COUNTIES ‑- TAXATION ‑- APPLICABILITY OF STATE BUSINESS AND OCCUPATION TAX TO COUNTY DATA PROCESSING SERVICES
The deduction from the measure of the business and occupation tax authorized by RCW 82.04.430(1) is applicable to a county which provides data processing services to other counties and cities in the manner discussed in AGLO 1975 No. 97 [[to Robert E. Schillberg, Prosecuting Attorney, Snohomish County on December 22, 1975, an Informal Opinion, AIR-75597]].
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February 9, 1976
Honorable Robert E. Schillberg
3000 Rockefeller Avenue
Everett, Washington 98201 Cite as: AGLO 1976 No. 10
This is in response to your recent request for our opinion on a question which we paraphrase as follows:
Is the deduction from the measure of the business and occupation tax provided for in RCW 82.04.430(10) applicable to a county which provides data processing services to other counties and cities in the manner discussed in AGLO 1975 No. 97 [[to Robert E. Schillberg, Prosecuting Attorney, Snohomish County on December 22, 1975, an Informal Opinion, AIR-75597]]?
We answer this question in the affirmative.
In AGLO 1975 No. 97 [[to Robert E. Schillberg, Prosecuting Attorney, Snohomish County on December 22, 1975, an Informal Opinion, AIR-75597]], this office concluded that the state business and occupation tax provided for by chapter 82.04 RCWis applicable to the activities of a county in providing data processing services to other counties, cities, and title insurance companies. That opinion, however, did not consider the applicability of RCW 82.04.430(10), which provides as follows:
"In computing tax there may be deducted from the measure of tax the following items:
". . .
"(10) Amounts derived by a political subdivision of the state of Washington from another political subdivision of the state of Washington as compensation for services which are within the purview of RCW 82.04.290;"
[[Orig. Op. Page 2]]
RCW 82.04.290, to which reference is thus made, covers the "service" category of transactions subject to the business and occupation tax.
The deduction provided by RCW 82.04.430(10) is clearly applicable with respect to those activities of the county which are performed for another county and which fall within the service category of the business and occupation tax, for there can be no question but that a county is a "political subdivision" of the state.1/ With respect to data processing services furnished by a county to a city, however, the answer is less obvious.
A city is certainly a municipal corporation. "The word city imports a municipal corporation." McQuillin Municipal Corporations (3rd ed.) § 2.32. A county, on the other hand, though it is a political subdivision of the state, is generally not considered to be a municipal corporation.
". . . it is generally held that, although counties have the general characteristics of municipal corporations, they are not considered such unless made so by constitution or statute and, therefore, fall into the class of bodies politic, called quasi-public or quasi-municipal corporations organized to aid in the proper administration of state affairs with such powers and functions as the law prescribes. . . ." Ibid, § 2.46.
Thus, using the terms in their narrowest sense, "political subdivision" would include only a county, not a city, and the term "municipal corporation" would include a city but not a county.
However, we do not believe that such a narrow reading of the term "political subdivision" as used in RCW 82.04.430(10) [[Orig. Op. Page 3]] is proper. Such a narrow reading has not been adopted by either the state supreme court or this office. Further, it would attribute to the legislature an intent which could scarcely be called reasonable.
InBd. Ag'nst Discr. v. Bd. of Directors, 68 Wn.2d 262, 412 P.2d 769 (1966), the court considered the question of whether RCW 49.60.300, denying judicial review with respect to any order of the state board against discrimination "issued against any political or civil subdivision of the state. . . " was applicable to an order issued against a school district. In holding that RCW 49.60.300 was applicable, the court stated:
"There can be no doubt that the School District is a political or civil subdivision of the state, within the meaning of RCW 49.60.300. . ." (68 Wn.2d at 269.)
Similarly, there is no doubt that the court would likewise hold that a city is a "political or civil subdivision of the state" within the meaning of RCW 49.60.300.2/
In a letter opinion dated August 15, 1968, to the Honorable Irving Newhouse, this office considered the question of whether an irrigation district constituted a political subdivision for purposes of the Public Employees' Collective Bargaining Act, chapter 108, Laws of 1967, Ex. Sess. The question was answered in the affirmative.
Rejection of a narrow reading of the term "political subdivision" as used in RCW 82.04.430(10) is also required in order to avoid an unreasonable result, policy-wise. If the term "political subdivision" is limited in scope to [[Orig. Op. Page 4]] a county, the deduction would be applicable only in the case of a county providing services to another county. It would not be applicable in the case of a county providing services to a city, a city providing services to another city, or a city providing services to a county. We can find no reasonable justification for such a result, and accordingly cannot attribute such an intent to the legislature.
For the foregoing reasons, we conclude that RCW 82.04.430 (10) is applicable to amounts which are received by a county by reason of data processing services rendered both to a county and to a city and which would otherwise be taxable under the service category of the business and occupation tax.
We trust that the foregoing will be of assistance to you.
Very truly yours,
TIMOTHY R. MALONE
Assistant Attorney General
*** FOOTNOTES ***
1/Cf., Article XI, § 1 of the state constitution which provides as follows:
"The several counties of the Territory of Washington existing at the time of the adoption of this Constitution are hereby recognized as legal subdivisions of this state." (Emphasis supplied.)
2/RCW 28A.58.010 describes a school district as follows:
"A school district shall constitute a body corporate and shall possess all the usual powers of a public corporation, . . ."
Thus a school district appears to be just as much a "municipal corporation" as is a city.