413 P.3d 1083
Wash. Ct. App.2018Background
- Taxpayers (Rainier Xpress, Green Collar Club, Triple C Collective) operated collective medical-marijuana gardens under former RCW 69.51A.085 and sought refunds of sales taxes paid for 2011–2014.
- RX admitted selling products containing medical marijuana; GCC and TCC claimed they only provided management services to collective gardens.
- GCC/TCC managed meeting places where qualifying patients presented "valid documentation," signed membership forms, chose products from menus with prices, and made monetary "contributions" in exchange for marijuana; most transactions involved cash payments.
- GCC/TCC reported substantial gross income from these transactions on excise tax returns; nonpermanent members routinely signed up and then resigned after each acquisition.
- Department of Revenue denied refund claims; superior court granted DOR summary judgment and denied Taxpayers’ motion; Taxpayers appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether GCC/TCC engaged in taxable "retail sales" of marijuana | GCC/TCC were separate management companies providing services, not sellers | Transactions had commercial retail characteristics (menus, prices, staffed windows, monetary consideration) and were retail sales | Held: GCC/TCC engaged in retail sales as a matter of law |
| Whether "valid documentation" equals a "prescription" for the prescription-drug tax exemption | Valid documentation is functionally identical to a prescription and authorizes possession, so exemption applies | Valid documentation is permissive; it is not an "order" or medical directive from a licensed prescriber as required by statute | Held: Valid documentation is not an "order/prescription;" sales are not exempt under the prescription-drug exemption |
| Whether medical marijuana qualifies as a "naturopathic medicine" exempt from sales tax | Medical marijuana is a botanical medicine "used in treatment" when a naturopath issues valid documentation | Naturopaths cannot prescribe/administer/dispense schedule I drugs; statutory scope excludes marijuana | Held: Not exempt—marijuana is not a naturopathic medicine within the statutory exemption |
| Whether a genuine factual dispute exists about taxable sales by GCC/TCC | At least a triable issue exists about whether GCC/TCC merely provided services | Record shows undisputed facts indicating sales characteristics and income, so no triable factual issue | Held: No genuine issue of material fact; summary judgment for DOR appropriate |
Key Cases Cited
- First Am. Title Ins. Co. v. Dep't of Revenue, 144 Wash.2d 300 (courts look to substance over form in tax classification)
- Wash. Imaging Servs., LLC v. Dep't of Revenue, 171 Wash.2d 548 (same: substance controls tax treatment)
- Ford Motor Co. v. City of Seattle, 160 Wash.2d 32 (taxes presumed valid; burden on taxpayer to show error)
- AOL, LLC v. Dep't of Revenue, 149 Wash. App. 533 (taxpayer bears burden to prove incorrect tax assessment)
- Conant v. Walters, 309 F.3d 629 (doctors may discuss/recommend marijuana but prescribing raises federal-law issues)