What part of the test failed??
Do you have a print out of the tailpipe readings?
A little more info WOULD help!!

Let me guess, they failed you because your Check Engine Light was on
when they did the test. There is a Mercedes Service Bulletin about this.
On 1996, and some other model years, the Check Engine Light illuminates
whenever a device is successfully connected to the OBDII port. This lets
you know that the device is actually plugged in. This does not indicate
a failure. Later versions of the OBDII spec disallowed this "feature".

Hello Dara,

Your vehicles might be failing from an OBDII readiness problems. Here's
the explanation. Note: This info is from SmogTips.com.
http://www.smogtips.com.

If you own a 1996 or newer vehicle you more then likely own a vehicle
which is equipped with an On-Board Diagnostics system called OBD II.
The OBD II Diagnostic system is designed to monitor all aspects of your
engine's emission conditions and report this information to a central
database within the OBDII computer. This information is processed and
checked against the computer's pre-determined values for various inputs
levels and performance patterns of your vehicle. If any problems are
found, the computer will determine whether to alert the driver or not.
If a decision has been made to alert the driver of an emissions
problem, the "Check Engine" or "Engine Malfunction" light will
illuminate on the vehicle's dashboard. In more serious emission
conditions the computer may even begin to rapidly flash the "Check
Engine/Malfunction" light indicating to the driver, that the vehicle
needs immediate diagnosis/repair attention.

Now here's what the smog test has to do with the OBD II system. Your
vehicle is equipped with an OBD II computer AND a link to connect the
OBD II computer to a Smog Check Analyzer or Data Scan Tool (available
at most auto part stores). The OBD II link relays all "Check Engine"
conditions along with stored Trouble Codes within the central database,
to the smog machine during the time of the smog inspection. If any
codes are present which cause the Check Engine light to illuminate
either regularly or intermittently, the vehicle fails the smog
inspection. Here's the tricky part, not all computer codes illuminate
the Check Engine light, yet will fail a vehicle during the smog test.

In fact I can say there are two types of codes, bad codes and good
codes. The good codes are the "Readiness Flags". These Readiness Flags
indicate that certain emissions systems which the OBD II computer has
been monitoring have PASSED the test, indicating that those systems are
working properly. Then there are the bad codes. The bad codes are
actual "Trouble Code". These codes indicate that the OBD II computer
has detected a problem with in the emissions system. The Trouble Code
will specifically indicate the component and problem which was found.
Newer vehicle's have very complex codes in the thousands.

A vehicle will fail the smog inspection if the proper "Readiness Flags"
are not set. A vehicle will also fail the smog inspection if any
"Trouble Codes" are present. So it is possible for a vehicle to fail
the smog inspection without the "Check Engine" light on. "Readiness
Flags" do not cause the "Check Engine" light to illuminate, but may
cause a vehicle to fail the smog test.

The repair in this case involves extracting all stored trouble codes
and readiness flag readings from the OBDII, and inspecting the
emissions systems which are indicated. If this has already been done.
The next step involves driving the vehicle through 2 or 3 "drive cycle"
in order to set the proper "flags". Drive cycles vary per vehicle -
usually 1-2 weeks worth of driving is enough.

I hope this information is helpful to you. If there is anything I can
help with in the future, don't hesitate to e-mail.

For more information you may want to locate a reputable smog service
center in your area by simply typing in your zip code in the Smog Shop
Locator search section at www.smogtips.com

Sincerely,
Alec -  SmogTips Support