286 P.3d 417
Wash. Ct. App.2012Background
- Bi-Mor Inc. and Furniture Outlet LLC operate several Washington retail stores with an advertising model claiming prices include all sales taxes or that the retailer pays the tax.
- Bi-Mor used a “backing out” method, calculating tax on the gross receipts by deducting tax from the gross sale rather than adding tax to the customer’s tendered price.
- The Department audited January 2003 through March 2012, finding many receipts failed to separately state sales tax from the selling price.
- The Department asserted Bi-Mor owed taxes on the gross amount under former RCW 82.08.050, because the receipts did not show tax separately.
- Bi-Mor appealed to the Department, then to the Board of Tax Appeals, which dismissed the assessment and ruled in Bi-Mor’s favor.
- The superior court affirmed, and the Department appealed to the court of appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether former RCW 82.08.050 plain language prohibits using gross receipts. | Bi-Mor: plain language bars tax on gross receipts in tax-included sales. | Department: statutory framework supports gross receipts basis when tax isn’t separately stated. | Bi-Mor prevail; Department cannot tax on gross in tax-included sales. |
| Whether WAC 458-20-107 is a valid regulation interoperable with RCW 82.08. | Bi-Mor: regulation helps implement statute; it is valid. | Department: regulation correctly interprets and applies the statute. | WAC 458-20-107 is valid and interoperable with RCW 82.08. |
| Whether advertising that prices include tax affects the selling price determination. | Bi-Mor: plain language excludes advertised tax-included price as selling price. | Department: statutory presumption should treat advertised price carefully. | Advertised tax-included price cannot be the selling price for tax calculation. |
| Whether the receipt’s failure to separately state tax mandates tax on the gross amount. | Bi-Mor: receipts suffice; declarative advertising governs. | Department: lack of separate tax state forces gross-basis taxation. | Receipt failure to separate tax supports gross-amount taxation. |
| Whether the Department’s position is consistent with statutory objectives to transparency in tax collection. | Bi-Mor: transparency requires clear statements of tax on receipts. | Department: policy aims to prevent tax misstatement and ensure clarity. | Court defers to statutory framework; Bi-Mor’s practice violates plain terms. |
Key Cases Cited
- Overlake Hosp. Ass’n v. Dep’t of Health, 170 Wn.2d 43 (Wash. 2010) (plain-meaning rule and regulatory interpretation guidance)
- Pomeroy v. Anderson, 32 Wn. App. 781 (Wash. App. 1982) (statutory presumption on price and tax when not specified in receipts)
- AARO Med. Supplies, Inc. v. Dep’t of Revenue, 132 Wn. App. 709 (Wash. App. 2006) (interprets regulatory interplay on tax-included sales)