Appeals Tribunal of
the State of New York, 86 NY2d 165, 178; 654 NW2d 954 (1995). Here, there is no question that
plaintiff maintained two employees in Michigan who regularly conducted economic activities in
the state on plaintiff’s behalf. Plaintiff admitted in his complaint that it had two resident
employees in the state who called on customers in this state and solicited requests for purchases
of plaintiff’s products. Plaintiff’s admission that its physical presence in this state consisted of
two employees is sufficient under Magnetek, supra, to withstand a Commerce Clause challenge.
The trial court clearly erred in finding that that the presence of two employees in Michigan could
not establish a substantial nexus with the state sufficient to withstand a Commerce Clause
challenge. For this reason, the trial court erred in failing to grant summary disposition to
defendant on Count IV of the complaint.
Defendant also argues the trial court’s decision regarding plaintiff’s claim for laches is
contrary to this Court’s decision in Speaker-Hines v Dep’t of Treasury, 207 Mich App 84; 523
NW2d 826 (1994). In Speaker-Hines, the petitioner argued, in part, that its due process rights
were violated because the department and Tax Tribunal delayed over fifteen years in processing
and finalizing the assessment. This Court concluded that:
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petitioner’s due process rights were not violated by the substantial delays in
processing and finalizing the assessment. We find no authority to support
petitioner’s argument that it had a due process right to a speedy adjudication of
the tax assessment. Unlike the cases cited by petitioner, petitioner was not
deprived of liberty or property without notice and the right to be heard. [Id. at
91.]
This Court, noting that “the argument concerning the due process violation also suggests
laches as a basis for the abatement of interest,” also stated with regard to laches:
In any event, we find the argument without merit because the department
was not operating under any time constraints and because petitioner had failed to
establish prejudice. [Id.]
For laches to apply, plaintiff must prove (1) a lack of diligence on defendant’s part and (2)
prejudice to the plaintiff. Jackson v Thompson-McCully Co, 239 Mich App 482, 494; 608 NW2d
531 (2000). As demonstrated by the plethora of cases following Gillette, there were many
businesses affected by the decision. The fact that it took defendant three and a half years to get
to plaintiff does not demonstrate a lack of due diligence. Furthermore, plaintiff’s only claim of
prejudice was that it did not get the benefit of the tax status conferred by the tax bulletins in
1994. However, by that time Gillette had already been decided, and plaintiff was on notice that
the tax bulletins were not determinative with regard to its tax status and it might be liable for the
SBT. Further, in Syntex Laboratories v Dep’t of Treasury, 233 Mich App 286, 289; 590 NW2d
612 (1998), this Court held that Gillette applies retroactively because, among other things,
taxpayers have no vested right in the continuation of any tax law. The trial court clearly erred in
denying summary disposition with regard to Count VI of the complaint.
We reverse the order denying defendants' motion for summary disposition of Counts IV
and VI, and remand for entry of an order granting summary disposition to defendant.
Jurisdiction is not retained.
/s/ Donald S. Owens
/s/ E. Thomas Fitzgerald
/s/ Henry William Saad
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