The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site -






Taxation of transportation service companies under Michigan Stadia and Convention Act

Companies that provide limousine, taxi, or bus services are not "engaged in the business of leasing or rental of motor vehicles of which delivery is made" and, accordingly, are not subject to the tax imposed under the Michigan Stadia and Convention Act, MCL 207.751 et seq.

Opinion No. 7169

February 4, 2005

Honorable Alan Cropsey
State Senator
The Capitol
Lansing, MI

You have asked whether companies that provide limousine, taxi, or bus services are engaged in the business of "leasing or rental of motor vehicles" and subject to the tax imposed under the Michigan Stadia and Convention Act, 1991 PA 180, MCL 207.751 et seq.

Section 2(1)(b) of the Michigan Stadia and Convention Act (Act), MCL 207.752(1)(b), permits an eligible municipality, including certain counties to:

[L]evy, assess, and collect an excise tax on the privilege of operating the following businesses in the eligible municipality:

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(b) A person engaged in the business of the leasing or rental of motor vehicles of which delivery is made in the eligible municipality.

Section 2(2) of the Act further provides:

The rate of tax imposed pursuant to subsection (1) shall not exceed the following amounts:

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(b) 2% of the gross receipts received by the person subject to tax under subsection (1)(b) from the leasing or rental of motor vehicles for periods of less than 30 consecutive days. [MCL 207.752(2)(b).]

Generally, each tax has an object (generally a privilege or property), a measure (e.g., gross receipts, income, value), and is incident upon a person or property. Where the terms of a statute, including a tax measure, are plain, specific, and unambiguous, there is no occasion to "construe" its provisions. They must be enforced as written. In doubtful cases, i.e., those involving ambiguity, the law is construed liberally in favor of taxpayers. R C Mahon Co v Dep't of Revenue, 306 Mich 660, 666; 11 NW2d 280 (1943). See also Bechtel Power Corp v Dep't of Treasury, 128 Mich App 324, 329; 340 NW2d 297 (1983), citing Ecorse Screw Machine Products v Corporation and Securities Comm, 378 Mich 415, 418; 145 NW2d 46 (1966). The scope of a tax measure should not be extended by implication or forced construction. Garavaglia v Michigan Dep't of Revenue, 338 Mich 467, 471; 61 NW2d 612 (1953); Detroit v Norman Allan & Co, 107 Mich App 186, 191; 309 NW2d 198 (1981). But neither should the measure be so narrowly construed as to defeat the purposes for which it was enacted, raising revenue for public purposes. See In re Brackett Estate, 342 Mich 195, 205; 69 NW2d 164 (1955), quoted with approval in Michigan Bell Telephone Co v Dep't of Treasury, 445 Mich 470, 477-478; 518 NW2d 808 (1994).

The tax involved in your question is an excise tax imposed upon the privilege of engaging in the business of leasing or renting motor vehicles to others. The tax is incident upon those operating such businesses.

The Act defines neither "leasing" nor "rental" of motor vehicles. But, significantly, the only businesses falling within the scope of section 2(1)(b) of the Act are those that rent or lease vehicles "of which delivery is made in the eligible municipality."

Words used in a statute must be construed and understood according to the common and approved usage of the language, taking into account the context in which the words are used. MCL 8.3a; Western Michigan Univ Bd of Control v State, 455 Mich 531, 539; 565 NW2d 828 (1997). Technical words and those that have acquired a peculiar and appropriate meaning in the law, however, must be construed according to that peculiar and appropriate meaning. MCL 8.3a. Consulting dictionary definitions is appropriate to learn the common and approved usage of the language. Stanton v Battle Creek, 466 Mich 611, 617; 647 NW2d 508 (2002).

The most relevant conventional meaning of the word "delivery" given the context of section 2(1)(b) of the Act is "a giving or handing over; transfer." Webster's New World Dictionary, 3rd College Edition (1988), p 365. Black's Law Dictionary, Revised 4th Edition (1968) offers the following definition: "The tradition or transfer of the possession of personal property from one person to another."

The Act contemplates only those transactions in which the person takes "delivery" of the motor vehicle "in the eligible municipality." When hiring the services of a taxi, bus, or limousine, a person does not take "delivery" of the vehicle within the common and approved meaning of the word. The owner or operator of the vehicle does not surrender possession and control to the patron or transfer the vehicle in any way. Nor has research disclosed any definition of the term "leasing" or "rental" that would support the view that a person using a limousine, taxi, or bus service either "rents" or "leases" the vehicles involved.

This distinction between transactions involving the hiring of a taxi, bus, or limousine service and those involving the rental or leasing and delivery of a vehicle is drawn by the Department of Treasury in administering provisions of the General Sales Tax Act, 1933 PA 167, MCL 205.51 et seq, and the Use Tax Act, 1937 PA 94, MCL 205.91 et seq. These statutes afford those in the business of leasing or renting tangible personal property the option of remitting use tax (based on lease or rental receipts) rather than paying the sales tax on such items at the time the lessor purchases them.

The General Sales Tax Act imposes a tax on retailers based on the gross receipts realized from the sale at retail of items of tangible personal property. The sales tax is typically collected from the purchaser. The use tax is imposed upon the use, storage, and consumption of items of tangible personal property upon which a sales tax has not been paid. Were the purchaser to pay sales tax in conjunction with the purchase of motor vehicles to be used for lease to others, 6% of the purchase price would be paid at the time of purchase. The Use Tax Act, section 5(4), however, provides:

A lessor may elect to pay use tax on receipts from the rental or lease of the tangible personal property in lieu of payment of sales or use tax on the full cost of the property at the time it is acquired. [MCL 205.95(4).]

In a letter ruling dated July 1, 1988 (LR 1988-17),1 the Acting Commissioner of Revenue for the Michigan Department of Treasury distinguished the leasing of motor vehicles from the chartering of transportation services:

You have inquired about the difference between a charter and a lease of tangible personal property.

When an individual leases tangible personal property, that person has full control of the property. For instance, when an individual leases a vehicle, he may drive that vehicle wherever he chooses. He pays a daily rate, etc., but he has full control over where that vehicle is driven. The lessor of the vehicle may elect to pay Michigan sales tax on the acquisition of the vehicle or collect and remit Michigan use tax on the rental receipts under Michigan's Specific Sales and Use Tax Rules, 1979 AC, R 205.132.

On the other hand, when an individual charters a boat and captain for a day of fishing, for example, the individual does not have total control of the vessel. This would also be true of a person who purchases an airline ticket, or a ticket for a tour of the Soo Locks. The owner or provider is in control. He is providing a service to his customers. As a person who provides a service, he must pay sales tax on the purchase of all tangible personal property used to provide his service.

Under the Stadia and Convention Act, a similar distinction is warranted between motor vehicles leased or rented to others, with complete possession and control delivered to the lessee, and those instances where a person engages the services of a taxi cab, limousine, or bus operated by a chauffeur2 or other authorized vehicle operator.

It is my opinion, therefore, that companies that provide limousine, taxi, or bus services are not "engaged in the business of leasing or rental of motor vehicles of which delivery is made" and, accordingly, are not subject to the tax imposed under the Michigan Stadia and Convention Act, MCL 207.751 et seq.

Attorney General

1The Department of Treasury Revenue Administrative Bulletin, RAB 1989-34, explaining its issuance of bulletins and letter rulings, states:

 The Michigan Revenue Act empowers the Department of Treasury to periodically issue bulletins that index and explain state tax laws.  (See MCL 205.3(f).)  The purpose of this Bulletin is to establish the general procedures for issuing Bulletins and Letter Rulings as position statements of the Bureau of Revenue.  These documents are to provide guidance to persons regarding the proper interpretation and application of Michigan tax laws administered by the Bureau of Revenue.

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A Letter Ruling is a formal document setting forth the position of the Commissioner of Revenue on specific tax matters.  It is issued to taxpayers by the Commissioner of Revenue, or designee of the Commissioner, in response to a particular tax issue.  Letter Rulings help to promote uniform application of tax laws throughout the State by Bureau of Revenue personnel and to provide guidance to taxpayers.  A Letter Ruling is prospective in nature.  It provides a taxpayer with assurance regarding the tax ramification of a future transaction.  The Department is bound by a Letter Ruling only for the specific transaction and only for the tax period indicated.  Letter Rulings are available to the public upon request. 

The powers and duties of the Commissioner of Revenue have been transferred by Type III transfer to the State Treasurer by Executive Reorganization Order 1991-16, as codified at MCL 205.35.

"Chauffeur" is defined by the Motor Vehicle Code, section 6(1), as: 

    (a)  A person who operates a motor vehicle as a motor common carrier of property or a motor contract carrier of property as defined in section 1(f) and (h) of the motor carrier act, 1933 PA 254, MCL 475.1, or a motor carrier of passengers as defined in section 3 of the motor bus transportation act, 1982 PA 432, MCL 474.103.
   (b)  A person who is employed for the principal purpose of operating a motor vehicle with a GVWR of 10,000 pounds or more.
   (c)  A person who operates a bus or school bus.
   (d)  A person who operates a taxi.

   (e)  A person who operates a limousine as defined by section 3 of the limousine transportation act, 1990 PA 271, MCL 257.1903 [MCL 257.6(1)(a)-(e)].