Czars, Inc v. Dep't of Treasury

In Czars, Inc v. Dep't of Treasury, 233 Mich. App. 632, 635-636; 593 N.W.2d 209 (1999), the petitioner was a Delaware corporation not engaged in any business activity. The petitioner's sole shareholder, Tahir Cheema, created the corporation to register aircraft in its name in order to shield a sister corporation, Grand Aire, from the use tax and other liabilities. The petitioner had no assets, conducted no business, and employed no workers. Id. The petitioner did not enter into a formal contractual agreement to acknowledge the relinquishment of control of the aircraft to Grand Aire. However, the petitioner allowed Grand Aire to fly the plane to Michigan, allowed Grand Aire to modify the aircraft in Michigan, allowed Grand Aire to obtain FAA approval to fly the plane, and allowed use of the aircraft in Grand Aire's cargo transport business. Despite the fact that Grand Aire was the active user of the plane, this Court held that the petitioner had failed to rebut the presumption that it exercised rights and powers of ownership in Michigan and therefore was liable for use tax. Id. at 639. The petitioner allowed a sister corporation, Grand Aire, to use the petitioner's airplane in the absence of a formal lease agreement, the majority held: Petitioner concedes that there is no lease or other documentary evidence showing that it totally or permanently relinquished control of the aircraft to Grand Aire in Arizona. In addition to allowing Grand Aire to fly the plane to Michigan . . . petitioner also permitted Grand Aire in Michigan to modify the plane extensively, to obtain FAA approval to fly the plane, and to make use of the plane in Grand Aire's cargo transport business. Under these circumstances, petitioner failed to rebut the presumption that it exercised rights and powers of ownership . . . . in Michigan and, therefore, is liable for use tax. Id. at 639.