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March 10, 2026 Get Citation Alerts Download PDF Add Note

Sav-Time Inc v. Department of Treasury

Michigan Court of Appeals

• Citations: None known
• Docket Number: 370459

• Disposition: Lower Court Judgment/Order Affirmed

• Opinion

• Authorities (7)

• Cited By (0)

• Summaries (0)

• Similar Cases (26.8K)

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Disposition

Lower Court Judgment/Order Affirmed

Lead Opinion

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

SAV-TIME, INC., FOR PUBLICATION
March 10, 2026
Plaintiff-Appellant, 11:50 AM

v No. 370459
Court of Claims
DEPARTMENT OF TREASURY, LC No. 21-000186-MT

Defendant-Appellee.

Before: RICK, P.J., and MALDONADO and KOROBKIN, JJ.

RICK, P.J.

Plaintiff, Sav-Time, Inc. (Sav-Time), appeals as of right an opinion and order granting
summary disposition in favor of defendant, the Department of Treasury (the Department), under
MCR 2.116(C)(10) (no genuine issue of material fact), and denying Sav-Time’s countermotion for
summary disposition under MCR 2.116(C)(10) and MCR 2.116(I)(2) (opposing party entitled to
summary disposition). We affirm.

This appeal arises from the Department’s audit of Sav-Time’s sales, use and withholding
(SUW) tax returns for the years 2015 through 2018. We are primarily asked to determine whether
the Court of Claims properly determined that Sav-Time failed to properly itemize labor charges in
its financial documents and data, and that Sav-Time’s documents contained inaccurate and
inconsistent dollar amounts in a variety of sales categories. However, because the proper
resolution of this case rests largely on the correct interpretation of certain portions of the General
Sales Tax Act (GSTA), MCL 205.51 et seq., we will first set forth the relevant statutes and rules
before addressing the factual and procedural history of the case.

I. LEGAL BACKGROUND

As stated, this matter is generally governed by the GSTA. MCL 205.52 of the GSTA
provides, in relevant part:

(1) Except as provided in section 2a, there is levied upon and there shall be
collected from all persons engaged in the business of making sales at retail, by
which ownership of tangible personal property is transferred for consideration, an

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annual tax for the privilege of engaging in that business equal to 6% of the gross
proceeds of the business, plus the penalty and interest if applicable as provided by
law, less deductions allowed by this act.

---

(3) Any person engaged in the business of making sales at retail who is at
the same time engaged in some other kind of business, occupation, or profession
not taxable under this act shall keep books to show separately the transactions used
in determining the tax levied by this act. If the person fails to keep separate books,
there shall be levied upon him or her the tax provided for in subsection (1) equal to
6% of the entire gross proceeds of both or all of his or her businesses. The taxes
levied by this section are a personal obligation of the taxpayer.

For this purpose, “gross proceeds” is defined as “sales price.” MCL 205.51(1)(c). In turn,
“sales price” is defined as “the total amount of consideration, including cash, credit, property, and
services, for which tangible personal property or services are sold, leased, or rented, valued in
money, whether received in money or otherwise, and applies to the measure subject to sales tax.”
MCL 205.51(1)(d). Sales price includes “[c]harges by the seller for any services necessary to
complete the sale, other than . . . [l]abor or service charges involved in maintenance and repair
work on tangible personal property of others if separately itemized.” MCL 205.51(1)(d)(iii)(B).

Relatedly, pursuant to Mich Admin Code, R 205.117(3), which was in effect during the
2015 through 2018 tax years:

[p]ersons selling tangible personal property in addition to providing labor or service
shall obtain a sales tax license and pay the tax on their sales of tangible personal
property, including such property sold in connection with repair work. When both
labor and service charges are involved in repair work for others, the retailer shall
separately itemize the amount charged for the tangible personal property sold;
otherwise, the tax shall apply to the total gross proceeds.[1]

Individuals liable for taxes imposed under the GSTA must “keep in a paper, electronic, or
digital format an accurate and complete beginning and annual inventory and purchase records of
additions to inventory, complete daily sales records, receipts, invoices, bills of lading, and all
pertinent documents in a form the department requires.” MCL 205.68(1). Further, under
MCL 205.68(4):

(4) If a taxpayer fails to file a return or to maintain or preserve sufficient
records as prescribed in this section, or the department has reason to believe that
any records maintained or returns filed are inaccurate or incomplete and that
additional taxes are due, the department may assess the amount of the tax due from
the taxpayer based on an indirect audit procedure or any other information that is
available or that may become available to the department. That assessment is

1
Rule 205.117 has since been rescinded, see 2023 Mich Reg 15 (August 11, 2023).

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considered prima facie correct for the purpose of this act and the burden of proof
of refuting the assessment is upon the taxpayer. An indirect audit of a taxpayer
under this subsection must be conducted in accordance with 1941 PA 122,
MCL 205.1 to 205.31, and the standards published by the department under section
21 of 1941 PA 122, MCL 205.21, and must include all of the following elements:

(a) A review of the taxpayer’s books and records. The department may use
an indirect method to test the accuracy of the taxpayer’s books and records.

(b) Both the credibility of the evidence and the reasonableness of the
conclusion must be evaluated before any determination of tax liability is made.

(c) The department may use any method to reconstruct income, deductions,
or expenses that is reasonable under the circumstances. The department may use
third-party records in the reconstruction. [Emphasis added.]

With respect to an audit by the Department in regard to tax liability, MCL 205.21(1)
provides:

If a taxpayer fails or refuses to make a return or payment as required, in
whole or in part, or if the department has reason to believe that a return made or
payment does not supply sufficient information for an accurate determination of the
amount of tax due, the department may obtain information on which to base an
assessment of the tax. By its duly authorized agents, the department may examine
the books, records, and papers and audit the accounts of a person or any other
records pertaining to the tax. A taxpayer who has been audited by the department
or its agent or a taxpayer whose books, records, and papers have been examined by
the department shall, upon request, be provided a complete copy in printed or
electronic format of the complete audit work papers and the audit report of findings.
Any audit performed by the department or its duly authorized agents . . . shall be
performed in accordance with auditing standards which shall include, but are not
limited to, confidentiality, technical training, independence, due professional care,
planning, supervision, understanding of the entity audited including internal control
and an assessment of risk, audit evidence and documentation, sampling and
sampling projections, and elements of the audit report of findings. . . .

“When designing an audit sample, auditors must consider the purpose of the audit procedure and
the characteristics of the population from which the sample will be drawn,” and “[t]he auditor may
use statistical or nonstatistical sampling.” Mich Admin Code, R 205.2009(1).2 The auditor should

2
Rule 205.2009(6) provides:
Auditors may use either statistical or non-statistical sampling of the audited
person’s books and records to provide sufficient evidence to form a conclusion
about the correct tax liability. Non-statistical sampling includes judgmental
samples, random samples, simple random sampling, systematic sampling, and

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determine the sampling method on a case-by-case basis, and may “consider the circumstances of
the audit, the type of taxpayer entity, and the taxpayer’s internal control system.” Id. “Auditors
must select items for the sample in such a way that the auditors can reasonably expect the sample
to be representative of the relevant population and likely to provide the auditors with a reasonable
basis for conclusions about the population.” Rule 205.2009(2).3 “Auditors must investigate the
nature and causes of any deviations or misstatements identified and evaluate their possible effect
on the purpose of the audit procedure and on other areas of the audit.” Rule 205.2009(4). “If an
audited person does not have sufficient records or fails to provide records, the auditor shall
determine the best information available and base the estimated tax liability on that information.”
Rule 205.2009(9).

“[T]he department, after determining the amount of tax due from a taxpayer, shall give
notice to the taxpayer of its intent to assess the tax,” and “[t]he notice shall include the amount of
the tax the department believes the taxpayer owes, the reason for that deficiency, and a statement
advising the taxpayer of a right to an informal conference.” MCL 205.21(2)(b). And
MCL 205.21(2)(c) provides as follows:

If the taxpayer serves written notice upon the department within 60 days
after the taxpayer receives a notice of intent to assess, remits the uncontested
portion of the liability, and provides a statement of the contested amounts and an
explanation of the dispute, the taxpayer is entitled to an informal conference on the
question of liability for the assessment.

“A taxpayer aggrieved by an assessment, decision, or order of the department may appeal
the contested portion of the assessment, decision, or order to the tax tribunal within 60 days, or to
the court of claims within 90 days after the assessment, decision, or order.” MCL 205.22(1).4 Any
“uncontested portion of an assessment, order, or decision shall be paid as a prerequisite to appeal.”
Id. “The assessment, decision, or order of the department, if not appealed in accordance with this
section, is final and is not reviewable in any court by mandamus, appeal, or other method of direct
or collateral attack.” MCL 205.22(4). And “[a]n assessment is final, conclusive, and not subject
to further challenge after 90 days after the issuance of the assessment, decision, or order of the
department.” MCL 205.22(5).

cluster sampling or any other sampling method that does not involve statistical
evaluation.
3
“When sampling the same accounts for multiple years, the auditor may combine the accounts
into 1 population. The result must be projected by a reasonable method that the auditor determines
prior to selecting the sampling units.” Rule 205.2009(8).
4
“A taxpayer or the department may take an appeal by right from a decision of the tax tribunal or
the court of claims to the court of appeals. The appeal shall be taken on the record made before
the tax tribunal or the court of claims.” MCL 205.22(3).

-4-
II. FACTUAL BACKGROUND

Sav-Time operates two oil change and automotive maintenance facilities in Saginaw,
Michigan, and claimed significant sales tax exemptions for labor charges associated with its
services. The Department’s audit of Sav-Time’s SUW tax returns for 2015 through 2018
concluded that Sav-Time failed to properly itemize labor charges on its invoices and other financial
documents, resulting in the disallowance of claimed exemptions totaling $955,287. 5 The
Department also made an upward adjustment of $13,443 to Sav-Time’s gross sales, resulting in a
total tax liability of $50,350, plus interest.

The audit report stated that “[d]ue to a software change during the audit period . . . . [s]ome
reports provided did not have all of the necessary information.” The report continued that “[t]he
taxpayer has an accounting firm prepare their returns. During the audit period a different
accountant was assigned to prepare the monthly and annual return.” Further, the report explained
that “[t]he taxpayer has used the same store software during the audit period. However, the
accounting firm changed their financial software during the audit period.” The audit report
additionally stated that Sav-Time “creates a sales sheet for their two locations. This sheet breaks
down the various types and amounts of each sale. They send this to their accountant and the
accountant prepares the monthly return.”

The report continued that the review method examined gross sales and allowable
deductions relative to exempt services for the tax period at issue. With respect to “gross sales,”
the auditor reviewed sales invoices, sales reports, and the general ledger, resulting in the upward
adjustment of $13,443. With respect to the upward adjustment, the auditor reasoned:

The taxpayer was inconsistent in their reporting method for gross sales on
their monthly and annual SUW returns. According to their SUW returns from
2015-July 2018 the taxpayer did not report sales with tax in gross, except for
November 2017. They changed their method to include tax in gross sales in August
2018.

The auditor reviewed monthly sales reports, financial statements, detail[ed]
general ledger reports and federal returns. After reviewing the taxpayer’s financial
reports it was determined that they were reporting tax on their gross sales. Auditor
noted the sales reports were the best representation of sales. There were un-
reconcilable differences between the various reports. Adjustments were made for
untaxed sales of used oil and unreconcilable differences.

The auditor next examined allowable deductions in the form of exempt services. He
ultimately made a series of downward adjustments, which resulted in the elimination of a
deduction for exempt services totaling $955,287, a figure that Sav-Time asserted represented labor
sales that were not subject to sales tax. The auditor reasoned:

5
Unless otherwise indicated, we have rounded the dollar amounts to the nearest dollar.

-5-
The taxpayer invoices their oil changes as part of a lump sum package, with
the exception of add-ons as needed to complete the oil change or minor
maintenance parts as requested by the customer. The auditor reviewed a batch of
sample invoices within the audit period. Within their software they determine a
taxable amount for the cost of the tangible personal property used to complete the
oil change. The taxpayer reports the remainder of the cost as an exempt service.
The tax in their gross sales was also included and reported as a deduction under
exempt services. For July 2018 the taxpayer erroneously filed their monthly SUW
return for exempt sales as tax included in gross sales. This was carried over to their
annual return. The auditor also reviewed invoices for coolant/fluid exchanges and
rustproofing. These [are] invoiced the same as the oil changes as one lump sum.
The tangible personal property and labor are not separately itemized on the
invoices. [Emphasis added.]

The auditor disallowed Sav-Time from claiming the exempt services deduction because Sav-Time
failed to “separately itemiz[e] the labor on their invoices[.]”

The audit report additionally set forth adjustments with respect to taxes included in gross
sales, which were relational to adjustments to either the gross sales or deductions. The report
stated that the adjustments were made to taxes included in gross sales. By our calculations, the
value of the adjustments totaled $129,577. The auditor then calculated interest through June 15,
2020, but imposed no penalty because “[t]he taxpayer demonstrated reasonable cause by
exercising ordinary care and prudence.” Finally, the audit report set forth the overall monetary
results of the audit, noting a tax liability or assessment of $50,350, plus $7,279 in interest, for a
total due of $57,629.

In November 2020, the Department issued a final audit determination that reflected the
same liability dollar amounts set forth in the audit report. The Department sent Sav-Time bills and
final bills for taxes due, stating an intent to assess the following amounts in outstanding sales tax:
$5,680 for 2015; $14,953 for 2016; $15,699 for 2017; and $13,859 for 2018.

Sav-Time requested an informal conference to challenge the results of the audit and sales-
tax assessment. In the request, Sav-Time argued:

The audit started September 18, 2019. All requested information was sent
to the auditor promptly. Included in the information were duplicate invoices for
services rendered. On April 22, 2020, additional duplicate invoices were provided.
Unbeknownst to our office, the duplicated invoices did not show the labor cost line.
When the auditor completed the audit on June 30, 2020 it came to our attention.

At that time we requested an additional 2 weeks . . . to get actual invoices
to the [Department]. We needed the additional time due to the state’s Covid-19
restrictions. We were refused. The reason given was we had the 10 months the
auditor took to do the audit to get them to the [Department]. Two weeks didn’t
seem like an unreasonable time since the audit took 10 months. Since then the
programmer fixed the duplicate invoices. The actual invoices always stated the
non-taxable labor.

-6-
We don’t have any actual invoices for the audit period, but the duplicate
invoices now state the non-taxable labor.

The taxpayer was audited on this issue in the past when invoices were
printed by hand. At that time it was being done incorrectly and the taxpayer
corrected the manual invoices. When he purchased the current invoicing program,
he specifically requested that the invoice state the non-taxable labor which the
programmer provided. It seems very unreasonable to think the taxpayer would
make the same mistake twice.

As evidence, we can provide current actual invoices by printing 2 at the time
of the service and provide the new duplicate invoices on any old invoices.

The duplicate invoices originally provided to the auditor listed an initial sales price and
then indicated the “Taxable Amt,” which was followed by a listing of the sales tax being charged
and the overall charge to be paid by the customer. There was no specific or express itemization
for labor charges or labor sales. The new duplicate invoices that Sav-Time wanted the Department
to consider listed an initial sales price and then indicated an amount for “Taxable Parts,” which
was followed by an amount designated for “Non-Taxable Labor” and then the sales tax being
charged, concluding with the overall charge to be paid by the customer.

An informal conference was held before a referee in June 2021. The referee recommended
upholding the Department’s assessment. The referee opined:

Here, [Sav-Time] did not provide sufficient and accurate records. The
Department utilized the best information available when auditing [Sav-Time] and
determining its tax liability. [Sav-Time] did not meet the burden of proving
adjustments are needed. The Intents to Assess were lawfully imposed against [Sav-
Time] and should be upheld as originally determined.

In July 2021, the Department issued a decision and order of determination, accepting and adopting
the referee’s recommendation.

In September 2021, Sav-Time filed suit in the Court of Claims, challenging the validity of
the assessment and the Department’s audit methodology. During the proceedings, the Department
filed a motion for summary disposition under MCR 2.116(C)(4) (lack of subject-matter
jurisdiction) and (C)(10). Relevant to this appeal,6 the Department argued that summary
disposition was proper under MCR 2.116(C)(10) because no genuine issue of material fact existed
regarding the validity of its decision to adjust Sav-Time’s gross sales, exempt services for labor,

6
As will be discussed further, the Court of Claims granted the Department’s motion under
MCR 2.116(C)(10). Although the issue of subject-matter jurisdiction may be raised at any time,
Maxwell v Dep’t of Environmental Quality, 264 Mich App 567, 574; 692 NW2d 68 (2004), the
Department has not renewed its jurisdictional argument on appeal. We thus focus our attention on
the arguments made in relation to MCR 2.116(C)(10), and the Court’s decision to grant the motion
under that subsection.

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and tax in gross. The Department maintained that Sav-Time failed to separately itemize charges
for labor and tangible personal property as required by MCL 205.51(1)(d)(iii)(B) and Rule
205.117(3) in order to support the claimed sales tax exemption. The Department explained that
Sav-Time’s invoices during the audit period did not separately itemize labor charges, and the
amounts reported as exempt services in Sav-Time’s SUW returns were not supported by reliable
documentation. The Department further contended that Sav-Time’s SUW returns were not filed
accurately, with irreconcilable differences between various reports, and that Sav-Time did not
contest the Department’s adjustment to its gross sales. Ultimately, the Department argued that,
because Sav-Time failed to comply with statutory requirements and did not provide sufficient and
accurate records, no genuine issue of material fact existed regarding the correctness of the
assessments, rendering summary disposition proper under MCR 2.116(C)(10).

Sav-Time filed a combined response to the Department’s motion for summary disposition
and a countermotion for summary disposition under MCR 2.116(C)(10) and (I)(2). Sav-Time
argued that the Department ignored data and documents provided during the audit, and that the
auditor’s workpaper adjustments were “unproven, not in evidence, and hearsay.” Sav-Time
disputed the claim that it used an inconsistent method of reporting gross sales. It demonstrated the
accuracy of its accounting by explaining that its 2018 Annual Sales Tax filing reconciled with its
financial statements. Sav-Time pointed out that its reported gross sales of $1,098,136.53 included
$48,725.96 in sales tax, and that the reported gross sales number matched Sav-Time’s income
statement total revenue of $1,049,291.52, with minimal variance. It thus argued that its accounting
records and sales-tax report filings were accurate and consistent.

Sav-Time additionally argued that separately itemized labor charges to change oil and
perform maintenance work were exempt from sales tax, and that the operation of its business
indisputably entailed a labor component, the cost of which Sav-Time’s customers paid. Sav-Time
contended that its customer sales data and invoices were permanently maintained as “read only”
in its computer system. Attached as an exhibit to Sav-Time’s motion was a sample duplicate-sales
invoice printed from the “read only” data that Sav-Time had submitted during the audit. Sav-Time
asserted that the document showed the sales price, the taxable amount, the sales tax, the total bill
to be paid by the customer, and the nontaxable labor.7 Sav-Time also submitted a second duplicate
invoice covering the same transaction, which Sav-Time had sought to present after the audit
concluded, and which expressly had a line in the bill that referenced a charge for “Non-Taxable
Labor.” Sav-Time maintained that the invoices complied with the “itemization” requirement of
MCL 205.51(d).

Sav-Time further contended that Rule 205.117(3) compelled itemization only with regard
to the amount charged for tangible personal property sold to customers, even when labor and
service charges are involved in repair work. Sav-Time argued that it originally focused on
providing the auditor with business documents showing the sale of personal property because the
nature of the audit was to identify whether Sav-Time paid all of the sales tax due on those sales.

7
Contrary to this assertion, our review of the document indicates that no specific reference was
made to nontaxable labor. Instead, it appears that Sav-Time simply calculated the purported
nontaxable labor by subtracting the taxable amount from the sales price.

-8-
Sav-Time contended that the Department’s auditor arbitrarily rejected invoices showing itemized
nontaxable labor. Sav-Time thus asserted that the auditor’s distortion of the facts, his failure to
fully disclose them, and the existence of a factual dispute, called for denying the Department’s
motion for summary disposition.

The Court of Claims issued a written opinion and order granting the Department’s motion
for summary disposition and denying Sav-Time’s countermotion. The Court of Claims found that
it had subject-matter jurisdiction, and granted summary disposition to the Department under
MCR 2.116(C)(10), concluding that Sav-Time failed to separately itemize labor charges as
required by statute and that inconsistencies in Sav-Time’s reporting methods supported the
Department’s assessment.

Sav-Time moved for reconsideration, arguing that (1) its electronic digital documents
clearly separated taxable personal property from nontaxable labor; (2) the Court of Claims
misconstrued and misapplied MCL 205.68(4) and Rules 205.2009(9) and 205.117; (3) the audit
report lacked a supporting affidavit from the person who prepared the report attesting to its
accuracy and truthfulness, rendering the report mere hearsay; (4) Sav-Time was denied due
process; and (5) the court improperly decided factual disputes. The Court of Claims denied the
motion because Sav-Time failed to show that the Court made a palpable error or that a different
outcome was required. This appeal followed.

III. ANALYSIS

A. STANDARDS OF REVIEW

This Court reviews de novo summary disposition rulings issued by the Court of Claims in
actions brought against the Treasury Department. Maple Manor Rehab Ctr, LLC v Dep’t of
Treasury, 333 Mich App 154, 162; 958 NW2d 894 (2020). The Court of Claims granted the
Department’s motion for summary disposition in this matter under MCR 2.116(C)(10). Motions
brought under MCR 2.116(C)(10) “test the factual sufficiency of a claim.” El-Khalil v Oakwood
Healthcare, Inc, 504 Mich 152, 160; 934 NW2d 665 (2019). In reviewing a motion under
MCR 2.116(C)(10), the court “must consider all evidence submitted by the parties in the light most
favorable to the party opposing the motion.” Id. The motion “may only be granted when there is
no genuine issue of material fact.” Id. “A genuine issue of material fact exists when the record
leaves open an issue upon which reasonable minds might differ.” Id. (quotation marks and citation
omitted). Conversely, “[a] trial court may award summary disposition to the opposing party under
MCR 2.116(I)(2) if it determines that the opposing party, rather than the moving party, is entitled
to judgment.” Hambley v Ottawa Co, 348 Mich App 585, 591-592; 19 NW3d 411 (2023).

We review de novo questions of statutory interpretation, as well as questions regarding the
interpretation of administrative rules and regulations. Delmotte v Secretary of State, ___ Mich
App __, _; __ NW3d ___ (2025) (Docket No. 370273); slip op at 2. In Slis v Michigan, 332
Mich App 312, 335-336; 956 NW2d 569 (2020), this Court recited the well-established principles
that guide statutory construction:

This Court’s role in construing statutory language is to discern and ascertain
the intent of the Legislature, which may reasonably be inferred from the words in

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the statute. We must focus our analysis on the express language of the statute
because it offers the most reliable evidence of legislative intent. When statutory
language is clear and unambiguous, we must apply the statute as written. A court
is not permitted to read anything into an unambiguous statute that is not within the
manifest intent of the Legislature. Furthermore, this Court may not rewrite the
plain statutory language or substitute its own policy decisions for those decisions
already made by the Legislature.

Judicial construction of a statute is only permitted when statutory language
is ambiguous. A statute is ambiguous when an irreconcilable conflict exists
between statutory provisions or when a statute is equally susceptible to more than
one meaning. When faced with two alternative reasonable interpretations of a word
in a statute, we should give effect to the interpretation that more faithfully advances
the legislative purpose behind the statute. [Quotation marks and citations omitted.]

Additionally, “[w]hether due process has been afforded is a constitutional issue that is
reviewed de novo.” Elba Twp v Gratiot Co Drain Comm’r, 493 Mich 265, 277; 831 NW2d 204
(2013).

B. EVIDENTIARY CHALLENGES

Sav-Time first argues that the Court of Claims erred by relying on the Department’s audit
report and the affidavit of audit supervisor Elaine Van Buskirk, contending that these materials
constituted inadmissible hearsay and lacked proper foundation. Sav-Time also contends that the
audit report was prepared in anticipation of the litigation in this matter. We disagree.

As an initial matter, we note that the evidentiary arguments that Sav-Time presents on
appeal were first raised in Sav-Time’s brief in support of its motion for reconsideration. To
preserve an issue for appeal, “the party asserting error must demonstrate that the issue was raised
in the trial court.” Tolas Oil & Gas Exploration Co v Bach Servs & Mfg, LLC, 347 Mich App 280,
289; 14 NW3d 472 (2023). However, “[a]s a general rule, an issue is not preserved if it is raised
for the first time in a motion for reconsideration in the trial court.” George v Allstate Ins Co, 329
Mich App 448, 454; 942 NW2d 628 (2019). Michigan generally follows the “raise or waive” rule
of appellate review. Walters v Nadell, 481 Mich 377, 387; 751 NW2d 431 (2008). Under the
“raise or waive” rule, “[i]f a litigant does not raise an issue in the trial court, this Court has no
obligation to consider the issue.” Tolas Oil, 347 Mich App at 289. Based on the foregoing, Sav-
Time has waived these issues on appeal by failing to properly preserve them. Id. However, we
exercise our discretion to overlook the preservation requirements in this case because the matter
“involves a question of law and the facts necessary for its resolution have been presented.” Id.
(quotation marks and citations omitted).

Brian Herek was the auditor who prepared the report regarding Sav-Time’s SUW tax
returns. Rather than present an affidavit from Herek himself, the Department offered an affidavit
by Elaine Van Buskirk as foundation for the Court of Claims to allow the Department to introduce
Herek’s audit report and other exhibits in support of their summary disposition motion. The record
indicates that the Department submitted Van Buskirk’s affidavit because Herek had left his job as

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an auditor. Sav-Time points out that Van Buskirk did not prepare the audit report or exhibits
herself, and contends that this creates hearsay and authentication issues.

Hearsay is “a statement that . . . a party offers in evidence to prove the truth of the matter
asserted in the statement.” MRE 801(c)(2). Under MRE 801 and 802, hearsay is generally
inadmissible unless an exception applies. Contrary to Sav-Time’s argument, the audit report and
Van Buskirk’s affidavit were not hearsay, and were submitted merely to establish the auditor’s
findings, which were eventually adopted by the Department. For example, the auditor found that
there were inconsistencies in Sav-Time’s accounting and reporting methods, but the submission
of those findings was not evidence proving those findings; rather, those findings needed to be
established by evidence demonstrating the inconsistencies. To the extent that the audit report and
schedules included financial information, statements regarding that financial information in the
report and affidavit simply showed the basis of Herek’s reasoning and were not submitted to prove
the truth of that information. The information was therefore not hearsay, and we need not explore
the hearsay exceptions listed in MRE 803 and 804.

The argument that Van Buskirk’s affidavit lacked sufficient foundation for authentication
is also flawed. MRE 901(a) requires only that “the proponent . . . produce evidence sufficient to
support a finding that the item is what its proponent claims it is.” As a departmental employee
who specifically supervised Herek’s work and was familiar with the Sav-Time audit report, Van
Buskirk was qualified to authenticate the audit report, even though she did not personally conduct
the audit. Van Buskirk’s testimony would be sufficient to support a finding that the audit report
and schedules were exactly what the proponent Department claimed them to be.

Additionally, under MRE 602, “[a] witness may testify to a matter only if evidence is
introduced sufficient to support a finding that the witness has personal knowledge of the matter.
Evidence to prove personal knowledge may consist of the witness’s own testimony . . . .”
Although Van Buskirk did not perform the audit herself, her position as Herek’s supervisor, her
knowledge of the audit procedure, and her familiarity with the contents of the audit report provided
a sufficient basis to conclude that Van Buskirk had personal knowledge of the Sav-Time audit and
the information contained in the report that she shared in her affidavit.

Finally, the audit report and schedules were clearly not prepared in anticipation of
litigation. In Attorney General v John A Biewer Co, Inc, 140 Mich App 1, 17; 363 NW2d 712
(1985), this Court stated:

[A]s a general rule, documents prepared for use in litigation are not
admissible as records of regularly conducted activities. The justification for the
business records exception is that a record kept in the regular course of business is
trustworthy. However, where the record is prepared for the purpose of litigation,
the record does not have the inherent trustworthiness that a record kept in the
regular course of business does.

Here, the auditor’s report was prepared pursuant to a standard sales-tax audit conducted by the
Department. Sav-Time’s argument thus fails.

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C. THE DEPARTMENT’S AUDIT

1. RULE 205.117

Sav-Time first contends that the Department ignored Rule 205.117 in favor of the more
exacting standard set forth in the GSTA. We disagree and find that Sav-Time is not entitled to
relief on this issue.

As part of its business, Sav-Time engages in retail sales, chiefly of oil and oil filters, while
also performing oil changes. The retail sale of oil and oil filters is subject to a 6% sales tax, but
the labor involved in performing oil changes generates no sales tax. See MCL 205.52(1) and (3).
Under the GSTA, businesses are required to “keep books to show separately the transactions used
in determining the tax levied . . . .” MCL 205.52(3). Moreover, the sales tax was levied on “gross
proceeds,” which includes charges for services, except for labor or service charges “if separately
itemized.” MCL 205.51(1)(c), (d), and (d)(iii)(B). Thus, under the GSTA, Sav-Time was required
to separately itemize “labor or service charges involved in maintenance and repair work on tangible
personal property,” MCL 205.51(1)(d)(iii)(B), to avoid paying a 6% sales tax on the labor sales.

Sav-Time argues that it need only have satisfied former Rule 205.117(3), which required
businesses to “separately itemize the amount charged for the tangible personal property sold;
otherwise, the tax shall apply to the total gross proceeds.” Unlike MCL 205.51(1)(d)(iii)(B), which
requires separate itemization of labor charges, Rule 205.117(3) only required itemization of the
sales of tangible personal property to avoid sales tax on labor charges. It is well settled “that
agencies are bound to follow their own duly promulgated rules.” Grass Lake Improvement Bd v
Dep’t of Environmental Quality, 316 Mich App 356, 366-367; 891 NW2d 884 (2016). That said,
while “an agency’s interpretation of the statute it administers is entitled to respectful consideration,
it cannot conflict with the intent of the Legislature as expressed in the language of the statute.”
Brightmoore Gardens, LLC v Marijuana Regulatory Agency, 337 Mich App 149, 160; 975 NW2d
52 (2021). Indeed, an administrative rule that conflicts with a statute is invalid, as agencies are
not empowered to change laws enacted by the Legislature. Id. at 160-161. Thus, the GSTA
controls in this matter, and Sav-Time was required to demonstrate that labor sales or charges were
separately itemized in its financial documents or records in order to qualify for an exemption from
sales tax on the labor sales.

Even if we were to agree with Sav-Time’s position that the Department “ignored” its own
duly promulgated Rule 205.117, the invoices that Sav-Time submitted to the auditor do not clearly
itemize the cost of tangible personal property required by Rule 205.1173(3). Each contains a line
called “Taxable Amount,” but it is unclear whether that line is intended to be the line itemization
for tangible personal property in accordance with Rule 205.117(3). Only the invoices submitted
to the Department after the audit was complete contain separate lines for “Taxable Parts,” i.e.,
tangible personal property, and “Non-Taxable Labor.” But this is immaterial because, as discussed
below, the Department was not obligated to review the postaudit invoices. Sav-Time failed to
comply with the directive to itemize tangible personal property under Rule 205.117(3). For these
reasons, Sav-Time’s argument fails.

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2. MCL 205.68(4) AND THE PRESUMPTION OF CORRECTNESS

Sav-Time next contends that none of MCL 205.68(4)’s conditions precedent were
satisfied, and that the trial court thus had no basis to apply the prima facie presumption of
correctness in this case. We disagree.

This argument is unpreserved because Sav-Time raised it for the first time in its motion for
reconsideration. George, 329 Mich App at 454. Sav-Time has waived the argument on appeal.
Tolas Oil, 347 Mich App at 289. We nevertheless exercise our discretion to address it because
consideration is necessary for a proper determination of the case. Id.

Under MCL 205.68(4),

If a taxpayer fails to file a return or to maintain or preserve sufficient records
as prescribed in this section, or the department has reason to believe that any records
maintained or returns filed are inaccurate or incomplete and that additional taxes
are due, the department may assess the amount of the tax due from the taxpayer
based on an indirect audit procedure or any other information that is available or
that may become available to the department.

MCL 205.68(4) requires at least one of the conditions precedent—failure to file a return, failure to
maintain or preserve sufficient records, or a belief by the Department that records or returns are
inaccurate or incomplete and that additional taxes are due—be satisfied in order for the Department
to assess taxes on the basis of an indirect audit or any other available information. Additionally,
an “assessment is considered prima facie correct for the purpose of [the GSTA] and the burden of
proof of refuting the assessment is upon the taxpayer.” MCL 205.68(4).

The first round of duplicate invoices submitted to the Department during the audit period,
standing alone, revealed problems with accuracy and completeness connected to the labor-based
exemptions claimed in the sales-tax returns because labor sales were not properly itemized.
Moreover, the record is replete with evidence of inaccuracies and inconsistencies in Sav-Time’s
financial documents. Thus, the documentation originally submitted to the auditor gave the
Department reason to believe that Sav-Time’s records, or the returns it filed, were inaccurate and
incomplete. Consequently, the Department’s tax assessments were “prima facie correct,”
MCL 205.68(4), and Sav-Time had the burden of refuting them.

1. MCL 2.116(C)(10)

Sav-Time next contends that the Court of Claims failed to view the evidence in the light
most favorable to the nonmoving party as required by MCR 2.116(C)(10). Sav-Time maintains
that the Court of Claims instead opted to overlook evidence showing that Sav-Time properly
itemized labor charges and that its records were consistent and accurate. We disagree.

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First, the documentation Sav-Time submitted to the Department during the audit period did
not separately itemize labor charges as required by the GSTA.8 As stated, our review of the sample
invoice indicates that no specific reference was made to nontaxable labor; instead, it appears that
Sav-Time simply calculated the purported nontaxable labor by subtracting the taxable amount
from the sales price. After the audit was completed, Sav-Time attempted to introduce computer-
generated invoices purporting to show the nontaxable labor charges. But Sav-Time’s general
manager, David Wojewoda, averred that “software people” added the nontaxable labor line to
invoices after the audit, along with tax columns in description boxes. This admission directly
contradicts Sav-Time’s assertion that labor sales were properly itemized during the relevant tax
period, rather than added in after the fact in order to comply with the GSTA. Moreover, even Sav-
Time’s computer system data did not expressly track “labor” sales, but rather tracked “nontaxable
sales,” meaning that to determine labor sales, one had to subtract the taxable amounts from the
gross totals. This calculation method fell short of the separate itemization requirement, as it did
not provide the direct and express reference to labor sales necessary for statutory compliance. See
MCL 205.51(1)(d)(iii)(B).

Sav-Time’s reliance on generic “nontaxable” sales classifications was insufficient to meet
the itemization requirements. The GSTA provides numerous bases for sales tax exemptions, and
merely labeling sales as “nontaxable” without specific identification as labor sales creates
ambiguity and fails to satisfy the statutory requirement for separate itemization. Its failure to
provide proper documentation to the auditor, combined with the contradictory nature of its
postaudit submissions and the generic nature of its “nontaxable” classifications, underscores how
Sav-Time failed to meet its burden to overcome the prima facie correctness of the Department’s
tax assessments. No genuine issue of fact exists to show that Sav-Time’s records were adequately
itemized in accordance with the GSTA.

Sav-Time nevertheless argues that the Department arbitrarily rejected the late-filed
invoices that separately itemized labor charges. However, Sav-Time points to no statute,
administrative rule, or case law that imposes a legal duty on the Department to review postaudit
submissions. MCL 205.68(1) specifically states that taxpayers must maintain accurate and
complete records in paper, electronic, or digital format, including complete daily sales records,
receipts, invoices, and all pertinent documents. When taxpayers fail to provide adequate records
during the designated audit period, the Department is authorized to proceed with its assessment
based on available information. MCL 205.68(4). Here, the Department conducted its audit
according to established procedures and statutory requirements. When Sav-Time failed to provide
adequate documentation, the Department properly proceeded with its audit assessment based on
the available information. The GSTA does not require the Department to consider evidence
submitted after the audit’s completion, particularly when Sav-Time had ample opportunity to
present such evidence during the designated audit period.

Additionally, Sav-Time failed to submit accurate and consistent records to the Department.
Sav-Time’s federal returns, sales reports, financial statements, general ledgers, and SUW returns

8
And as earlier noted, the documentation also failed to properly itemize taxable tangible property
under Rule 205.117(3).

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reflected different gross sales values, creating irreconcilable differences that the Department was
forced to address through adjustments. Significantly, Sav-Time’s accountant, Tiffany Fortier,
confirmed during her deposition that sales reports were used to complete the monthly SUW
returns, yet those very reports contained the inconsistencies that necessitated the Department’s
adjustments. While Sav-Time’s sales reports showed that reported gross sales included sales taxes
for the period at issue, the SUW returns from 2015 through July 2018 did not consistently report
sales with tax in gross, with the sole exception of November 2017. The company changed its
method to include tax in gross sales in August 2018, but failed to report tax on gross sales between
January and June 2018.

Furthermore, in July 2018, Sav-Time erroneously filed its SUW return reporting nothing
for exempt services while simultaneously reporting exempt services as tax included in gross sales,
an error that carried over to the 2018 annual return. Even Sav-Time’s attempt to demonstrate
record accuracy through its 2018 SUW worksheet fails to support its position. Sav-Time conceded
that there is a 1% difference between the worksheet and its other records. This admission of
inaccuracy, while minimal, demonstrates that Sav-Time’s records failed to meet the statutory
requirement for accurate and complete recordkeeping. Accordingly, the evidence overwhelmingly
demonstrates that no genuine issue of material fact existed regarding the accuracy and consistency
of Sav-Time’s records throughout the audit period.

Overall, Sav-Time presents nothing compelling to show that the Court of Claims neglected
to properly consider the documentary evidence submitted by both parties, or that it reached an
incorrect result based on that evidence. The opinion issued by the Court of Claims in this matter
demonstrates that it properly applied the summary disposition standard by evaluating the evidence
submitted and determining whether Sav-Time’s evidence created a genuine issue of material fact.
El-Khalil, 504 Mich at 160; see also Campbell v Kovich, 273 Mich App 227, 229; 731 NW2d 112
(2006) (stating that, in response to a motion under MCR 2.116(C)(10), the nonmoving party may
not “rest on mere allegations or denials in the pleadings, but must, by documentary evidence, set
forth specific facts showing that there is a genuine issue for trial”). The mere fact that Sav-Time
failed to establish a genuine issue of material fact does not mean that the Court of Claims did not
properly apply the (C)(10) standard. Sav-Time’s argument to the contrary is unsupported by the
record.

D. DUE PROCESS

Finally, Sav-Time argues that its procedural due-process rights were violated when the
Court of Claims elected to grant summary disposition to the Department. Essentially, Sav-Time
contends that this case should have instead gone to trial. We disagree.

Sav-Time first raised the due-process argument in its motion for reconsideration, which
would typically render the argument unpreserved and waived. See George, 329 Mich App at 454;
Tolas Oil, 347 Mich App at 289. However, we again exercise our discretion to address the issue
because it “involves a question of law and the facts necessary for its resolution have been
presented.” Tolas Oil, 347 Mich App at 289 (quotation marks and citations omitted).

Under the Fourteenth Amendment to the United States Constitution, a state may not
“deprive any person of life, liberty, or property, without due process of law.” See also Const 1963,

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art 1, § 17. “Due process is a flexible concept, the essence of which requires fundamental
fairness.” Al-Maliki v LaGrant, 286 Mich App 483, 485; 781 NW2d 853 (2009). Minimally, due
process mandates notice and an opportunity to be heard before the deprivation of life, liberty, or
property by adjudication. Id. Due process requires the government to provide notice that is
reasonably calculated to apprise an interested party of the pendency of an action and afford him or
her the opportunity to present objections. Id. “To comport with these procedural safeguards, the
opportunity to be heard must be granted at a meaningful time and in a meaningful manner.” Id.
(quotation marks and citations omitted).

Sav-Time contends that it was deprived of an opportunity to be heard because the Court of
Claims disposed of the case via summary disposition, rather than allowing the matter to go to trial.
Contrary to this assertion, nothing in the record suggests that Sav-Time was deprived of notice of
any proceeding or an opportunity to be heard before the Court of Claims ruled on the motions for
summary disposition. Sav-Time’s argument fundamentally misconstrues the nature of summary
disposition proceedings. The due-process requirement of notice and opportunity to be heard does
not guarantee a trial on the merits when no genuine issues of material fact exist. See
MCR 2.116(C)(10).

Sav-Time also makes a cursory argument that, in light of the affidavits of Wojewoda and
Fortier, the trial court erred by not granting Sav-Time’s motion for summary disposition.
However, those affidavits provided no basis to grant summary disposition to Sav-Time in light of
the conflicting evidence presented by the Department, including Wojewoda’s and Fortier’s own
deposition testimony. A party cannot create a question of fact by submitting an affidavit that
directly contradicts previous deposition testimony. Bakeman v Citizens Ins Co of the Midwest,
344 Mich App 66, 76-77; 998 NW2d 743 (2022). Sav-Time is not entitled to relief.

Affirmed.

/s/ Michelle M. Rick
/s/ Allie Greenleaf Maldonado
/s/ Daniel S. Korobkin

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