The U.S. Supreme Court denied an appeal by a Ford Motor Co. unit to get a $16 million refund on its Michigan taxes related to a dispute over the power of states to impose levies retroactively.
The Supreme Court upheld a ruling by a Michigan court that had rejected Ford’s request for a refund of sales taxes that the company paid on vehicles sold to people who later defaulted on their loans.
The case is centered on a Michigan requirement that the entire sales tax has to be paid up front, even in instances when the consumer is paying by installments.
There was a 2006 ruling (Ford is not involved) where a Michigan court ruled that companies that pay the sales tax for buyers can take a deduction if the consumers ultimately default. The tax laws were then amended by the Michigan legislature, aiming to overturn the court decision and block companies that are aiming to get up to $100 million in refunds.
Michigan courts then clarified that the amendment indicated that Ford wasn't entitled to a $16 million refund it was seeking on taxes paid over a five-year period.
At the Supreme Court, Ford cited a 1994 high court ruling that said the Constitution bars retroactive tax increases that reach back more than a “modest” period of time.
The justices in this case had affirmed a tax increase that extended back 14 months. Michigan Attorney General Michael A. Cox said that the 1994 ruling isn’t applicable to the Ford case since the state's legislature was correcting a misinterpretation by the courts, not enacting a new retroactive tax.