Contact:
PO Box 40123
Olympia, WA 98504-0123
E-mail
The Revenue Unit of the Revenue, Bankruptcy and Collections Division is comprised of 9 attorneys and 6 professional staff. The unit represents the Department of Revenue (DOR), the state agency responsible for the administration of the state's excise and property tax laws. Since taxes impact virtually all business activities in Washington, difficult and complex issues arise involving an endless variety of businesses, such as aerospace and computer software manufacturers, petroleum product producers, telecommunication companies, tobacco manufacturers, hospitals, and fish harvesters. The Revenue Unit also advises DOR on its administration of the state’s unclaimed property law and the estate tax.
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The Revenue Unit’s principal legal activity involves defending DOR against excise tax refund actions. The issues raised often involve complex statutory construction and constitutional claims. The unit's attorneys appear regularly before the Board of Tax Appeals, Thurston County Superior Court and state appellate courts.
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The Revenue Unit historically receives around 50 new cases each year. In fiscal year 2007, the unit has opened 59 new cases. The unit is currently handling approximately 160 cases addressing a wide variety of predominantly excise tax refund claims. Many of these claims are of industry-wide significance. Additionally, a number of cases involve out-of-state manufacturer issues. The unit handled one appellate case that was decided during the last fiscal year, successfully opposed several petitions for discretionary review, and briefed and argued several additional appeals in which decisions are pending.
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Cigarette Tax Compact with Puyallup Tribe: Division II of the Court of Appeals affirmed a trial court order dismissing a challenge brought by a tribal retailer against the cigarette compact entered into by the governor and the Puyallup Tribe in 2005. The appellate court agreed the retailer’s action should be dismissed based on the Tribe’s sovereign immunity and his failure to name the Tribe as a party. The tribal retailer is seeking review by the United States Supreme Court.
Loan Servicing Fees: In this excise tax refund action, the taxpayer sold loans it had made to borrowers and then took its fees under contracts from interest paid by the borrowers. The taxpayer argued that the fees it received were deductible interest income. DOR asserted that the compensation taxpayer received was a taxable contractual fee for the performance of services on behalf of the entities to which it sold the loans and not deductible interest income. Division II of the Court of Appeals issued a decision affirming a trial court order granting summary judgment to the DOR. The taxpayer is seeking review by the Washington Supreme Court.
Direct Seller’s Representatives: Division II of the Court of Appeals issued a decision in favor of DOR, holding that the taxpayer (the nation’s leading food redistributor) did not qualify for the direct seller’s exemption, a B&O tax exemption for certain out-of-state companies that make sales in Washington exclusively to or through a direct seller’s representative. The Court agreed with DOR that direct sellers must exclusively sell consumer products in this state to qualify for the exemption. The taxpayer is seeking review by the Washington Supreme Court.
Geoducks: Division II of the Court of Appeals issued a decision agreeing with DOR that the sale of the right to harvest geoducks from state lands by the Department of Natural Resources does not make it the first commercial possessor of the geoducks for purposes of the enhanced food fish tax (RCW 82.27). Consequently, the appellate court concluded that the DOR properly required that the taxpayer pay the enhanced food fish tax.
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Implementation of Tobacco Settlement: The Revenue Unit continues to play an important role in the implementation of the historic tobacco litigation settlement agreement. The unit enforces the “escrow” statute adopted by the Legislature that applies to cigarette manufacturers selling tobacco products within the state which have not joined the master settlement agreement. The amount that must be put into escrow is based on product sales each year and protects the fiscal soundness of the state and the public health. Diligent enforcement of the escrow statute insulates the settlement payments received by the state under the master settlement agreement from being reduced based on the non-participating manufacturers’ (NPM) adjustment. This adjustment applies if there is an increase in the NPM’s market share resulting from the implementation of the master settlement agreement. The unit also helps maintain the Attorney General’s Office Web site required by a 2003 law, under which tobacco product manufacturers must certify to the AGO prior to selling their cigarettes in this state. Tobacco manufacturers whose certifications have been approved can be found at www.atg.wa.gov/Tobacco/default.aspx.
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