WASHINGTON (Bloomberg) -- The U.S. Supreme Court rejected a bid by a Ford Motor Co. unit for a $16 million refund on its Michigan taxes in a dispute over the power of states to impose levies retroactively.
The justices today left intact a Michigan court decision denying Ford a refund of sales taxes the company paid on vehicles sold to people who later defaulted on their loans.
The case stemmed from a Michigan requirement that the entire sales tax be paid up front, even when the consumer is buying a product on an installment plan. In a 2006 ruling not involving Ford, a Michigan court said companies that pay the sales tax for buyers can take a deduction if the consumers ultimately default.
The Michigan legislature then amended the tax laws, aiming to overturn the court decision and thwart companies seeking as much as $100 million in refunds. Michigan courts then said the amendment meant Ford wasn't entitled to a $16 million refund it sought on taxes paid over a five-year period.
At the Supreme Court, Ford pointed to a 1994 high court ruling that said the Constitution bars retroactive tax increases that reach back more than a “modest” period of time. In that case, the justices upheld a tax increase that extended back 14 months.
Michigan Attorney General Michael A. Cox said that the 1994 ruling doesn't apply to the Ford case because the state's legislature was correcting a misinterpretation by the courts, not enacting a new retroactive tax.