Justia Washington Supreme Court Opinion Summaries

Articles Posted in Tax Law
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The Supreme Court of the State of Washington found that the initiation fees charged by Royal Oaks Country Club, a nonprofit corporation, are fully deductible from the business and occupation (B&O) tax under RCW 82.04.4282. The statute permits taxpayers to deduct "bona fide" initiation fees, among other things, from their B&O tax. The court held that these initiation fees were "bona fide" as they were paid solely for the privilege of membership, and did not automatically entitle a member to use any service or facility of the club. The court differentiated between dues and initiation fees, noting that the statute treats these two terms separately. The court rejected the Washington Department of Revenue's argument that a portion of the initiation fee was for access to facilities and thus not subject to the exemption, stating that there is a difference between access and use. The court affirmed the Court of Appeals' decision that Royal Oaks' initiation fees qualify as bona fide initiation fees and are therefore wholly deductible. View "Royal Oaks Country Club v. Dep't of Revenue" on Justia Law

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Two groups of plaintiffs, the Quinn and Clayton plaintiffs (Plaintiffs), brought suit to facially invalidate a capital gains tax enacted by the Washington legislature on three independent constitutional grounds. They principally claimed the tax was a property tax on income, in violation of the uniformity and levy limitations on property taxes imposed by article VII, sections 1 and 2 of the Washington Constitution. They also claimed the tax violated the privileges and immunities clause of the Washington Constitution and the dormant commerce clause of the United States Constitution. The State argued that it was a valid excise tax not subject to article VII’s uniformity and levy requirements, and that it was consistent with other state and federal constitutional requirements. The trial court concluded the tax was a property tax, and did not address the constitutional questions. But the Washington Supreme Court reversed, finding the capital gains tax was appropriately characterized as an excise because it is levied on the sale or exchange of capital assets, not on capital assets or gains themselves. "Because the capital gains tax is an excise tax under Washington law, it is not subject to the uniformity and levy requirements of article VII. We further hold the capital gains tax is consistent with our state constitution’s privileges and immunities clause and the federal dormant commerce clause." View "Quinn, et al. v. Washington" on Justia Law

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The Washington Department of Revenue issued instructions to Lakeside Industries Inc. regarding the valuation of Lakeside’s self-manufactured asphalt products. This valuation determined the amount of use tax that Lakeside had to pay to use its asphalt in public road construction projects. Lakeside did not follow DOR’s instructions and, instead, petitioned for judicial review pursuant to the Administrative Procedure Act (APA), ch. 34.05 RCW. The Washington Supreme Court held that the APA’s general review provisions did not apply to Lakeside’s nonconstitutional tax challenge. To obtain judicial review of DOR’s tax reporting instructions, Lakeside had to follow the specific procedures for tax challenges set forth in Title 82 RCW (Title 82). Therefore, Lakeside’s APA petition for judicial review was properly dismissed for failure to state a claim. The Court therefore affirmed the Court of Appeals. View "Lakeside Indus., Inc. v. Dep't of Revenue" on Justia Law

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Hardel Mutual Plywood Corporation owns property in Lewis County. Hardel challenged the value assessed by the Lewis County assessor, paid its taxes under protest, and brought this refund action in Thurston County Superior Court. Lewis County timely moved for a change of venue under RCW 84.68.050. The issue this case presented concerned two venue statutes that were in tension with each other. Under the more specific statute, property tax refund cases “shall be brought in the superior court of the county wherein the tax was collected.” RCW 84.68.050. Under the more general statute, “[a]ll actions against any county may be commenced in the superior court of such county, or in the superior court of either of the two nearest judicial districts.” RCW 36.01.050(1). The Washington Supreme Court concluded the legislature intended the specific statute to govern. Accordingly, it affirmed the trial court’s order transferring venue to the superior court of the county where the tax was collected. View "Hardel Mut. Plywood Corp. v. Lewis County" on Justia Law

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This case involves the constitutionality of a business and occupation (B&O) tax. In 2019, the Washington state legislature imposed an additional 1.2 percent B&O tax on financial institutions with a consolidated net income of at least $1 billion. The tax applied to any financial institution meeting this threshold regardless of whether it was physically located in Washington, and it was apportioned to income from Washington business activity. The Washington Supreme Court found that because the tax applied equally to in- and out-of-state institutions and was limited to Washington-related income, it did not discriminate against interstate commerce. The Court therefore reversed the trial court and upheld the constitutionality of the tax. View "Washington Bankers Ass'n v. Dep't of Revenue" on Justia Law

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Petitioners PeaceHealth St. Joseph Medical Center and PeaceHealth St. John Medical Center (PeaceHealth) argued that, under RCW 82.04.4311’s plain language, qualifying Washington hospitals were entitled to a business and occupation (B&O) tax refund and deduction on compensation they receive from any state’s Children’s Health Insurance Programs (CHIP) or Medicaid programs, not just Washington’s. Alternatively, PeaceHealth contended that by excluding compensation that qualifying Washington hospitals receive from other states’ CHIP and Medicaid programs, the Washington Department of Revenue (Department) unlawfully penalized those hospitals that served out-of-state patients, thus violating the dormant Commerce Clause of the United States Constitution. In holding that RCW 82.04.4311’s deduction excluded compensation that qualifying hospitals receive from other states’ CHIP and Medicaid programs, the Court of Appeals used the "series-qualifier" rule of statutory construction in lieu of the last antecedent rule. To this, the Washington Supreme Court held the Court of Appeals properly applied the series-qualifier rule to delimit the scope of RCW 82.04.4311’s deduction, thus affirming the Court of Appeals’ reasoning on this issue. Additionally, because the Supreme Court found that RCW 82.04.4311 supported a traditional government function without any differential treatment favoring local private entities over similar out-of-state interests, the Supreme Court held that RCW 82.04.4311 was constitutional under the government function exemption to the dormant Commerce Clause. View "Peacehealth St. Joseph Med. Ctr. v. Dep't of Revenue" on Justia Law

Posted in: Health Law, Tax Law
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The city of Federal Way (City) is a noncharter code city incorporated under Title 35A RCW. To address a budget deficit, the City identified and implemented cost-saving measures, but the spending cuts did not close the deficit. The City thus considered several potential sources of new revenue, including levying an excise tax on water and sewer utilities. The council found it necessary to expand the kinds of excises levied in order to pay for basic municipal services and to meet the budget deficit. In passing the ordinance, the council relied on RCW 35A.82.020, which it concluded gave the City broad authority to impose excises for regulation or revenue regarding all places and kinds of businesses. The issue this case presented for the Washington Supreme Court's review reduced to a decision on a municipal corporation's authority to impose an excise tax on another municipal corporation doing business within its borders. Several water-sewer districts petitioned for declaratory judgment, arguing the City lacked express legislative authority to impose the tax on them. The districts also raised a governmental immunity defense, and further challenged the ordinance on constitutional grounds, arguing it violated both due process vagueness principles and privileges and immunities antifavoritism principles. The parties cross moved for summary judgment, and the superior court granted summary judgment in the City’s favor. The Washington Supreme Court affirmed, finding the legislature granted code cities broad authority to levy excises on all places and kinds of business. "That policy prescription contemplates code cities may choose to exercise their local taxing power by imposing excises for regulation or revenue on the business of providing water-sewer services to ratepayers. We hold the governmental immunity doctrine does not bar the city from taxing the districts because they perform a proprietary function when they engage in this business. As for the districts’ constitutional claims, they lack standing to bring such claims." View "Lakehaven Water & Sewer Dist. v. City of Federal Way" on Justia Law

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In 2015, the Washington legislature enacted RCW 81.104.160(1) (MVET statute) authorizing Sound Transit to use two separate depreciation schedules to calculate motor vehicle excise taxes (MVET). Under the statute, Sound Transit could pledge revenue from a 1996 depreciation schedule for MVETs to pay off bond contracts; Sound Transit could use a 2006 depreciation schedule for all other MVETs. Though each schedule is referenced, the MVET statute did not restate in full either schedule. Taylor Black and other taxpayers alleged the MVET statute violated article II, section 37 of the Washington Constitution, stating "no act shall ever be revised or amended by mere reference to its title, but the act revised or the section amended shall be set forth at full length." The Washington Supreme Court held the MVET statute is constitutional because (1) the statute was a complete act because it was readily ascertainable from its text alone when which depreciation schedule would apply; (2) the statute properly adopted both schedules by reference; and (3) the statute did not render a straightforward determination of the scope of rights or duties established by other existing statutes erroneous because it did not require a reader to conduct research to find unreferenced laws that were impacted by the MVET statute. View "Black v. Cent. Puget Sound Reg'l Transit Auth." on Justia Law

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Lowe's Home Centers sought reimbursement of state sales taxes and Business and Occupation ("B&O") taxes from the Washington Department of Revenue ("DOR") because it contracted with banks to offer private-label credit cards to its customers, and agreed to repay the banks for losses it sustained when customers defaulted on their accounts. RCW 82.08.050 provided that a seller must collect and remit sales taxes to the State; for sellers unable to recoup sales taxes from buyers, RCW 82.08.037(1) provided that sellers could claim a deduction "for sales taxes previously paid on bad debts." In a split decision, the Court of Appeals affirmed the trial court's denial of reimbursement. After its review, the Washington Supreme Court held that although banks were involved in the credit transaction, Lowe's was still the seller burdened with the loss from its customers' defaults, including their nonpayment of the sales taxes. Accordingly, the Supreme Court reversed the Court of Appeals. View "Lowe's Home Ctrs., LLC v. Dep't of Revenue" on Justia Law

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First Student, Inc., a school bus contractor, sought to reverse a Court of Appeals decision to affirm dismissal of its business and occupation ("B&O") tax refund action. At issue was whether First Student's transporting of students qualified as transporting persons "for hire" such that it made First Student subject to the public utility tax ("PUT") rather than the general B&O tax. The Washington Supreme Court found the meaning of "for hire" was ambiguous as used in the PUT, but resolved the ambiguity in favor of the long-standing interpretation that school buses were excluded from the definitions of "motor transportation business" and "urban transportation business" under RCW 82.16.010(6) and (12). The Court found that WAC 458-20-180 was a valid interpretation of the statute, and affirmed the Court of Appeals. View "First Student, Inc. v. Dep't of Revenue" on Justia Law