LANSING, Mich. -- Manufacturers of vehicles assembled in Michigan aren't entitled to a refund of motor fuel taxes on gasoline left in the tanks of vehicles shipped to out-of-state dealerships, a three-judge panel has ruled.
In a test case, the state Court of Appeals unanimously rejected a refund claim for $319,709 that DaimlerChrysler Corp. paid in state fuel taxes from April 1 to June 30, 2001.
Although the decision applied only to a three-month period, its legal principles have multimillion-dollar ramifications for all automakers with assembly plants in Michigan.
DaimlerChrysler also has applied for refunds for later time periods, spokesman Michael Palese said in a statement. He added, "We are not at liberty to discuss specific amounts. In addition, he said the company is looking into the situation in other states where it has assembly plants.
Michigan Department of Treasury spokesman Terry Stanton told Automotive News that he can't discuss whether DaimlerChrysler, or any other automaker, has refund claims pending. But he said the department was "confident it had properly administered the tax."
DaimlerChrysler purchased the fuel at retail prices, paying tax rates of 19 cents a gallon on gasoline and 15 cents a gallon on diesel fuel, the court said. The fuel was placed in the vehicles during assembly under DaimlerChrysler's engineering specifications.
The vehicles were shipped out of state with unused fuel in the tanks. Under DaimlerChrysler's sales and service agreements, the vehicles' titles, risk of loss and control were transferred to the purchasing dealerships upon delivery to the carrier company for transport, the court said.
DaimlerChrysler unsuccessfully petitioned the state Tax Tribunal for a refund, then appealed, arguing that the fuel was only "incidental to the commercial enterprise of auto manufacturing" and "not consumed by (DaimlerChrysler) on Michigan public roads or highways."
The state attorney general's office declined to discuss the case, but its brief argued that, for tax purposes, fuel is "used once it is taken out of storage and placed into vehicles."
In upholding the Tax Tribunal's decision, the appeals court said DaimlerChrysler doesn't qualify for a refund because it isn't an "end user" of the fuel.
"The evidence demonstrates that it did not use the fuel to power the vehicles, but rather passed the fuel on to someone else who used it," the court said, referring to the purchasing dealerships and their retail customers.
As for a possible further appeal, Palese said DaimlerChrysler is considering all of its legal options.