On July 8, 2021, the Michigan Court of Appeals issued a decision holding that a retailer was not subject to use tax on advertising materials mailed to Michigan residents. The retailer designed the materials in-house and had them printed by a third-party printer, outside of Michigan. After printing, the retailer sent the materials to a provider of marketing solutions. The retailer contracted with this marketing solutions company to prepare and deliver the advertisements to in-state residents. The marketing solutions company was in charge of preparing and delivering the advertising materials. This marketing solutions company had exclusive control over the packaging of the marketing materials and the handoff of the materials to the USPS, who ultimately delivered the materials to Michigan residents.
Upon audit, the Michigan Department of Treasury assessed the retailer for use tax on the advertising materials that were sent to Michigan customers. The Michigan Court of Claims held in favor of the retailer, declaring the use tax assessment void and invalid. On appeal to the Michigan Court of Appeals, the court upheld the decision of the Court of Claims, finding that the retailer did not exercise any control over the materials within the state’s border. The court found that the retailer’s provision of a list of Michigan customers and direction of the dates of distribution did not constitute adequate power or control to subject the retailer to use tax. As a result, the court affirmed the Court of Claims’ decision holding the use tax assessment against the retailer void and invalid.