GMC v. Dep't of Treasury

466 Mich. 231, 644 N.W.2d 734 (2002)

 

RULE:

To have consideration there must be a bargained-for exchange. There must be a benefit on one side, or a detriment suffered, or service done on the other. Courts do not generally inquire into the sufficiency of consideration.

FACTS:

The corporation manufactured and sold cars. The department conducted an audit of the corporation's compliance with Michigan tax laws for a period of years. As a result of the audit, the department assessed against the corporation use taxes and interest of $ 5.5 million on the vehicle components and parts provided by the corporation to customers as goodwill adjustments. Both of the lower courts ruled against the corporation. On review, the supreme court held that because the goodwill adjustment policy provided an opportunity for the corporation's customers to seek redress of vehicle defects and because the policy was included in the retail price of the corporation's vehicles and purchased at the time of retail sale, it was part of the consideration flowing to the corporation's customers when they purchased one of the corporation's vehicles that was taxed pursuant to the General Sales Tax Act (GTA), 1933 PA 167 as amended, Mich. Comp. Laws § 205.51 et seq., at retail sale.

ISSUE:

Are replacement parts provided to customers at GM's expense through the goodwill program independently, subject to Michigan's use tax in connection with the transfer of the parts?

ANSWER:

No.

CONCLUSION:

To have consideration there must be a bargained-for exchange. There must be "'a benefit on one side, or a detriment suffered, or service done on the other.'"  Courts do not generally inquire into the sufficiency of consideration. It has been said "[a] cent or a pepper corn, in legal estimation, would constitute a valuable consideration." The owner's manual provided at the time of sale invites customers to voice complaints even after the warranty period ends, with the goal of resolving the complaint to the customer's satisfaction. We hold that this opportunity for dialogue and possible resolution of complaints--even outside the warranty period-is a benefit flowing to purchasers of GM vehicles at the time of retail sale and, therefore, is consideration for the sale. Therefore, replacement parts provided pursuant to the goodwill program are subject to the sales tax at the time of retail sale and are exempt from the use tax under § 4(1)(a) of the UTA.

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