RESPONDENT:Michigan Department of Treasury
LOCATION:Clark County Jail
DOCKET NO.: 89-1106
DECIDED BY: Rehnquist Court (1990-1991)
LOWER COURT: Michigan Supreme Court
CITATION: 498 US 358 (1991)
ARGUED: Oct 01, 1990
DECIDED: Feb 19, 1991
Peter S. Sheldon – on behalf of the Petitioner
Richard R. Roesch – on behalf of the Respondent
Media for Trinova Corporation v. Michigan Department of Treasury
Audio Transcription for Opinion Announcement – February 19, 1991 in Trinova Corporation v. Michigan Department of Treasury
William H. Rehnquist:
The opinions of the Court in two cases will be announced by Justice Kennedy.
Anthony M. Kennedy:
The first case is No. 89-1106 Trinova Corporation versus Michigan Department of the Treasury.
The case comes to us on writ of certiorari to the Supreme Court of Michigan.
Michigan levies its single business tax upon entities which have business activity within that state.
The single business tax is known as a value-added tax.
Tax payers such as petitioner, Trinova a major company, they have operations both within and without Michigan must determine the portion of their tax base attributable to Michigan under a three-factor formula.
This formula considers property payroll and sales in Michigan and allocate some Michigan tax, by computing these to the tax payer’s property, payroll, and sales nationwide.
In 1980, Trinova had little property and payroll within Michigan but made sales of over $100 million in that state.
The three-factor apportionment formula attributed 9% of Trinova’s total business activity to Michigan.
Trinova paid its tax to Michigan, and later brought this refund claim in a challenge to the apportionment formula.
Relying upon the due process and commerce clauses, Trinova first contends that apportionment is unwarranted because the tax base is largely composed of the elements of compensation and appreciation, and that these items can be geographically located.
We reject that argument.
The premise that the Michigan tax can be analyzed, as if it were separate taxes upon compensation, depreciation and income is not found.
The taxes upon a different bona fide measure of business activity, the value added.
The tax base includes the element of income which cannot be geographically located, but the result that the tax base as whole cannot geographically located.
Trinova’s approach would distort the theory of the tax and will not adequately account for the contribution of Michigan’s sales to value added.
Second, Trinova contends that even a sum of portion that were acceptable, the three-factor formula employed here lacks the required rational relation to Trinova’s business activity in Michigan.
We have rejected similar challenges to the three-factor formula in the income tax context.
Our reason implies also where the formula is used to apportion value added.
Further, Trinova has failed to provide an alternative apportionment which would give any effect to its Michigan sales or acknowledge that value added is more than merely compensation plus depreciation.
Finally, Trinova cannot demonstrate any facial discrimination or other violation of our tests for unconstitutional discrimination against interstate commerce.
The judgment of the Supreme Court of the State of Michigan is affirmed.
Justice Scalia has filed in an opinion concurring in the judgment.
Justice Steven has filed a dissenting opinion in which Justice Blackmun joins.
Justice Souter took no part in the consideration or decision of the case.