Court Opinion

ID: 9915334
Source: CourtListenerOpinion
Date Created: 2024-01-05 06:05:06.036589+00
Date Added: 2024-06-11T13:10:02.543857
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                          STATE OF MICHIGAN

                           COURT OF APPEALS

APEX LABORATORIES INTERNATIONAL,                                    UNPUBLISHED
INC.,                                                               January 4, 2024

               Petitioner-Appellee,

v                                                                   No. 363984
                                                                    Tax Tribunal
CITY OF DETROIT,                                                    LC No. 16-000724-TT

               Respondent-Appellant.

Before: RIORDAN, P.J., and MURRAY and M. J. KELLY, JJ.

PER CURIAM.

       In this income-tax dispute, respondent, the city of Detroit, appeals as of right the Tax
Tribunal’s order granting in part Detroit’s motion for reconsideration, while also granting
summary disposition in favor of petitioner, Apex Laboratories International, Inc. For the reasons
provided below, we reverse and remand to the Tax Tribunal for further proceedings.

                                       I. BACKGROUND

       This case arises out of Detroit’s attempt to assess and collect income tax from Apex for the
period covering May 1, 2012, through April 30, 2013, and returns to this Court for a third time.
The pertinent background is summarized in this Court’s initial opinion, Apex Labs Int’l, Inc v
Detroit, unpublished per curiam opinion of the Court of Appeals, issued May 17, 2018 (Docket
No. 338218) (Apex I), pp 1-3, vacated 503 Mich 1034 (2019):

               A Detroit-based private equity firm, Huron Capital Partners LLC (Huron),
       solicited investors to acquire partnership interests in a limited partnership, The
       Huron Fund II, LP (the Fund), which in turn was to acquire shares in existing “lower
       middle-market” companies. The general partner of the Fund was an entity known
       as Huron Capital Partners GP II, LLC (the general partner); however, the business
       operations of the general partner and the Fund were carried out by Huron.

              In 2006, Huron recommended that the Fund acquire shares in (as well as
       debt of) Labstat International, ULC (Labstat), a Canadian company, for eventual

                                               -1-
sale. As part of the transaction, Apex was incorporated as a Delaware corporation
for the sole purpose of holding the shares of Labstat to be acquired by the Fund—
Apex never possessed or acquired any other assets. Although Apex possessed a
Detroit mailing address, it did not have any employees, owned no real or personal
property, provided no services, and sold no goods, either in Detroit or elsewhere.
Various members and employees of Huron were appointed to Apex’s board of
directors. Apex never held a board meeting.

        Apex earned dividend income from its shares of Labstat in 2010, and paid
those dividends to the limited partners of the Fund. Apex paid 1% Detroit city
income tax (approximately $70,000) in 2010. In 2012, Apex sold its Labstat shares
to a Canadian corporation. According to the securities purchase agreement
governing the sale, the closing was to be conducted in the city of Waterloo, in
Ontario, Canada. Apex realized significant capital gains from the sale, in the
amount of approximately $36 million (Canadian). Apex again paid 1% ($319,000
(U.S.)) in city income tax to Detroit in 2012.

        In 2015, Apex received a proposed assessment from Detroit indicating that
Detroit had conducted an audit and had determined that Apex had miscalculated
the income tax it owed for the 2010 and 2012 tax years. Detroit assessed Apex an
additional $3,280.48 in tax, interest, and penalties for the 2010 tax year, and an
additional $401,165.51 for the 2012 tax year. Apex objected on the ground that it
did not conduct business within the city of Detroit and lacked the required nexus
necessary for the assessment of taxes by Detroit. Apex requested a refund of the
taxes paid for the 2010 and 2012 tax years. Detroit denied the request. Apex
appealed that decision to the Tribunal in 2016.

        The parties filed cross-motions for summary disposition under MCR
2.116(C)(10); the dispositive issue was whether Apex possessed the requisite
constitutional “nexus” with Detroit to render it subject to Detroit’s taxing authority.
Apex argued in the alternative that it was exempt from city income tax as a
qualifying financial institution, and that if it was liable for taxation, its income
should be subject to apportionment. Following a hearing on the parties’ motions,
the Tribunal issued a written opinion and order granting Apex’s motion, denying
Detroit’s motion, and ordering that a refund of taxes, interest, and penalties paid by
Apex be issued.

        The Tribunal held that Apex did not “do business” in Detroit within the
meaning of the city income tax act, MCL 141.501 et seq., because, although Apex
was “doing business” under MCL 141.605, it was not doing business in Detroit; in
other words, Apex lacked the constitutional “nexus” with Detroit to be subject to
taxation. The Tribunal held that Detroit had not established that Apex (1) had a
“commercial domicile” within the city or (2) had sufficient “physical presence” in
the city to establish such a nexus. The Tribunal also rejected Detroit’s “unitary
business group” theory on the ground that it was an “apportionment concept and
not a method to determine nexus.” The Tribunal did not address Apex’s alternative
argument.

                                         -2-
       Detroit appealed, and this Court affirmed the tribunal’s decision. Apex I, unpub op at 1, 6.
Although the issues before this Court involved the tribunal’s decisions on competing motions for
summary disposition, this Court employed the “multifaceted” standard of review for appeals from
the Tax Tribunal, stating:

              “If fraud is not claimed, this Court reviews the Tax Tribunal’s decision for
       misapplication of the law or adoption of a wrong principle. We deem the Tax
       Tribunal’s factual findings conclusive if they are supported by competent, material,
       and substantial evidence on the whole record. But when statutory interpretation is
       involved, this Court reviews the Tax Tribunal’s decision de novo.” [Id. at 3,
       quoting Briggs Tax Serv, LLC v Detroit Pub Schs, 485 Mich 69, 75; 780 NW2d 753
       (2010).1]

       While affirming, this Court repeatedly relied on this general, highly deferential standard of
review, where reversal is only warranted when the tribunal misapplied the law, adopted a wrong
legal principle, or made factual findings that were not supported by competent, material, and
substantial evidence. See Apex I, unpub op at 4-6.

       After this Court issued its decision in Apex I, the United States Supreme Court decided
South Dakota v Wayfair, Inc, 585 US ___; 138 S Ct 2080; 201 L Ed 2d 403 (2018), which overruled
Quill Corp v North Dakota ex rel Heitkamp, 504 US 298; 112 S Ct 1904; 119 L Ed 2d 91 (1992),
and Nat’l Bellas Hess, Inc v Dep’t of Revenue of Illinois, 386 US 753; 87 S Ct 1389; 18 L Ed 2d
505 (1967). The day after Wayfair was decided, Detroit filed its application for leave to appeal in
our Supreme Court. In Apex Labs Int’l Inc v Detroit, 504 Mich 1034 (2019) (Apex II), our Supreme
Court, in lieu of granting leave to appeal, vacated Apex I and remanded to this Court for
reconsideration in light of Wayfair.

        On remand, this Court determined that “under the circumstances of this case, remand is
required for the Tribunal to address the impact of Wayfair and the overruling of Quill and Bellas
Hess, and if necessary, to address Apex’s alternative arguments.” Apex Labs Int’l, Inc v Detroit
(On Remand), 331 Mich App 1, 9; 951 NW2d 45 (2020) (Apex III). This Court therefore vacated
the tribunal’s judgment granting summary disposition in favor of Apex and remanded to that
agency “to allow the parties to focus their arguments concerning Wayfair, Quill, and the Due
Process and Commerce Clauses, and to allow the Tribunal to make a ruling in the first instance.”
Id. at 10.

      On remand to the Tax Tribunal, both parties filed supplemental briefs addressing Wayfair
and Apex’s potential nexus with Detroit, and both parties filed competing motions for partial
summary disposition.

      After holding a hearing on the competing motions, the Tax Tribunal, in a final opinion and
judgment, granted Apex’s motion for summary disposition and denied Detroit’s motion for
summary disposition. Detroit moved for reconsideration, and although the tribunal partially

1
 This Court also did cite a de novo standard for reviewing motions for summary disposition, but
as described below, this Court nonetheless seemed to rely on the more deferential standard.

                                                -3-
agreed with Detroit, it again granted summary disposition in favor of Apex because Apex’s
physical presence in the city was de minimis and did not meet the “substantial nexus” requirement
of Wayfair. Furthermore, even assuming that Apex had a nexus with Detroit, the tribunal ruled
that no tax was assessable because Apex had no “in-city” business in Detroit. The Tax Tribunal
therefore ruled that Apex was not subject to income taxation by Detroit. This appeal followed.

                                 II. SUMMARY DISPOSITION

        “The standard of review of Tax Tribunal cases is multifaceted.” Briggs, 485 Mich at 75.
“If fraud is not claimed, this Court reviews the Tax Tribunal’s decision for misapplication of the
law or adoption of a wrong principle. We deem the Tax Tribunal’s factual findings conclusive if
they are supported by competent, material, and substantive evidence on the whole record.” Id.
(quotation marks and citations omitted). However, issues of law, such as statutory interpretation
and rulings on motions for summary disposition, are reviewed de novo. Id. Thus, because the
issues before the tribunal in this case involved the parties’ competing motions for summary
disposition, the standard of review is de novo. A court deciding a motion for summary disposition
is prohibited from making any factual findings. In re Handelsman, 266 Mich App 433, 437; 702
NW2d 641 (2005).

         While Detroit argues that the Tax Tribunal erred when it granted Apex’s motion for
summary disposition, there are two components to the tribunal’s ruling that must be considered.
The first is its ruling that Apex did not have a substantial nexus with Detroit.2 The second is how,
if taxation is proper, Apex’s income should be apportioned. This latter aspect is discussed later in
Part II-B of this opinion.

        “A motion under MCR 2.116(C)(10) tests the factual sufficiency of the complaint.”
Maiden v Rozwood, 461 Mich 109, 119; 597 NW2d 817 (1999). “In evaluating such a motion, a
court considers the entire record in the light most favorable to the party opposing the motion,
including affidavits, pleadings, depositions, admissions, and other evidence submitted by the
parties.” Corley v Detroit Bd of Ed, 470 Mich 274, 278; 681 NW2d 342 (2004). The motion
should be granted if there are no genuine issues of material fact and the moving party is entitled to
judgment as a matter of law. Kisiel v Holz, 272 Mich App 168, 170; 725 NW2d 67 (2006). As
already mentioned, a court is precluded from making any factual findings when ruling on a motion
for summary disposition. In re Handelsman, 266 Mich App at 437.

                                            A. NEXUS

        As of 2012, Detroit imposed a 2% income tax “on the taxable net profits of a corporation
doing business in the city, being levied on such part of the taxable net profits as is earned by the
corporation as a result of work done, services rendered and other business activities conducted in
the city.” Detroit City Code § 44-2-8(a)(3); Detroit City Code § 44-2-9(c). “Doing business” is

2
  Detroit mischaracterizes the tribunal’s ruling as concluding that Apex had a nexus. While the
tribunal’s opinion did mention at one point that there was a nexus, it later ruled that Apex’s
activities did not meet the “substantial nexus” requirement of Wayfair.

                                                -4-
in turn defined as “the conduct of any activity with the object of gain or benefit.” Detroit City
Code § 44-2-3.3

        Apex is a Delaware corporation. The Commerce Clause of the United States Constitution
prohibits states from discriminating against interstate commerce and prohibits states from
imposing undue burdens on interstate commerce.4 Wayfair, 138 S Ct at 2091. A tax is permissible
on a foreign company so long as it “(1) applies to an activity with a substantial nexus with the
taxing State, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and
(4) is fairly related to the services the State provides.” Id., citing Complete Auto Transit, Inc v
Brady, 430 US 274, 279; 97 S Ct 1076; 51 L Ed 2d 326 (1977); see also Gillette Co v Dep’t of
Treasury, 198 Mich App 303, 313; 497 NW2d 595 (1993). Before the Supreme Court’s decision
in Wayfair, a substantial nexus could only exist if a company had a physical presence in the state.
Wayfair, 138 S Ct at 2091-2092; Quill, 504 US at 317-318.

        The Supreme Court in Wayfair overruled Quill, noting that “the physical presence rule is
not a necessary interpretation of the requirement that a state tax must be ‘applied to an activity
with a substantial nexus with the taxing State.’ ” Wayfair, 138 S Ct at 2092, quoting Complete
Auto, 430 US at 279. The Court also noted that Quill, because it provided an advantage to
businesses with no physical presence, created, rather than resolved, market distortions. Wayfair,
138 S Ct at 2092, 2094; see also id. at 2094 (“In effect, Quill has come to serve as a judicially
created tax shelter for businesses that decide to limit their physical presence . . . .”). Finally, the
Court stated that the rule from Quill imposed the type of “arbitrary, formalistic distinction that the
Court’s modern Commerce Clause precedents disavow.” Id. at 2092. As such, the Court overruled
the portion of Quill pertaining to the Commerce Clause and nexus. Id. at 2099.

        In deciding whether a tax on a foreign company is permissible because the tax applies to
an activity with a substantial nexus with the taxing state, “[s]uch a nexus is established when the

3
 The city code provides for a safe harbor for companies by excluding the following conduct as
“doing business,” of which none is implicated in this case:
               (1) The solicitation of orders by a person or such person’s representative in
       the City, for sales of tangible personal property, which orders are sent outside the
       City, for approval or rejection and which, if approved, are filled by shipment or
       delivery from a point outside the City; or

               (2) The solicitation of orders by a person or such person’s representative in
       the City, in the name of, or for the benefit of, a prospective customer where such
       orders are to enable the customer to fill orders resulting from the solicitation of
       orders as described in Subsection (1) of this definition; or

               (3) The mere storage of personal property in the City in a warehouse which
       is neither owned nor leaved by the taxpayer. [Detroit City Code § 44-2-3.]
4
  The Due Process Clause also prevents a state from taxing foreign companies under certain
circumstances, but our focus in this case is on the Commerce Clause.

                                                 -5-
taxpayer . . . avails itself of the substantial privilege of carrying on business in that jurisdiction.”
Id. at 2099 (quotation marks and citations omitted). But, although having a physical presence is
no longer required to establish a nexus, when physical presence exists, it still can establish a nexus.
See id. at 2093 (“Physical presence is not necessary to create a substantial nexus.”) (emphasis
added). That is because physical presence in a jurisdiction is a company’s express availing of the
substantial privilege of carrying on business in that jurisdiction. See id.

       In this instance, because the issue is whether the Tax Tribunal properly granted Apex’s
motion for summary disposition, the submitted evidence must be viewed in a light most favorable
to Detroit. See Corley, 470 Mich at 278.

         Although Apex is a Delaware corporation, it listed in its Delaware filings that Detroit was
its principal place of business. It is undisputed that Apex had no employees and owned no property
in the city. Apex’s officers and directors engaged in activities to sell an asset that Apex owned,
which was its interest in Labstat. Further, those officers and directors undertook their efforts in
Detroit. The officers and directors of Apex were Brian Demkowicz, Michael Beauregard,
Christopher Sheeren, and Nicholas Barker. All of them, in addition to being directors or officers
of Apex, were employees of Huron Capital Partners and had their offices in Huron Capital’s
headquarters in Detroit, which is where they were physically present when they went to work. No
evidence was introduced showing that the work associated with the Labstat sale was performed
exclusively outside of Detroit. On the contrary, it was established that those individuals held
meetings in Detroit regarding the sale of Labstat and performed other work in Detroit related to
Labstat. Moreover, those individuals used equipment, such as phones and computers, in Detroit
in furtherance of the growing and selling of Labstat.

        Apex’s reliance on the self-serving testimony of its officers that they never acted for the
benefit of Apex and instead were acting on behalf of Huron Capital is misplaced. Regardless of
what the officers’ subjective motivations purportedly were, they legally were acting on behalf of
Apex. See Mossman v Millenbach Motor Sales, 284 Mich 562, 568; 280 NW 50 (1938) (stating
that a corporation can only act through its agents). In addition, there is no legal basis for allowing
Apex’s officers and agents, when performing duties for Apex, to be under the control of Huron
Capital because Huron Capital did not own Apex. Apex instead was owned by Huron Fund II,
which is a separate entity from Huron Capital, and is in turn owned by a collection of limited
partners. Indeed, as part of the consideration to sell its ownership of the Labstat stock, Apex agreed
to receive, in addition to $32 million in Canadian currency, a contingent promissory note for $5
million. That promissory note named Apex as the sole payee and did not mention Huron Capital
or any other payee.

        In sum, Apex’s officers and agents, located in the city of Detroit, took many actions on
behalf of Apex in conjunction with the sale of the Labstat stock. These actions are sufficient to
show that there was a nexus between Apex and Detroit, and the Tax Tribunal erred when it ruled
otherwise and granted Apex’s motion for summary disposition on this issue. Furthermore, viewing
the evidence in a light most favorable to Apex, to determine whether summary disposition should
be granted in favor of Detroit, results in the same conclusion—the work was primarily done in
Detroit. While there may have been some exceptions, such as reading some documents at home
or while traveling, no evidence demonstrated that Apex’s principal place of business was anywhere
but Detroit. Consequently, Apex established a nexus with Detroit because it “avail[ed] itself of

                                                  -6-
the substantial privilege of carrying on business in [Detroit].” Wayfair, 138 S Ct at 2099 (quotation
marks and citations omitted).

         We are aware that this Court in Apex I reached a different conclusion. First, the familiar
law-of-the-case doctrine5 is not implicated because Apex I ultimately was vacated by our Supreme
Court and therefore did not decide any issues. Apex II, 504 Mich 1034. Second, this Court in
Apex I seemed to apply the incorrect legal standard when ruling on motions for summary
disposition. Instead of truly conducting a de novo review of a decision on a motion for summary
disposition where factual findings are not permissible, this Court framed some of the Tribunal’s
rulings as “findings” and deferred to those rulings because there was “substantial, competent, and
material evidence” on the record. Apex I, unpub op at 4-6. Not only is this the incorrect standard
of review for reviewing decisions on motions for summary disposition, see Briggs, 485 Mich at
75, it also mischaracterizes a court’s function when deciding motions for summary disposition by
suggesting that factual findings are permissible.

                                        B. ALLOCATION

        Detroit next argues that the Tax Tribunal erroneously allocated none of Apex’s income to
Detroit. We conclude that the tribunal erred by granting summary disposition in favor of Apex,
but we disagree that Detroit was entitled to summary disposition because neither party was entitled
to summary disposition.

       Even though a company has a nexus with Detroit, it does not mean that Detroit can
necessarily tax the entirety of the company’s income. The relevant ordinance provides, in pertinent
part:

               The tax under this article shall apply on the taxable net profits of a
       corporation doing business in the City, being levied on such part of the taxable net
       profits as is earned by the corporation as a result of work done, services rendered
       and other business activities conducted in the city, as determined in accordance
       with this article. [Detroit City Code, § 44-2-9(c) (emphasis added).]

Further,

       [w]hen the entire net profit of a business subject to the tax is not derived from
       business activities exclusively within the city, the portion of the entire net profit,
       earned as a result of work done, services rendered or other business activity
       conducted in the city, shall be determined under either [MCL 141.619], [MCL
       141.620 to MCL 141.624], or [MCL 141.625]. [MCL 141.618.]

5
  Under the law-of-the-case doctrine, an appellate court’s decision on a particular issue binds both
the trial courts and other appellate panels in subsequent appeals of the case. Grievance
Administrator v Lopatin, 462 Mich 235, 259-260; 612 NW2d 120 (2000). The law of the case
applies to issues actually decided in the prior appeal. Id.

                                                -7-
        MCL 141.619 relates to “the separate accounting method” and is not relevant to this case.
MCL 141.620 to MCL 141.624 “set forth the three-factor formula, known as the ‘business
allocation percentage method,’ for calculating the taxable ‘net profit of a business.’ ” Honigman
Miller Schwartz & Cohn, LLP v Detroit, 505 Mich 284, 296; 952 NW2d 358 (2020). MCL 141.620
introduces the three-factor formula:

               The business allocation percentage method shall be used if such taxpayer is
       not granted approval to use the separate accounting method of allocation. The
       entire net profits of such taxpayer earned as a result of work done, services rendered
       or other business activity conducted in the city shall be ascertained by determining
       the total “in-city” percentages of property, payroll and sales. “In-city” percentages
       of property, payrolls and sales, separately computed, shall be determined in
       accordance with [MCL 141.621 to MCL 141.624]. [MCL 141.620.]

MCL 141.621 pertains to the first factor, the property factor:

               First, the taxpayer shall ascertain the percentage which the average net book
       value, of the tangible personal property owned and the real property . . . owned or
       used by it in the business and situated within the city during the taxable period, is
       of the average net book value of all such property . . . owned or used by the taxpayer
       in the business during the same period wherever situated. . . .

For the payroll factor, MCL 141.622 states:

               Second, the taxpayer shall ascertain the percentage which the total
       compensation paid to employees for work done or for services performed within
       the city is of the total compensation paid to all the taxpayer’s employees within and
       without the city during the period covered by the return. For allocation purposes,
       compensation shall be computed on the cash or accrual basis in accordance with
       the method used in computing the entire net income of the taxpayer. . . .

For the final factor, the revenue factor, MCL 141.623 provides:

               Third, the taxpayer shall ascertain the percentage which the gross revenue
       of the taxpayer derived from sales made and services rendered in the city is of the
       total gross revenue from sales and services wherever made or rendered during the
       period covered by the return.

               (1) For the purposes of this section, “sales made in the city” means all sales
       where the goods, merchandise or property is received in the city by the purchaser,
       or a person or firm designated by him. . . .

                                              * * *

                (3) In case the business of the taxpayer involves substantial business
       activities other than sales of goods and services such other method or methods of
       allocation shall be employed as shall reasonably measure the proportion of gross
       revenue obtained in the city by such business.

                                                -8-
        Under MCL 141.624, the average of those three percentages is the “business allocation
percentage.” However, if a factor does not exist anywhere for a business, then that factor is omitted
completely. MCL 141.624. In other words, if only two factors are present, then the average is
taken from those two factors, and if only one factor is present, then that percentage is used for the
“business allocation percentage.”

         The Tax Tribunal ruled that no income should be apportioned to Detroit because Apex

         (1) had no personal or real property in the City of Detroit within the meaning of
         MCL 141.621, (2) had no employees to which it paid compensation for work done
         or services performed in the City of Detroit within the meaning of MCL 141.622,
         and (3) had no gross revenue derived from sales made and services rendered in the
         City [of] Detroit within the meaning of MCL 141.623.

Put another way, the numerators for each of the three factors was zero.

        Detroit argues that the alternative method described in MCL 141.625 should have been
utilized because none of the three factors was present in this case, which yields a fraction of zero
divided by zero, which is mathematically undefined. In other words, Detroit contends that because
none of the three factors is present, the three-factor system is inapplicable and the alternative
mentioned in MCL 141.625, as authorized by MCL 141.623(3), should be utilized. Again, MCL
141.623(3) provides:

                 In case the business of the taxpayer involves substantial business activities
         other than sales of goods and services such other method or methods of allocation
         shall be employed as shall reasonably measure the proportion of gross revenue
         obtained in the city by such business.

         This provision is applicable here. The business of Apex involved “substantial business
activities other than the sales of goods and services.” Apex’s sole business activities instead
involved the retention and sale of Labstat stock, and stock is not a “good.” See MCL 440.2105
(Michigan’s UCC defining “goods” as all things that are movable at the time of identification and
omitting “investment securities” from that definition). Thus, the Tax Tribunal made an error of
law when it implicitly ruled that MCL 141.623(3) was inapplicable.6

         That error, however, appears to be harmless because the Tax Tribunal, albeit briefly,
considered allocation under MCL 141.625. The tribunal rejected Detroit’s earlier argument that
liability should be determined under that provision.7 That section provides, “An alternative

6
    The Tribunal did not expressly address MCL 141.623(3) in its final order.
7
  Apex avers that the issue is not preserved. However, as the Tax Tribunal recognized, Detroit
raised the argument that MCL 141.625 applies earlier in the proceedings. Thus, the issue is
preserved. See Glasker-Davis v Auvenshine, 333 Mich App 222, 227; 964 NW2d 809 (2020).
Further, “[n]o exception need be taken to a finding or decision.” MCR 2.517(A)(7). In this
instance, no preservation steps needed to be taken because the Tax Tribunal addressed and decided

                                                  -9-
method of accounting shall be used if the taxpayer or the administrator demonstrates that the net
profits of the taxpayer allocable to the city cannot be justly and equitably determined under the
separate accounting method or the business allocation percentage method . . . .” MCL 141.625.
The tribunal ruled that this alternative method is not applicable because of “the very minimal
presence and activities conducted by [Apex’s] agents in the City of Detroit.” The Tribunal also
rejected Detroit’s contention that 100% of Apex’s business activities were conducted in Detroit,
relying on the fact that the closing of the Labstat sale occurred in Canada.

         We are inclined to disagree with the tribunal’s ruling. It is not clear how Apex, who had
no presence anywhere other than in the offices of Capital Partners in Detroit, had “very minimal
presence” in Detroit. In essence, as discussed earlier, all of Apex’s business was conducted in the
city. Its directors, officers, and agents all performed duties related to the sale of Labstat on behalf
of Apex in Detroit. Thus, even assuming that those activities were somehow “minimal” in terms
of the number of hours spent on the activities, the evidence nonetheless shows that these activities
constituted 100% of Apex’s activities. As such, we disagree that Apex’s presence in Detroit or its
activities can be deemed “minimal.”

         The tribunal also relied on the fact that the sale ultimately occurred in Canada, reasoning
that this fact shows that Apex did not conduct 100% of its business in Detroit. There is no dispute
that the closing was done remotely. But while the closing was done remotely in Canada, there was
no evidence that any agent of Apex was present in Canada for the closing. Instead, the evidence
shows that Apex’s agents, while in Detroit, performed all of their work related to the sale. The
fact that the documents were collected in Canada and the transaction was finalized in Canada does
not alter the salient point that the evidence shows that Apex performed its work to effectuate the
sale wholly in Detroit. On this basis, we reverse and remand for the Tax Tribunal to determine
what alternate method of accounting under MCL 141.625 should be used to determine the net
profits of the taxpayer allocable to Detroit. Put another way, due to the nebulous “alternative
method of accounting” to be employed, no party was entitled to summary disposition on the issue
of allocation, and further proceedings are warranted. See Borman’s, Inc v Detroit, 386 Mich 250,
257; 191 NW2d 367 (1971) (explaining that because the taxpayer’s proposed method of allocation
clearly did not justly and equitably allocate its profits, remand was necessary to have the trial court
determine which alternative method should be implemented).

        In sum, the Tax Tribunal erred when, while granting Apex’s motion for summary
disposition, it ruled that the three-factor accounting method applied. Because Apex’s business
“involves substantial business activities other than sales of goods and services,” another method
of allocation must be used. MCL 141.623(3). The only other applicable method resides in MCL
141.625, which permits “[a]n alternative method of accounting” to be used. Ultimately, what type
of method to use necessarily involves the exercise of discretion and is not properly considered on
summary disposition. Therefore, we reverse and remand for further non-summary-disposition
proceedings.

the matter, granting summary disposition in favor of Apex on the basis of allocating all of Apex’s
income to outside of Detroit.

                                                 -10-
                                    III. CONCLUSION

       We reverse and remand to the Tax Tribunal for further proceedings consistent with this
opinion. We do not retain jurisdiction.

                                                         /s/ Michael J. Riordan
                                                         /s/ Michael J. Kelly

                                            -11-