First Student, Inc. v. Dep't of Revenue
451 P.3d 1094
Wash.2019Background:
- First Student, Inc. operates school buses under contracts with Washington school districts and historically reported revenue under the general B&O tax (WAC 458-20-180).
- In 2013 First Student sought a Department of Revenue ruling that its school-bus operations should be taxed under the Public Utility Tax (PUT) rather than the B&O tax; the Department denied relief and refused refunds for taxes paid (Dec. 1, 2008–Dec. 31, 2014).
- First Student administratively appealed, then sued in superior court; the trial court granted summary judgment for the Department, and the Court of Appeals affirmed.
- The statutory dispute centers on whether transporting students qualifies as conveying persons "for hire" under RCW 82.16.010(6) (motor transportation) and (12) (urban transportation), which would subject the activity to the PUT.
- The Department (and predecessor Tax Commission) has long interpreted and regulated to exclude school buses from the PUT definitions (WAC 458-20-180), a classification in place since the 1940s.
- The Supreme Court concluded "for hire" is ambiguous in the PUT definitions, deferred to the agency’s long-standing interpretation, held the WAC valid, and affirmed dismissal of First Student’s refund claim.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether First Student’s contracted school-bus transportation is transporting persons "for hire" under RCW 82.16.010 | "For hire" means transporting persons for compensation regardless of who pays (so PUT applies) | "For hire" contemplates passengers (or those for whom transport is provided) effecting payment; school districts pay, students do not, so B&O applies | Term is ambiguous; court defers to long-standing agency interpretation excluding school buses from PUT; B&O classification stands |
Key Cases Cited
- Simpson Inv. Co. v. Dep't of Revenue, 141 Wn.2d 139 (2000) (de novo review of trial court legal conclusions in tax refund actions)
- Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1 (2002) (statutory ambiguity: provision is ambiguous if fairly susceptible to two or more reasonable interpretations)
- Pringle v. State, 77 Wn.2d 569 (1969) (agency interpretive rules deserve great weight in resolving doubtful meanings of taxing laws)
- In re Sehome Park Care Ctr., Inc., 127 Wn.2d 118 (1995) (legislative acquiescence in agency construction over time is a significant factor)
- Allen v. City of Bellingham, 95 Wash. 12 (1917) (illustrative differing uses of "for hire" in public-transport contexts)
- Klopfenstein v. Eads, 143 Wash. 104 (1927) (Washington cases suggesting passenger must pay or expect to pay to be a "passenger for hire")