Cell Phones Subject to Michigan Tax on Basis of Full Purchase Price

The taxpayer owed Michigan use tax on the sales price of cell phones purchased from Verizon, as it converted them to a taxable use when it gave them away with service plans.

Promotional Purposes

The taxpayer sold cell phones and equipment, and had an exclusive agreement to sell Verizon cell-phone service contracts. Verizon paid the taxpayer a fixed commission for each service plan. Though it conceded that it owed use tax on its purchase of cell phones, the taxpayer claimed that the purchase price must take into account the amount of reimbursements Verizon provided for the cost of the phones. However, the record does not support the assertion that Verizon conveyed reimbursements to the taxpayer. Testimony presented by Verizon disputed that it paid reimbursements, and the agreement between the parties only provided for the payment of commissions based on the sale of wireless service contracts.

Emery Electronics v. Department of Treasury, Michigan Court of Appeals, No. 342250, February 12, 2019, ¶402-343

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