Rehab & Mobility Systems LLC v. Department of Treasury

CourtMichigan Court of Appeals
DecidedMay 18, 2026
Docket370829
StatusPublished

This text of Rehab & Mobility Systems LLC v. Department of Treasury (Rehab & Mobility Systems LLC v. Department of Treasury) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rehab & Mobility Systems LLC v. Department of Treasury, (Mich. Ct. App. 2026).

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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

REHAB & MOBILITY SYSTEMS, LLC, FOR PUBLICATION May 18, 2026 Plaintiff-Appellant, 2:11 PM

v No. 370829 Court of Claims DEPARTMENT OF TREASURY, LC No. 23-000012-MT

Defendant-Appellee.

Before: BORRELLO, P.J., and MARIANI and TREBILCOCK, JJ.

BORRELLO, P.J.

In this appeal by right involving a denial of a sales tax exemption after an audit, plaintiff, Rehab & Mobility Systems, LLC, challenges the Court of Claims’ order granting partial summary disposition under MCR 2.116(C)(10) in favor of defendant Department of Treasury (the Department), ruling that (1) MCL 205.54a(1)(k) and MCL 205.51a(q) of the General Sales Tax Act (GSTA), MCL 205.51 et seq., and not Mich Admin Code, R 205.139 (Rule 89), controls the availability of a sales tax exemption for “prosthetic device[s]”; (2) the prescription medical items at issue that plaintiff sold to disabled persons are not “prosthetic device[s]” eligible for statutory sales tax exemptions; and (3) the Department properly applied plaintiff’s overpayment to outstanding liabilities and plaintiff is not due a refund for a corrected negative 2017 Intent to Assess. For the reasons set forth in this opinion, we affirm.

I. BACKGROUND

Plaintiff has outlined this appeal as centering around the statutory conflict between MCL 205.54a(1)(k) and Mich Admin Code, R 205.139 (Rule 89), involving the sales tax exemption for certain medical items. The question at hand is whether certain medical items sold to individuals with disabilities pursuant to written prescriptions issued by licensed health professionals qualify for an exemption from sales tax under the General Sales Tax Act (GSTA). The parties do not appear to be in disagreement over the material facts underlying this dispute.

-1- Plaintiff is in the business of selling prescribed medical devices to patients with various severe conditions, broadly categorized as conditions resulting in neural impairments (such as spinal cord and traumatic brain injuries), debilitating physical impairments (such as paralysis, amputations, and serious wounds), and other catastrophic conditions leading to disability. The Department conducted an audit regarding Michigan sales tax paid by the plaintiff for the tax years 2017 through 2020. It determined that certain sales during that period were subject to Michigan sales tax. Specifically, the Department concluded that plaintiff owed sales tax for sales of items generally categorized as prescription bandages, prescription incontinence devices/briefs, prescription medical gauze, prescription medical tape, prescription medical gloves, prescription wound dressing materials, prescription patient lubricants, prescription underpads, and prescription patient body wipes. Plaintiff had treated these sales as exempt from sales tax under Mich Admin Code, R 205.139 (Rule 89), MCL 205.54a(1)(k), and MCL 205.51a(q). The parties stipulated that the sales at issue had all been made pursuant to written prescriptions by licensed health providers and that the items had been sold to individuals with disabilities.

The Department issued final tax assessments indicating that plaintiff owed sales tax (with penalties and interest) of $67,678.20 for 2018, $175,279.85 for 2019, and $133,878.63 for 2020. The Department also issued a corrected intent to assess of $-107,275.18 for 2017, indicating an overpayment by plaintiff. However, the Department subsequently cancelled the intent to assess for the tax year 2017. Plaintiff made a payment of $143,487.41 to the Department on February 7, 2022. This payment was applied to plaintiff’s tax liability for the 2018 and 2019 assessments at issue.

Plaintiff filed this action in the Court of Claims, challenging the tax assessed by the Department under the authority of the GSTA specifically citing MCL 205.54a(1)(k) as the statutory basis for the sales tax exemption. Plaintiff also disputes the Department’s decision to cancel the intent to assess for the tax year 2017, which reflected overpayments made by plaintiff. Plaintiff requests a refund or credit for these overpayments, as indicated in the 2017 intent to assess. Additionally, plaintiff seeks the cancellation of the taxes, interest, and penalties assessed by the Department for tax years 2018 through 2020, maintaining that the sales in dispute should qualify for an exemption from sales tax.

The Court of Claims denied plaintiff’s motion for summary disposition and granted the Department’s partial motion for summary disposition. The court first determined that the issue of the claimed exemption from sales tax was controlled by MCL 205.54a(1)(k) rather than Rule 89 because an administrative rule could not broaden the scope of a statutory sales-tax exemption. Noting that the statute exempted the “sale of a prosthetic device,” the court determined that the items at issue were not prosthetic devices for purposes of the statute and thus were not exempt from sales tax. Regarding the cancellation of the 2017 intent to assess, the Court of Claims ruled that there was no overpayment to refund because plaintiff’s payment had been credited toward its 2018 and 2019 tax liability.

Following the Court of Claims’ ruling on the motions for summary disposition, the parties stipulated to resolve the remaining outstanding count from plaintiff’s complaint, with the Department agreeing to refund and cancel certain penalties that had been assessed against plaintiff. This appeal followed.

-2- II. STANDARD OF REVIEW

We review de novo the grant or denial of a motion for summary disposition. Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). The trial court’s summary disposition ruling was made pursuant to MCR 2.116(C)(10), which provides that summary disposition is warranted if “[e]xcept as to the amount of damages, there is no genuine issue as to any material fact, and the moving party is entitled to judgment or partial judgment as a matter of law.” A genuine issue of material fact exists if, after considering the record evidence in the light most favorable to the party opposing the motion, the record “leaves open an issue upon which reasonable minds might differ.” El-Khalil v Oakwood Healthcare, Inc, 504 Mich 152, 160; 934 NW2d 665 (2019) (quotation marks and citation omitted). This Court “review[s] de novo the interpretation and application of unambiguous statutes and administrative rules. City of Romulus v Mich Dep’t of Environmental Quality, 260 Mich App 54, 64; 678 NW2d 444 (2003).

III. ANALYSIS

Under the GSTA, the “sale of a prosthetic device” is exempt from sales tax. MCL 205.54a(1)(k). As relevant to the present circumstances, “prosthetic device” means:

[A] replacement, corrective, or supportive device, other than contact lenses and dental prosthesis, dispensed pursuant to a prescription, including repair or replacement parts for that device, worn on or in the body to do 1 or more of the following:

(i) Artificially replace a missing portion of the body.

(ii) Prevent or correct a physical deformity or malfunction of the body.

(iii) Support a weak or deformed portion of the body. [MCL 205.51a(q).]

Former Administrative Rule 89 provided in relevant part during the tax years at issue as follows:

(1) Retail sales of hearing aids and replacement parts are exempt from tax.

(2) Retail sales of any apparatus, device, appliance, or equipment used to replace or substitute for any part of the human body, or used to assist the disabled person to lead a reasonably normal life, are exempt if purchased on a written prescription or order issued by a licensed health professional.

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Rehab & Mobility Systems LLC v. Department of Treasury, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rehab-mobility-systems-llc-v-department-of-treasury-michctapp-2026.