General Motors Corporation v. Michigan Department Of Treasury

Facts

When customers purchase new P automobiles, they are provided with a limited manufacturer's warranty. The warranties provide, in pertinent part, for the replacement of defective parts of the automobile under certain circumstances. They also generally provide coverage for an expressly stated length of time, subject to earlier expiration, if the vehicle is driven for a certain number of miles. D acknowledges that parts provided under these limited warranties are not subject to use tax because the customers paid for the right to replacement parts under the warranties at the time of the retail sale. P also provides a more open-ended 'goodwill' adjustment policy under which P will, on a discretionary basis, pay for replacement parts even after the limited warranty period has expired. Notice of this policy is contained in the General Motors warranty manual provided to customers at the time of sale. D conducted an audit of P's compliance with Michigan tax laws for the period of January 1, 1986, through December 31, 1992. D assessed use taxes and interest of $5.5 million on the vehicle components and parts provided by P to customers as goodwill adjustments. During the audit period, P customers in Michigan obtained $82 million in components and parts under the goodwill policy. P appealed the assessment to the Court of Claims. The Court of Claims granted summary disposition in favor of D holding, that the transfer of parts under the goodwill program is subject to use tax. The Court of Appeals affirmed. It  held that the dealers were not obligated to provide all customers with goodwill adjustments and, therefore, the 'value of the goodwill program was not included in the gross proceeds arising from the retail sales of P's vehicles.' The purchasers did not obtain 'any enforceable rights in the goodwill program.' P appealed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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