WA Legal Roundup - Washington State Supreme Court
Tax stuff is boring, feel free to tune out now.
The Department of Revenue used to consider DOT exempt from the B&O tax under its out of state seller exemption. Dot sold through products through its direct seller representative, Dot Transportation, Inc.. The Department then changed the WAC and included Dot under the WAC.
Under the RCWs, Dot gets the exemption if:
[T]he out-of-state seller [makes] sales in this state exclusively to or through a direct seller's representative." RCW 82.04.423(1)(d). Under the statute, a "direct seller's representative" is one who buys, sells, or solicits the sale of consumer products in places other than a permanent retail establishment.
Seems to fit so far. Only Dot didn't sell solely consumer products. Also, without the involvement of Dot or DTI, some of the items ended up in retail establishments. Nevertheless, Dot got the exemption from 1997-2000, before the WAC was changed. The new WAC said regardless, if your stuff ends up on retail shelves, that you're subject to the B&O tax.
Now lets take a second to take this to the extreme. Dot sells to DTI who sells to a nursing home who sells surplus to Timmy T. Wholesaler who sells to Ma and Pa Corner Store, who puts it on the shelf. Seems a bit wrong to tax Dot for that, no?
As to whether selling non-consumer products triggers, the court looked to the lack of the word exclusively...which was missing from the above provision, but found in other provisions of the statute. The court also looked to the fact that the provisions contemplated a mix of retail and not retail, so why not a mix of consumer and non-consumer.
Now here's the part where it gets dicey. The court refused the interpretation found in the WACs based on the unambiguous meaning of the statute. Those of you remember from law school that statute trumps over reg. Therefore, if the statute was unambiguous in the above interpretation, a WAC in contradiction fails. However, you'll notice they used maxims of statutory interpretation other than plain and unambiguous language...referring to the how things are set up in the rest of the statute. Sorry Charlie, but you don't get to touch canons of construction unless the statute is ambiguous. Thus, there was room for interpretation by the agency, in which case, you're pretty much limited to nullifying WACs that are in direct contradiction to the statute and those that are the result of arbitrary and capricious agency decision.
The dissent also points out that exemptions are to be construed narrowly, not giving interpretations that widen the exemption. I tend to agree.