Case Title: GENERAL MOTORS CORP V DEPT OF TREASURY

Citation: 

Docket Number: 116984

State: michigan

Court: Michigan Supreme Court

Date: 2002-06-04T00:00:00Z

Document:
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Michigan Supreme Court 
Lansing, Michigan 48909 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED JUNE 4, 2002  
GENERAL MOTORS CORPORATION,  
Plaintiff-Appellant,  
v  
No. 116984  
DEPARTMENT OF TREASURY, 
REVENUE DIVISION,  
Defendant-Appellee.  
BEFORE THE ENTIRE BENCH  
WEAVER, J.  
Plaintiff, General Motors Corporation (GM), appeals from  
the Court of Appeals decision that defendant, Department of  
Treasury, could impose use tax1 on the vehicle components and  
parts plaintiff provided to customers as part of plaintiff’s  
goodwill adjustments policy. We reverse the decision of the  
Court of Appeals and hold that assessment of use tax on the  
goodwill adjustments was improper because they were taxed  
1Use Tax Act, 1937 PA 94, MCL 205.91 et seq.  
pursuant to the General Sales Tax Act2 when customers  
purchased vehicles at retail.  
I  
When customers purchase new GM automobiles, they are  
provided with a GM limited manufacturer’s warranty.  These  
limited manufacturer’s warranties provide, in pertinent part,  
for the replacement of defective parts of the automobile under  
certain circumstances. They also generally provide coverage  
for an expressly stated length of time, subject to earlier  
expiration, if the vehicle is driven for a certain number of  
miles.  The department acknowledges that parts provided under  
these limited warranties are not subject to use tax because  
the customers paid for the right to replacement parts under  
the warranties at the time of the retail sale.  
In addition to the limited warranties, GM provides a more  
open-ended “goodwill” adjustment policy under which GM will,  
on a discretionary basis, pay for replacement parts for GM  
vehicles even after the limited warranty period has expired.  
Although not referred to by name as a “goodwill adjustment  
policy,” notice of this policy is contained in the General  
Motors warranty manual provided to customers at the time of  
sale. In this regard, the manual provides:  
21933 PA 167 as amended, MCL 205.51 et seq.  
2 
 
Should you ever encounter a problem during or  
after the warranty periods that is not resolved, 
talk to a member of dealer management.  If the  
problem persists, follow the additional procedure 
outlined in “Owner Assistance,” on page 16 of this 
booklet. [Emphasis added.]  
The Owner Assistance section of the manual outlines a  
“Customer Satisfaction Procedure.”  It states that problems  
will “normally” be resolved by the dealer’s sales or service  
departments.3  However, if a concern is not resolved at that  
level, 
the 
manual 
recommends first discussing the problem with  
the dealership management.  If the problem is not resolved by  
the dealer management, customers are told to contact GM  
directly.  A customer dissatisfied with the outcome of the  
procedure may elect arbitration.  The manual states that,  
while a customer is not bound to accept the result of the  
3General Motors, in a bulletin to its dealers, directs 
them to make goodwill adjustments case by case “where special 
consideration 
is 
in 
order to enhance customer satisfaction and  
loyalty.” GM provides the dealers with a recommended set of 
guidelines for goodwill policy adjustments to help them 
distinguish defects in materials and workmanship from defects 
caused by aging, physical damage, lack of proper maintenance, 
or owner abuse.  
Testimony revealed that GM estimates the cost of, and 
establishes a budget reserve for, both warranty repairs and 
goodwill adjustments for the lifetime of every make and model 
of vehicle.  Twice annually, GM internally audits both the 
cost of warranty repairs and that of the goodwill policy for 
each make and model of vehicle.  A GM representative explained 
that the vehicle sales price is designed to recover all costs, 
including those associated with the goodwill adjustment 
policy, as well as to maintain profitability.  
3  
arbitration proceeding, GM will “generally” agree to be bound  
by it even though it reserves the right to terminate its  
participation in the arbitration program.4  
The 
department 
conducted an audit of GM’s compliance with  
Michigan tax laws for the period of January 1, 1986, through  
December 31, 1992. As a result of the audit, the department  
assessed against GM use taxes and interest of $5.5 million on  
the vehicle components and parts provided by GM to customers  
as goodwill adjustments.  The department had not previously  
assessed such a tax.  During the audit period, GM customers in  
Michigan obtained $82 million in components and parts under  
the goodwill policy.  
GM appealed the assessment to the Court of Claims. In  
pertinent part, GM alleged that the department lacked the  
statutory authority to impose use tax on goodwill adjustments  
because sales tax was imposed on the cost of the goodwill  
adjustments when vehicles were sold at retail. However, the  
Court of Claims disagreed with GM’s position and granted  
summary disposition in favor of the department pursuant to MCR  
2.116(C)(10), holding, in relevant part, that the transfer of  
4 We note the possibility of arbitration merely to 
provide a comprehensive outline of the complaint resolution 
procedure. In light of our analysis, it is not necessary to 
consider whether the possibility of arbitration is a form of 
“consideration” in this case.  
4  
parts under the goodwill program is subject to use tax. The  
Court of Appeals affirmed regarding this issue5, concluding  
that “plaintiff’s dealers were not obligated to provide all  
customers with goodwill adjustments” and, therefore, that the  
“value of the goodwill program was not included in the gross  
proceeds arising from the retail sales of plaintiff’s  
vehicles.”6  The Court of Appeals also emphasized its view  
that the purchasers of GM vehicles did not obtain “any  
enforceable rights in the goodwill program.” We granted leave  
to appeal.  
II  
Because the essential facts are not in dispute, we are  
presented with a question of law: whether replacement parts  
provided to customers at GM’s expense through the goodwill  
program are independently subject to Michigan’s use tax in  
connection with the transfer of the parts.  We review  
questions of law de novo. Kelly v Builders Square, Inc, 465  
5 However, the Court of Appeals would have reversed the 
Court of Claims in part and remanded for further proceedings 
with regard to GM’s constitutionally based arguments that it 
was denied equal protection of the laws and the benefit of 
uniformity of taxation because the department did not apply 
the use tax in the same way to other similarly situated 
parties.  In light of our conclusion that the transactions at 
issue are not subject to the use tax as a matter of statutory 
law, it is unnecessary to reach these constitutional issues.  
6Unpublished opinion per curiam, issued May 9, 2000 
(Docket No. 213186).  
5  
 
Mich 29, 34; 632 NW2d 912 (2001). This is the same standard  
of review applicable to the grant of a motion for summary  
disposition.  MacDonald v PKT, Inc, 464 Mich 322, 332; 628  
NW2d 33 (2001).  
III 
 The sales tax and the use tax are interrelated. Sales  
tax is imposed by the General Sales Tax Act (GTA) on the gross  
proceeds of a business.  MCL 205.52(1). 
The GTA defines  
“[g]ross proceeds” as the “amount received in money, credits,  
subsidies, property, or other money’s worth in consideration  
of a sale at retail . . . .”  MCL 205.51(1)(i). In contrast,  
pursuant to the Michigan Use Tax Act (UTA), use tax is  
generally imposed on the privilege of “using, storing, or  
consuming tangible personal property.” MCL 205.93(1).  
GM contends that the cost of its goodwill adjustments is  
exempt from use tax under § 4(1)(a) of the UTA.  MCL  
205.94(1)(a) provides that “[p]roperty sold in this state on  
which transaction a tax is paid under the general sales tax  
act” is exempt from the use tax “if the tax was due and paid  
on the retail sale to a consumer.”  Thus, our inquiry is  
whether “tax was due and paid” pursuant to the GTA on the cost  
of the goodwill adjustments when vehicles were sold at retail.  
The sales and use taxes, while imposed in different ways,  
do not operate in isolation.  Rather, provisions of the UTA  
6  
 
  
and the GTA are supplementary and complementary. World Book,  
Inc v Treasury Dep’t, 459 Mich 403, 408; 590 NW2d 293 (1999);  
Elias Bros Restaurants, Inc v Treasury Dep’t, 452 Mich 144,  
153; 549 NW2d 837 (1996).  UTA § 4(1)(a)’s exemption is an  
expression of a legislative intent to avoid pyramiding of  
sales and use tax.  Elias Bros, supra. 
In other words, a  
transfer of property that has already been subjected to  
Michigan’s sales tax is not subject to this state’s use tax.  
As directed by § 4(1)(a), we examine the provisions of the GTA  
to determine whether tax was paid on the goodwill adjustment  
at the retail sale to a customer or whether the department’s  
assessment of use tax was appropriate.  
The GTA defines a “sale at retail” as “a transaction by  
which the ownership of tangible personal property is  
transferred for consideration, if the transfer is made in the  
ordinary course of the transferor’s business and is made to  
the transferee for consumption or use, or for any purpose  
other than for resale . . . .”  MCL 205.51(1)(b). 
The  
question is thus whether the goodwill adjustment policy is  
consideration flowing to customers when they purchase a GM  
vehicle or merely an illusory promise. Stated otherwise, we  
examine whether the cost of the goodwill adjustment policy is  
included in the retail price of GM vehicles as something that  
7  
 
  
is purchased by customers.  
At the time of retail sale, GM customers receive an  
owner’s manual.  The manual invites customers to initiate a  
dialogue with the dealership when a defect arises, “during or  
after the warranty periods.”  The manual states the goal of  
resolving the defect to the “customer’s satisfaction.”  GM  
admits that its customers are not guaranteed that requested  
after-warranty goodwill adjustments will be made.  Indeed, GM  
suggests 
its 
dealers 
negotiate with customers for copayment on  
goodwill adjustments case by case.7
 Nevertheless, GM’s  
goodwill policy is a promise to hear and address customer  
complaints even after the written warranty expires.  
To have consideration there must be a bargained-for  
exchange. Higgins v Monroe Evening News, 404 Mich 1, 20-21;  
272 NW2d 537 (1978). There must be “‘a benefit on one side,  
or a detriment suffered, or service done on the other.’”  
Plastray Corp v Cole, 324 Mich 433, 440; 37 NW2d 162 (1949).  
Courts do not generally inquire into the sufficiency of  
consideration, Harris v Bond & Mtg Corp, 329 Mich 136, 145; 45  
NW2d 5 (1950). It has been said “[a] cent or a pepper corn,  
in 
legal 
estimation, 
would 
constitute 
a 
valuable  
consideration.” 
Whitney v Stearns, 16 Me 394 (1839). 
The  
7GM Service Bulletin No. 57-05-01, April 1995.  
8 
  
 
 
owner’s manual provided at the time of sale invites customers  
to voice complaints even after the warranty period ends, with  
the goal of resolving the complaint to the customer’s  
satisfaction.  We hold that this opportunity for dialogue and  
possible resolution of complaints—even outside the warranty  
period–is a benefit flowing to purchasers of GM vehicles at  
the time of retail sale and, therefore, is consideration for  
the sale.8  Therefore, replacement parts provided pursuant to  
the goodwill program are subject to the sales tax at the time  
of retail sale and are exempt from the use tax under § 4(1)(a)  
of the UTA.9  
8While acknowledging that a customer pays for the 
goodwill program, the dissent “cannot fathom” that a customer 
would bargain for the opportunity to have postwarranty 
complaints addressed.  This skepticism is inconsistent with 
this 
Court’s 
traditional 
reluctance 
to 
question 
the  
sufficiency of consideration and is not justification to 
override the Legislature’s expression of intent in UTA § 
4(1)(a) to avoid the pyramiding of the sales and use taxes.  
9 While not part of our dispositive analysis, it is 
noteworthy that GM audits the cost of the goodwill adjustment 
policy twice annually with the goal of recovering costs and 
maintaining profitability.  A witness for the department 
acknowledged that GM uses the same method to account for the 
cost of warranty repairs and goodwill policy adjustments.  It  
is evident that GM attempts to effectively include the cost of 
warranty repairs in the retail price of its vehicles.  The  
record reflects that the cost of the goodwill adjustment 
policy is likewise included in the retail price of GM 
vehicles.  A GM witness testified that “implicit in the price 
is the fact that we need to cover all the costs, and both 
policy and warranty are costs that are included . . . .”  
9  
 
 GM’s promise pursuant to its goodwill adjustments  
policy, 
while 
discretionary with respect to whether there will  
be any “adjustment,” is not discretionary regarding GM’s  
obligation to act reasonably and in good faith in response to  
a customer complaint.10
 Reinforcing this contractual  
undertaking to act in good faith is MCL 440.1203, part of  
Michigan’s version of the Uniform Commercial Code.  MCL  
440.1203 provides that “[e]very contract or duty within this  
act imposes an obligation of good faith in its performance or  
enforcement.”11
 This means that, should GM not consider  
complaints 
under 
the 
goodwill adjustment policy in good faith,  
it can be sued.  
The dissent agrees that a unilateral or discretionary  
promise could “constitute valid consideration.”  Post, p 4.  
However, the dissent would decline to rule that GM’s promise  
10As stated by Professor Arthur Corbin:  
Promissory words are not nullified by making 
the promise conditional on some event within the 
promisor’s own power, if at the same time the 
promisor impliedly promises to make a reasonable 
effort to bring the event about or to use good 
faith and honest judgment in determining whether or 
not it has in fact occurred. [2 Corbin, Contracts, 
§ 5.32, p 177.]  
11 Because the sale of a vehicle is the sale of a good, 
a contract for such a sale is subject to the Uniform 
Commercial Code. See MCL 440.2102 (providing generally that 
the UCC “applies to transactions in goods”).  
10 
is valid consideration in part because GM’s customers have  
“little if any” knowledge of the scope of GM’s discretion.  
Id.  That it is unknown how liberally GM will exercise its  
discretion does not mean there is no discretion.  In fact, it  
means there is discretion, i.e., a benefit to the consumer.12  
The dissent has fallen into the error of considering not  
merely if there is consideration, but its sufficiency.  As we  
have stated, courts do not inquire into the adequacy of  
consideration to support a contract.  Higgins, supra.13  Thus,  
we conclude that the duty the goodwill policy imposes on GM to  
12 We note that this is a greater right than the inherent 
ability to complain possessed by consumers generally. While  
a customer would typically have the practical ability to bring 
a complaint to the attention of a manufacturer, absent a 
contractual or other legal duty, the manufacturer would be 
free to simply ignore such complaints without giving them any 
consideration.
 
However, 
because 
of 
its 
contractual  
undertaking for the goodwill policy, GM has a duty to consider 
such complaints in good faith.  
13 
This 
point 
is 
reinforced 
by 
Professor 
Samuel 
Williston:  
It is an elementary and oft quoted principle 
that the law will not inquire into the adequacy of 
consideration so long as the consideration is 
otherwise valid to support a promise.  By this is 
meant that so long as the requirement of a  
bargained-for benefit or detriment is satisfied, 
the fact that the relative value or worth of the  
exchange is unequal is irrelevant so that anything 
which fulfills the requirement of consideration 
will 
support 
a 
promise, 
regardless 
of 
the  
comparative value of the consideration and of the 
thing promised.  The rule is almost as old as the  
doctrine of consideration itself.  [3 Williston, 
Contracts (4th ed), § 7:21, pp 383-386.]  
11 
 
 
consider requests for redress in good faith is a valuable  
consideration that is worth far more than the legendary  
peppercorn.14  
Moreover, the evidence indicates that for the period  
1986-1992, 
plaintiff 
provided 
“goodwill” 
parts 
to 
customers 
of  
General Motors cars having an estimated value of $82 million.  
As the dissent itself recognizes, “the cost of . . . [these]  
parts has been factored into the retail cost of the  
car . . . .”  Post, p 5. If this is so, then such costs have  
been necessarily paid by the consumer at sale, i.e., a car  
otherwise valued at $9975 has been increased in price to  
$10,000 and the consumer has paid an additional $25 for the  
goodwill policy. 
Plaintiff, not being a charitable  
institution, must necessarily have factored the cost of the  
goodwill policy into the cost of the car, and such cost must  
necessarily have been paid by the consumer. Further, it can  
be presumed that the consumer paid $25 because something of  
value passed.  The automobile industry is sufficiently  
competitive that few companies can afford to tack costs onto  
14 In concluding that the goodwill program amounted to an 
illusory promise, the Court of Appeals referenced Barbat v M  
E Arden Co, 74 Mich App 540, 543-544; 254 NW2d 779 (1977), for 
the proposition that “[a]n unenforceable promise cannot 
constitute 
consideration.” 
 
However, 
that 
case 
is 
inapplicable  
because it involved a promised performance that was  
“unenforceable” because it was void as illegal.  
12  
their products for parts or services that are perceived as  
valueless by their consumers.  Contrary to the dissent, we can  
easily 
envision 
a 
“rational, 
self-interested 
market  
participant” paying something for a benefit estimated to  
provide more than $13 million in annual benefits to consumers.  
Our interpretation of MCL 205.94(1)(a) does not constitute a  
“lax” interpretation of consideration as the dissent asserts.  
Post, p 7. Rather, our interpretation is based on fundamental  
contract principles and reflects the realities of the  
marketplace.15  
IV  
Because the goodwill adjustment policy provides an  
opportunity for GM customers to seek redress of vehicle  
defects and because the policy is included in the retail price  
of GM vehicles and purchased at the time of retail sale, it is  
part of the consideration flowing to GM customers when they  
purchase a GM vehicle that is taxed pursuant to the GTA at  
15 The dissent asserts that “[m]erely because plaintiff 
proves through its accounting methods that it charges all 
consumers for costs associated with a program . . . , I cannot 
conclude that ‘consideration’ was paid by purchasers . . . .” 
Post, p 6, n 4.  If this statement does not set forth the very 
essence of “consideration,” it is hard to know what the term  
means.
 Of course, we recognize that not every cost factored  
into the price of a manufacturer’s product is exempt from use 
tax as a form of “consideration” to a customer.  Costs that do  
not 
provide 
a 
benefit 
to 
a 
customer 
could 
not be  
consideration. 
 
13  
 
retail sale.  We reverse the decision of the Court of Appeals  
and remand this case to the Court of Claims for entry of  
judgment in favor of GM.  
CORRIGAN, C.J., and TAYLOR, YOUNG, and MARKMAN, JJ.,  
concurred with WEAVER, J.  
14  
 
 
___________________________________ 
v 
S T A T E 
O F 
M I C H I G A N  
SUPREME COURT  
GENERAL MOTORS CORPORATION,  
Plaintiff-Appellant,  
No. 116984  
DEPARTMENT OF TREASURY, 
REVENUE DIVISION,  
Defendant-Appellee.  
CAVANAGH, J. (dissenting).  
I write separately to express my disagreement with the  
majority’s conclusion that retail new car customers exchange  
consideration for goodwill policy parts when purchasing  
vehicles 
manufactured by plaintiff.  Plaintiff has claimed its  
goodwill repair parts should not be subject to use tax because  
the costs are included in the price of the vehicle, which is  
subject to sales tax. Under MCL 205.94(1)(a), no use tax is  
owed on retail sales subject to sales tax.  However, this  
exemption applies only if the parts are included in a “sale at  
retail,” i.e., “a transaction by which the ownership of  
 
 
tangible 
personal 
property 
is 
transferred 
for  
consideration. . . .”  MCL 205.51(1)(b). 
Because I cannot  
agree 
that 
the 
goodwill 
parts 
are 
transferred 
for  
consideration, I must respectfully dissent.  
I  
Plaintiff 
directs 
its 
dealers 
to 
make 
goodwill  
adjustments case by case “where special consideration is in  
order to enhance customer satisfaction and loyalty.”1  Most  
dealers have the discretion to provide repair parts free or at  
a reduced rate to consumers after the original warranty  
expires.2  These repairs are provided to select customers who  
1 GM Service Bulletin No. 57-05-01, April 1995.  
2 Plaintiff provides specific negotiation tactics:  
In situations beyond the warranty period, but 
within 
your 
claim 
authorization 
empowerment, 
customers have received a value from use of the  
vehicle.  It would be reasonable to consider  
partial payment by the customer.  The judgment 
belongs to you.  
* * *  
In 
those cases 
which 
warrant 
a 
Policy 
Adjustment, there is seldom a reason for Buick to 
pay the entire amount.  Never lose sight of the 
fact that the owner has driven the vehicle for the  
life 
of 
the 
warranty, 
and 
then 
some.  
Unquestionably, the customer has received some  
value from the investment.  Do not hesitate to  
bring this up during the negotiation.  
Dealers are also advised to “determine what the owner  
expects . . . evaluate the . . . complaint . . . [and] 
(continued...)  
2  
 
are unsatisfied with defective parts after the manufacturer’s  
warranty expires.  
Consumers are not given any general or specific  
information concerning the goodwill program and are informed  
in the warranty manual of their right to contact plaintiff  
after the manufacturer’s warranty expires if they are  
dissatisfied with the dealer’s offered resolution.  The  
written warranty also indicates that arbitration proceedings  
may be an option.3
 In essence, the consumer is given an  
opportunity to ask for free repair parts, but has no legal  
right to any specific repair and knows nothing of the goodwill  
policy program in general, or of its specific terms. Though  
plaintiff may agree to subject itself to arbitration  
proceedings, consumers gain no legally enforceable right as a  
result of this program, a program purportedly “purchased” at  
the retail sale.  
Consideration requires bargained-for legal detriment.  
2(...continued) 
[d]etermine if the customer will be satisfied with any offer 
you might make.”  
3  Contrary 
to 
the 
implication 
by 
the 
majority, 
plaintiff’s participation in arbitration is in no way 
guaranteed.  While a consumer may always request arbitration, 
plaintiff reserves the right to refuse to participate.  See  
1990 Warranty and Owner Assistance Information for Buick New 
Cars (“GM will generally agree to be bound by the arbitrator’s 
decision . . . . [GM] reserves the right to change eligibility 
limitations and/or to discontinue its participation in the 
program” [emphasis added]).  
3  
 
Higgins v Monroe Evening News, 404 Mich 1, 20-21; 272 NW2d 537  
(1982) (opinion by Blair Moody, Jr., J.).  I agree with the  
majority that a discretionary promise must be exercised in  
good faith and that the reasonable execution of such a promise  
may constitute valid consideration. J R Watkins Co v Rich, 254  
Mich 82, 84-85; 235 NW 845 (1931); Wood v Lucy, Lady Duff- 
Gordon, 222 NY 88; 118 NE 214 (1917). 
However, I am not  
convinced that plaintiff’s good-faith exercise of its  
discretionary power is sufficient to permit a finding of  
bargained-for 
consideration in this instance.  A party relying  
on the good-faith exercise of another’s unilateral discretion  
generally has some knowledge of the scope of discretion  
involved and the potential benefits that might accrue.  In  
this case, customers have little if any knowledge of what they  
allegedly bargained and paid for at the retail sale.  I cannot  
fathom 
what 
rational, 
self-interested 
market 
participant 
would  
actually bargain for and purchase such a promise.  If it came  
free with the purchase price, most would accept it, but almost  
no one would buy it.  
Further, I am not sure that an arbitrator would have any  
reason to rule in favor of a customer if dissatisfaction  
actually resulted in an arbitration hearing.  On the basis of  
the contract between the parties, the express warranty would  
have expired if a customer requested parts under the goodwill  
4  
 
 
policy.
 The simple failure to purchase a supplemental  
warranty suggests plaintiff has absolutely no legal or good­
faith duty to repair defective parts after the warranty  
expires.  
The 
presence of express promises (original warranty)  
and the opportunity to purchase supplemental promises  
(extended warranty) evidence the parties’ intention that  
plaintiff escape liability for defects after the original  
warranty period expires. Because information concerning the  
terms of the goodwill policy is generally kept secret, I am  
not sure that a consumer could adequately plead his case to  
the 
arbitrator, 
assuming plaintiff agreed to participate.  All  
a consumer is left with is the right to complain to plaintiff,  
and I believe it is a stretch to consider that sufficient  
consideration where such a right exists regardless of the  
goodwill policy.  Therefore, I would hold that the goodwill  
policy 
adjustment 
program 
does 
not 
constitute 
valid  
consideration.4  
4Like the majority, I respect the doctrine that generally 
prohibits 
courts 
from 
questioning 
the 
adequacy 
of  
consideration. Unfortunately, that doctrine is inapplicable 
here because absolutely no consideration for the goodwill 
parts passed between the parties at the retail sale. Merely 
because plaintiff proved through its accounting methods that 
it charges all consumers for costs associated with a program 
that results in free or discounted parts to some, I cannot 
conclude that “consideration” was paid by purchasers at the 
retail sale for goodwill parts.  GM’s $82 million dollars  
worth of repairs, while certainly of value, simply cannot be 
regarded as legal consideration.  
(continued...) 
5  
 
Even so, I agree that the cost of the goodwill policy  
parts has been factored into the retail cost of the car, and  
to that extent the goodwill parts are subject both to use and  
sales tax.  Unfortunately, because the use tax statute exempts  
only costs transferred for consideration in a retail sale, the  
Legislature 
essentially 
failed 
to 
avoid 
pyramiding 
taxes 
where  
costs are factored into a product, but are not actually part  
of the consideration paid. MCL 205.51, 205.94(1)(e).5  
(...continued)
Further, 
the 
majority implies that any cost factored into 
the price of the car by GM should be exempt from use tax.  If  
that were the case, no manufacturer would ever pay use tax 
because generally all costs work their way into the price of 
products. The statute as currently drafted does not provide 
an exclusion per se for all costs factored into product 
prices, only those for which consideration has passed at a 
retail sale. See MCL 205.94(1)(a), 205.51(1)(b).  
The majority also presumes that a customer can pinpoint 
the costs associated with a program it knows nothing of and 
buy the car in part on the basis of the promised value 
associated with the goodwill policy. The error lies in that  
assumption. We cannot assume market participants are making 
rationale choices when they lack sufficient knowledge of the 
goodwill policy.  Neither GM nor the dealer bargains over this 
product with the consumer.  GM keeps the terms and scope of 
the program confidential, thereby making it impossible for a 
consumer to pay for such a program with consideration.  The  
majority’s attempt to rebut my position ignores the  
foundational principles of consideration, i.e., bargained-for 
consideration is absent where “the action that the promisee 
took was not induced by the promise.” Farnsworth, Contracts, 
(2d ed), § 2.6, p 52 (emphasis in original).  In this case, 
plaintiff simply fails to give consumers an opportunity to be 
induced by the alleged benefit.  
5In an attempt to refute my position, the majority 
erroneously infers the following:  
(continued...)  
6  
 
II  
I suspect the most appropriate and forthright method to  
analyze the goodwill program for tax purposes would be to  
conceive of the parts as promotional or gratuitous items.  
Plaintiff grants adjustments “in order to enhance customer  
satisfaction and loyalty.”  In essence, the goodwill policy is  
a select form of advertising, i.e., a large scale version of  
the distribution of free pens and cups to conference  
participants or the provision of free pharmaceutical samples  
to physicians.  Dealers probably grant the benefits of the  
discretionary goodwill program to those customers most likely  
to experience enhanced manufacturer loyalty.  Because the  
program most resembles a marketing or customer satisfaction  
5(...continued) 
[T]he dissent would decline to rule that GM’s 
promise is valid consideration in part because GM’s 
customers have “little if any” knowledge of the 
scope of GM’s discretion. Id.  That it is unknown  
how liberally GM will exercise its discretion does 
not mean there is no discretion.  In fact, it means 
there is discretion, i.e., a benefit to the  
consumer. [Ante at 10-11.]  
To clarify, I conclude that GM’s parts cannot constitute valid 
consideration because the consumers did not bargain for, and 
were not induced to act because of, the goodwill policy in 
general or the parts in particular.  Moreover, I agree that GM 
has discretion. In fact, GM has so much discretion that it 
would be impossible for consumers to bring an action claiming 
that 
discretion 
was 
exercised without good faith. The majority 
errs by inferring from my statement that describes a  
consumer’s lack of knowledge concerning the scope of GM’s 
discretion that the existence of discretion is itself  
dispositive of the inquiry.  
7  
 
 
  
 
offer, and because there is no general statutory exemption for  
promotional items from use tax in Michigan,6 I would permit  
defendant to assess use taxes, assuming it does so in a  
uniform fashion.  See Virginia Dep’t of Taxation v Miller- 
Morton Co, 220 Va 852, 859; 263 SE2d 413 (1980) (when a  
distributor of products withdrew products from inventory  
within the state for free disposition to customers also within  
the state, the distributor exercised a power incident to  
ownership of the products, and this use of products previously  
held for resale was not within the exemption from use tax).  
III  
The 
majority 
permits 
a 
lax interpretation of  
consideration in order to bridge the gap between the text of  
the statute and the general desire to avoid duplicate  
taxation.  While the end might be worthwhile, the method  
arguably creates an empty definition of consideration that  
could affect future bargainers.  Rather than compensate for  
the legislative failure to exempt all product costs from use  
tax by watering down our understanding of consideration, I  
6 
MCL 205.94(1)(c) exempts from use tax certain  
promotional items, which include:  
[P]romotional 
merchandise 
transferred 
pursuant 
to a redemption offer to a person located outside 
this state or any packaging material, other than  
promotional merchandise, acquired for use in  
fulfilling a redemption offer or rebate to a person 
located outside this state. [Emphasis added.]  
8  
would hold that the repair parts are not included in the  
retail sale for which consideration is paid.  
KELLY, J., concurred with CAVANAGH, J.  
9