Facts: Respondent Washington Imaging Services, L.L.C. filed suit against the petitioner Department of Revenue in the Superior Court for Thurston County, asserting that it is entitled to a refund of the business and occupation taxes that had been assessed upon the portion of its receipts that it paid to Overlake Imaging Associates, whose radiologists interpret the medical images generated by Washington Imaging Services, pursuant to a contractual agreement. The trial court granted summary judgment for the Department of Revenue, holding that all of the payments received by Washington Imaging Services constitute gross income subject to business and occupation tax. Upon appeal, the Washington Court of Appeals reversed. The Department of Revenue appealed this decision to the Supreme Court of Washington.

Question(s): Should Washington Imaging Services’ payments to Overlake Imaging Associates be subtracted from its gross income for purposes of assessing its business and occupation tax liability?

Conclusion: Chief Justice Madsen’s opinion for a unanimous Court reversed the Washington Court of Appeals, concluding that all of the payments received by Washington Imaging Services constitute gross income subject to business and occupation tax given that Washington Imaging Services’ patients contract solely with Washington Imaging Services and have no obligation to Overlake Imaging Associates. Thus, as Washington Imaging Services was not acting as an agent of Overlake Imaging Associates collecting payments owed to Overlake Imaging Associates, the Court reinstated the granting of summary judgment for the Department of Revenue.

Docket No. 84101-2 (from Court of Appeals Division II Case No. 38247-4)

Petitioner: Department of Revenue

(Counsel: Heidi A. Irvin and Peter B. Gonick)

Respondent: Washington Imaging Services, L.L.C.

(Counsel: Greg Montgomery and Monica Langfeldt)

Briefs:

Argument: Thursday, January 27, 2011 9:00am

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

Decided: Thursday, May 19th, 2011

Prevailing Party: Department of Revenue (Petitioner)

Vote: 9-0

Citation: Pending

Court: Madsen2 Court (2011-)

Madsen
(Majority)

Johnson

Alexander

Chambers

Owens

Fairhurst

Johnson

Stephens

Wiggins