Facts: Petitioner D.O.T. Foods is an out-of-state seller of food products in Washington through a wholly owned subsidiary. 99 percent of D.O.T.’s products are consumer products with the remainder of the sales coming from nonconsumer products. For many years D.O.T. has received a B & O (business and occupation) tax exemption for 100 percent of its sales under RCW §82.04.423(1). Respondent Department of Revenue later revised its interpretation of the statute, wherein the Department assessed the B & O tax against D.O.T. for 100 percent of its in-state sales because the nonconsumer products eventually ended up in permanent retail establishments. D.O.T. paid the tax and filed a refund action in Thurston County Superior Court, which entered a summary judgment in favor of the Department. D.O.T. appealed, and the Court of Appeals affirmed, holding that D.O.T. was not entitled to the statutory exemption because its “direct sellers representative” did not sell exclusively consumer products. The Supreme Court of Washington granted D.O.T.’s petition for review.

Questions: Under RCW §82.04.423, Does an out-of-state seller qualify for the B & O tax exemption when it sells some nonconsumer products?

If so, does such a seller qualify for the B & O tax exemption when some of its products ultimately end up in permanent retail establishments?

Conclusion: Justice Charles W. Johnson’s opinion for the Court held that D.O.T. is entitled to the statutory B & O tax exemption because the unambiguous, expressed language of RCW §82.04.423(2) did not require downstream sales to be restricted from permanent retail establishments or to consist exclusively of consumer goods. Even though D.O.T.’s activities might have looked like wholesaling to distributors, the sales nonetheless fell under the retailing provisions of RCW §82.04.423(2) and therefore continue to qualify for the tax exemption. The Court reversed the decision and judgment of the Court of Appeals and remanded the case to trial for further proceedings.

Docket No. 81022-2 (from Court of Appeals Division II Case No. 35733-0)

Petitioner: DOT Foods, Inc.

(Counsel: Howard M. Goodfriend and Jacquelyn A. Beatty)

Respondent: Wash. Dep't of Revenue

(Counsel: Robert M. McKenna and Cameron G. Comfort)

Briefs:

Argument: Tuesday, January 20, 2009 1:30pm

[Source: TVW, http://tvw.org]

Decided: Thursday, September 10th, 2009

Vote: 5-4

Opinion: 166 Wn.2d 912 (2009)

Court: Alexander4 Court (2008-2009)

Alexander

Johnson
(Majority)

Madsen

Sanders

Chambers

Owens

Sweeney
(Pro Tem)

Johnson

Stephens
(Dissent)