                           STATE OF MICHIGAN

                            COURT OF APPEALS



HONIGMAN MILLER SCHWARTZ AND                                          FOR PUBLICATION
COHN LLP,                                                             January 18, 2018
                                                                      9:05 a.m.
               Petitioner-Appellant,

v                                                                     No. 336175
                                                                      Tax Tribunal
CITY OF DETROIT,                                                      LC No. 16-000202

               Respondent-Appellee.


Before: MURPHY, P.J., and SAWYER and BECKERING, JJ.

SAWYER, J.

        We are asked in this case to determine whether services performed by an attorney in
Detroit on behalf of a client located outside the city while that attorney is physically located in
his or her office in the city is to be considered in-city or out-of-city income for purpose of § 23 of
the City Income Tax Act (CITA).1 Petitioner maintains that the relevant consideration is where
the client receives the services, while respondent and the Tax Tribunal maintain that the relevant
consideration is where the work is performed. We agree with petitioner and reverse the Tax
Tribunal and remand.

        Petitioner is a law firm with a primary office in the city of Detroit, but with additional
offices located elsewhere. Petitioner represents clients both within Detroit and outside Detroit.
Under § 18 of CITA2, petitioner must determine what percentage of its business income is
attributable to Detroit. Petitioner utilizes §§ 20 through 243 in making this determination. This
method requires the taxpayer to calculate the percentage attributable under three different
methods and then average the three.4 The three factors are: (1) the property factor under § 21,
considers what percentage of the business’ tangible personal and real property is located within



1
    MCL 141.623.
2
    MCL 141.618.
3
    MCL 141.620 through MCL 141.624.
4
    MCL 141.624.


                                                 -1-
the city,5 (2) the payroll factor under § 22, considers what percentage of the payroll is
attributable to “work done or services performed within the city,”6 and (3) the sales factor under
§ 23, considers the gross revenue “derived from sales made and services rendered in the city”7
compared to all gross revenue.

        This case involves tax years 2010-2014 (the “subject years”). The parties agreed upon
the computation of the first two factors (the property factor and the payroll factor), but disagree
as to the computation of the sales factor. As noted above, the dispute involves whether to
consider “services rendered” as being where the client receives the services (petitioner’s
interpretation) or where the work is performed (respondent’s interpretation). Specifically,
petitioner states that it calculated its “in-city” gross revenue by summing the gross revenue
collected from clients located within the city of Detroit. According to petitioner, it had been
utilizing this methodology in the past, but it is not until the subject years that the city objected
and calculated the sales factor based on the billable hours recorded for work performed within
the city, regardless of the location of the client. The difference is not insignificant.8 For the
subject years, under the city’s methodology, slightly over 51% of petitioner’s gross revenue
would be considered in-city, while under petitioner’s methodology, it would be slightly less than
11%.9

        In the Tax Tribunal, the parties filed cross-motions for summary disposition. The hearing
officer determined that § 23 was ambiguous and unclear. The hearing officer concluded that
because services are intangible, they cannot be delivered in the same manner as tangible property
and that there was no reason to overrule the city’s construction of the statute. Initially, we note
that both parties agree that the tribunal erred in determining that § 23 is ambiguous.10 Of course,
they offer differing interpretations of the statute. But, as an initial matter, we agree that the
statute is unambiguous. Accordingly, we must interpret the plainly expressed meaning of the
statute as contained in the words utilized by the Legislature.11 And we conclude that that plainly
expressed meaning does not support respondent’s position nor the conclusion of the tribunal.

        We begin by observing that the Legislature used two different terms in drafting the
payroll factor under § 22 and the sales factor under § 23. The payroll factor refers to “services


5
    MCL 141.621.
6
    MCL 141.622.
7
    MCL 141.623.
8
    For the subject years, the back taxes, plus interest and penalty, exceeds $1 million.
9
    Of course, this only accounts for one-third of the final attribution.
10
   This would seem to be a necessity for respondent as otherwise it would have to deal with a
principle of law that the tribunal overlooked. Namely, that “ambiguities in the language of a tax
statute are to be resolved in favor of the taxpayer.” Michigan Bell Telephone Co v Dep’t of
Treasury, 445 Mich 470, 477; 518 NW2d 808 (1994).
11
     Whitman v City of Burton, 493 Mich 303, 311-312; 831 NW2d 223 (2013).


                                                    -2-
performed” and § 23 refers to “services rendered.” We agree with petitioner that these must be
given two different meanings because when “the Legislature uses different words, the words are
generally intended to connote different meanings. Simply put, ‘the use of different terms within
similar statutes generally implies that different meanings were intended.’ 2A Singer & Singer,
Sutherland Statutory Construction, (7th ed), § 46:6, p 252. If the Legislature had intended the
same meaning in both statutory provisions, it would have used the same word.”12 Thus, because
§ 22 looks to where the work is done or performed, then the Legislature likely intended that the
term “services rendered” in § 23 to have a different meaning.

      The tribunal deals with this issue by also noting the directive of the Supreme Court in GC
Timmis & Co v Guardian Alarm Co13 that statutory

         language does not stand alone, and thus it cannot be read in a vacuum. Instead,
         “[i]t exists and must be read in context with the entire act, and the words and
         phrases used there must be assigned such meanings as are in harmony with the
         whole of the statute . . . .” Arrowhead Dev Co v Livingston Co Rd Comm, 413
         Mich 505, 516; 322 NW2d 702 (1982). “[W]ords in a statute should not be
         construed in the void, but should be read together to harmonize the meaning,
         giving effect to the act as a whole.” Gen Motors Corp v Erves (On Reh), 399
         Mich 241, 255; 249 NW2d 41 (1976) (opinion by COLEMAN, J.). Although a
         phrase or a statement may mean one thing when read in isolation, it may mean
         something substantially different when read in context. McCarthy v Bronson, 500
         US 136, 139; 111 S Ct 1737; 114 L Ed 2d 194 (1991); Hagen v Dep’t of Ed, 431
         Mich 118, 130–131; 427 NW2d 879 (1988). “In seeking meaning, words and
         clauses will not be divorced from those which precede and those which follow.”
         People v Vasquez, 465 Mich 83, 89; 631 NW2d 711 (2001), quoting Sanchick v
         State Bd of Optometry, 342 Mich 555, 559; 70 NW2d 757 (1955). “It is a familiar
         principle of statutory construction that words grouped in a list should be given
         related meaning.” Third Nat’l Bank in Nashville v Impac Ltd, Inc, 432 US 312,
         322; 97 S Ct 2307; 53 L Ed 2d 368 (1977); see also Beecham v United States, 511
         US 368, 371; 114 S Ct 1669; 128 L Ed 2d 383 (1994).

In our view, however, this strengthens, rather than weakens, petitioner’s interpretation. While
the Legislature does not give much direct guidance in § 23 to the meaning of “services rendered”
it does give explicit guidance to “sales made in the city.” MCL 141.23(1) provides as follows:

                 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. In the case of delivery of goods in the city
         to a common or private carrier or by other means of transportation, the place at


12
  United States Fidelity & Guaranty Co v Michigan Catastrophic Claims Ass’n, 484 Mich 1, 14;
795 NW2d 101 (2009).
13
     468 Mich 416, 421-422; 662 NW2d 710 (2003).


                                                 -3-
         which the delivery has been completed is considered as the place at which the
         goods are received by the purchaser.

         The following examples are not all inclusive but may serve as a guide for
         determining sales made in the city:

         (a) Sales to a customer in the city with shipments to a destination within the city
         from a location in the city or an out-of-city location are considered sales made in
         the city.

         (b) Sales to a customer in the city with shipments to a destination within the city
         directly from the taxpayer’s in-city supplier or out-of-city supplier are considered
         sales made in the city.

         (c) Sales to a customer in the city with shipments directly to the customer at his
         regularly maintained and established out-of-city location are considered out-of-
         city sales.

         (d) Sales to an out-of-city customer with shipments or deliveries to the customer’s
         location within the city are considered sales made in the city.

         (e) Sales to an out-of-city customer with shipments to an out-of-city destination
         are considered out-of-city sales.

There is a very obvious common thread here: what is relevant is not the location of the taxpayer
(or even the customer), but the destination of the goods. If the destination is within the city, then
it is a sale made in the city. If the destination is outside the city, then it is not a sale within the
city. This utilizes a “destination test” for the sales factor.14

        Returning to the meaning of the word “render,” petitioner supplies a contemporary
definition of the word from the 1969 edition of Webster’s Third New International Dictionary, 15
wherein the relevant definition of “render” is “to transmit to another: DELIVER.” This is in
contrast to the tribunal’s opinion which looks to another definition of “render” as “to do (a
service) for another”. It then equates “do” with “perform” to reach the conclusion that “render”
is “synonymous with perform.” We find this conclusion to be dubious and unnecessarily
convoluted.16 Why would the Legislature utilize “render” to mean “perform” by way of the verb



14
   See Hellerstein and Hellerstein, State and Local Taxation, Thomson West (8th ed), p 658
(2005).
15
     Section 23 was part of 1964 PA 284.
16
   Respondent pursues the same reasoning by citing a number of sources to suggest an
equivalency between “render” and “perform”. But only two examples come close to equating
the two: Thesaurus.com gives “performed” as a synonym of “rendered” and Black’s Law
Dictionary gives a definition of “render” to mean “perform . . . services”, though respondent


                                                 -4-
“to do”, when it would have been much simpler and clearer to simply reuse the word “perform”?
This neatly illustrates the principle that the Legislature utilizes different words when it intends
different meanings.

        The tribunal’s opinion finds a need for its strained conclusion because, it observes, that
services “cannot be ‘delivered’ in the same manner as tangible items.” It then invokes an
irrelevant quotation typically attributed to Abraham Lincoln that “A lawyer’s time and advice is
his stock in trade.” It is true that services are different than tangible items. But that does not
mean that services cannot be delivered. And, with all due respect to President Lincoln, a
lawyer’s time and advice can result in a tangible item. For example, a lawyer’s time and advice
may well result in the drafting of a will, a complaint, a contract, a brief, etc. And those items
may well be delivered to the client in a different location than where the lawyer performs the
drafting. Moreover, even the advice itself may be delivered to a different location. For example,
a lawyer in Detroit may have a telephone conversation with a client located in Ann Arbor. The
lawyer’s advice during that conversation is delivered to the client in Ann Arbor.

        In sum, we conclude that, after considering the Legislature’s use of the word “rendered,”
rather than reusing “performed,” in § 23 and in considering that term in the context of how it
treated the sale of tangible goods, we conclude that the relevant consideration in § 23 is where
the service is delivered to the client, not where the attorney performs the service. Thus, for
purposes of § 23, where a service is provided to a client outside the city of Detroit it is to be
considered an “out-of-city” service while services provided to a client in the city of Detroit is to
be considered an “in-city” service.

       The Tax Tribunal’s grant of summary disposition in favor of respondent is reversed and
the matter is remanded to the Tax Tribunal for further proceedings consistent with this opinion.
We do not retain jurisdiction. Petitioner may tax costs.



                                                             /s/ David H. Sawyer
                                                             /s/ William B. Murphy
                                                             /s/ Jane M. Beckering




leaves out a semi-colon and intervening words to reach that definition in Black’s. The other
examples involve some variation of doing or providing a service.


                                                -5-
