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### STATE OF MICHIGAN

COURT OF APPEALS

MJR GROUP, LLC,

Petitioner-Appellee, UNPUBLISHED December 29, 2016

v No. 329119 Tax Tribunal DEPARTMENT OF TREASURY, LC No. 00-441767

Respondent-Appellant.

Before: R ONAYNE K RAUSE , P.J., and O’C ONNELL and G LEICHER , JJ.

P ER C URIAM

. Respondent, Department of Treasury (the Department), appeals a s of right the determination of the Michigan Tax Tribunal (the Tribunal) that petitioner, MJR Group, LLC, (MJR) was entitled to a refund of the sales tax MJR remitted on nontaxable bottled water and prepackaged candy for tax y ears 2007 to 2010. We affirm.

I. FACTUAL AND PROCED URAL BACKGROUND

MJR owns and operates a chain of movie theaters in southeast M ichigan, and its concession stands sell bottled w ater and prepackaged candy. MJ R’s menu boards list the final transfer price paid by the customer and stated that “All Prices Include Sales Tax.” From at least 1991 going forward, MJR calculated its owed sales tax by multip lying its gross sales by the sales tax quotient, regardless of the items sold.

During an investigation about reimbursing sales tax to a group of Girl Scouts, MJR discovered that bottled water and prepackaged candy are nontaxa ble items. It subsequently sought a refund of $409,760.05 in excess sales taxes paid betwe en 2007 and 2010. The Department denied the refund, concluding that even had MJR erro neously collected sales tax, MCL 205.73 prohibited MJR from keeping the sales tax it had wro ngfully collected from customers. MJR appealed the denial of that refund, asserting t hat MJR “did not pass the burden of the tax to the customer. Ins tead [MJR] bore th e direct lega l incidence of the tax . . . .”

The hearing referee recommende d denying MJR’s refund request b ecause, although bottled water and prepackaged candy were not subject to sales t ax, a refund would unjustly enrich MJR under MCL 205.73(4). The referee concluded that MJR ’s contention that the customers did not pay sales tax was “misguided” because MJR inc luded sales tax in the cost of the items sold. The Department adopted the referee’s decision, and MJR appealed to the-2- Tribunal, asserting that the menu price was the final transfer price and it did not add sales tax to the menu prices. Both parties sought summary disposition under MCR 2.116(C)(10), and the Tribunal ruled in favor of the Department.

MJR appealed to this Court, which reversed and remanded. MJR Group LLC v Dep’t of Treasury , unpublished opinion per curiam of the Court of Appeals, issue d February 25, 2014 (Docket No. 312745). This Court concluded that summary disposi tion was improper because MJR presented evidence that it did not add sales tax to the men u items’ stated prices and, accepting that as true, MJR had not wrongfully collected any ta x from its customers. Id. at 5. The panel further concluded that summary disposition in favor o f MJR was improper because there was a factual question regarding whether MJR had, in fact , collected sales tax from its
customers. Id

. On remand, the Tribunal held a full hearing regarding whether MJR or its customers paid the sales tax on the concession items. Dennis Redmer, MJR’s vi ce president of operations, testified that he changed the concessions item prices about a y ear after he began working for MJR. Redmer explained that he implemented a pricing system to get people through the concessions stand faster, and he stated that he did not conside r sales tax when setting the prices; rather, Redmer considered sales tax a cost of doing business. Redmer stated that this was true whether the item was taxable, l ike popcorn, or nontaxable, like bottled water.

Donna Kondek, MJR’s controller, testified that sales tax was n ot charged to the customer above the price stated on the menu board. This conflicted with one of Kondek’s previous affidavits, in which she stated that sales tax was included in the prices that MJR charged its customers. Kimberly Knoll, a Department auditor, testified tha t based on how MJR’s software worked, she could not tell whether the prices for bottled water and packaged candy included sales tax or not because the software did not have transactiona l details.

Following the hearing, the Tribunal found that MJR had not con sidered sales tax when establishing its prices and that the sales tax ultimately came out of MJR’s profits. The Tribunal reasoned that Redmer’s testimony clarified the discrepancies in the documentation showing how tax was collected and the confusion in Kondek’s statements. It reasoned that Kondek’s belief that the concessions prices inclu ded sales tax was irrelevant b ecause Redmer, not Kondek, set the concessions prices. Finally, it found that the Department had not rebutted Redmer’s testimony about the way MJR collected sales tax. Because Redmer testifie d that he did not include sales taxes when setting the prices f or the menu board, the Tribunal concluded that MJR had not charged its customers sales tax and thus was not inappropriatel y keeping sales tax it had actually collected from customers.

II. STANDARDS OF REVIEW

This Court’s review of a decision by the Tax Tribunal is limit ed. Mich Props, LLC v Meridian Twp , 491 Mich 518, 527; 817 NW2d 548 (2012). We must accept the T ax Tribunal’s factual findings if “competent, material, and substantial evide nce on the record” supports them. Const 1963, art 6, § 28. See also Mich Props , 491 Mich at 527. Substantial evidence supports the Tax Tribunal’s findings if a reasonable person would accept the evidence as sufficient to-3- support the conclusion. Wayne Co v Mich State Tax Comm , 261 Mich App 174, 186-187; 682 NW2d 100 (2004). Substantial eviden ce “may be substantially le ss than a preponderance.” Id

.

III. ANALYSIS

The Department contends the Tribunal improperly found that MJR did not in fact collect sales tax from its customers. We disagree.

The only question presented after this Court’s previous remand was the factual question of whether MJR had actually collected sales tax from its custom ers. MJR Group LLC , unpub op at 5. At the hearing in this case, the parties presented the T ribunal with conflicting evidence on this point. Redmer—who was respons ible for setting the prices on the concessions stand items— testified that he did not consider sales tax when setting the p rices of items but instead considered sales tax a cost of doing business. Kondek made conflicting as sertions at different times: in her first affidavit, she stated tha t MJR did not collect additional sales tax above the amounts listed on the board, but in her second affidavit and testimony, she state d that MJR itself ultimately paid taxes on all the items, including bottled water and packaged ca ndy. Finally, Knoll testified that she could not tell wh ether MJR’s prices on bottled water includ ed sales tax or not because MJR’s software did not include t ransactional details.

A reasonable mind could accept as true Redmer’s statements tha t he, as the person who set the menu prices, did not incl ude sales tax in those prices but rather considered tax an eventual cost of doing business. And a reasonable person could credit K ondek’s later testimony that MJR was the party ultimately responsible for paying taxes on all it ems sold, particularly when it made more sense in light of MJR’s accounting software. Because a re asonable person could conclude that MJR did not, in fact, collect sales tax from its customers , we conclude that competent, material, and substantial eviden ce supported the Tribunal’s dec ision.

Moreover, contrary to the assertions of the dissent, MJR’s fin ancial records do not indisputably establish that MJR customers paid sales tax on con cession items. Rather, taken as a whole, record evidence supports a conclusion that MJR charged r ound prices for concession items to speed up transactions and then separated out the sales tax it was required to remit to the Department from its net profit. The Tax Tribunal could find th at during the years in question, MJR miscalculated its net profit by remitting sales tax for non taxable items. Given our limited review, we cannot accept the diss ent’s theory of this case.

We affirm.

/s/ Peter D. O’Connell /s/ Elizabeth L. Gleicher