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Paccar Inc. v. State

February 7, 1997


Appeal from Superior Court of Thurston County. Docket No: 85-2-02360-6. Date filed: 04/11/95. Judge signing: Hon. Paula K. Casey.

Petition for Review Granted June 3, 1997,

Authored by Carroll C. Bridgewater. Concurring: Elaine M. Houghton, Visiting Judge.

The opinion of the court was delivered by: Bridgewater

BRIDGEWATER, J.--The Department of Revenue appeals the trial court's ruling that allows Paccar to apply a 1977-80 overpayment of Business & Occupation tax against a 1985 deficiency assessment on the same period. Paccar did not submit a refund application for the 1977-80 period until it received the 1985 assessment. We hold taxes that have become nonrefundable may not be credited against a later deficiency assessment of that same period. We reverse.

Paccar, Inc., a company that engineers, manufactures and sells heavy-%duty trucks and industrial equipment, uses some of its surplus funds to make loans to its subsidiary corporations. It paid Business & Occupation (B&O) tax on the interest it received from these loans during the period of 1977-91. Paccar and the Department of Revenue (DOR) agree that Paccar did not have to pay tax on its subsidiary interest income, and that it therefore overpaid its taxes during that period.

Despite this overpayment of B&O tax, the DOR determined in 1982 that there was a deficiency in overall tax paid by Paccar during the period of 1977-81. To calculate this figure, the DOR "netted" or combined different kinds of taxes, such as sales, use, and B&O taxes. The taxes that Paccar paid on its subsidiary interest income was expressly included in the DOR's assessment schedules. In 1983, when Paccar realized that it overpaid during that period, it paid the deficiency amount, but immediately filed a refund petition. In its refund request, it argued that the assessment was incorrect, that the DOR should have given a tax credit for the years that were audited, and that the amount of overpayment should offset the deficiency assessment. The DOR denied Paccar's refund request.

In 1985, Paccar sued the DOR in superior court, *fn1 arguing that it was entitled to satisfy the assessment by way of a credit for, or offset from, its overpayment of B&O taxes during the period audited. The DOR contended that, because Paccar's overpayment in that period was only B&O taxes, and the deficiency assessment included several types of taxes, the deficiency could not be applied against the assessment amount; it argued that RCW 82.32.060 did not allow netting different types of taxes against each other. *fn2 The DOR refunded Paccar's overpayment of B&O taxes for 1981, which was still within the refund period, but did not refund the amount of B&O tax overpaid for the years 1977-80.

In 1995, on stipulated facts, the superior court granted Paccar's motion for summary judgment. It concluded that the deficiency assessment was incorrect because the DOR failed to consider the amount of B&O taxes that Paccar had already overpaid during that period, an amount approximating $300,000; it concluded that Paccar was, instead, entitled to a refund of the entire deficiency amount assessed in 1982 for tax years 1977-81. The court also concluded that RCW 82.32.060 does not require that the type of tax refunded match the type of tax improperly paid. The 1985 version of that statute provided the following:

If, upon receipt of an application by a taxpayer for a refund or for an audit of his records, or upon an examination of the returns or records of any taxpayer, it is determined by the department that within the statutory period for assessment of taxes prescribed by RCW 82.32.050 a tax has been paid in excess of that properly due, the excess amount paid within such period shall be credited to the taxpayer's account or shall be refunded to the taxpayer, at his option. No refund or credit shall be made for taxes paid more than four years prior to the beginning of the calendar year in which the refund application is made or examination of records is completed.

RCW 82.32.060 (emphasis added). *fn3

On appeal, the DOR asks this court to reverse and remand for an order dismissing Paccar's refund action with prejudice. Though it agrees with the trial court's Conclusion that Paccar overpaid its taxes, it argues that the court erred in interpreting RCW 82.32.060. That statute's time limit of four years, it argues, precluded the trial court from offsetting a 1977-1980 overpayment against a 1982 deficiency assessment because that would, in effect, allow a refund of taxes outside the statutory refund period. The DOR also argues that the coincidence that the deficiency and refund involve the same years does not allow an offset between them. In the alternative, it argues that, if such an offset can be made, the statute does not allow an overpayment of one type of tax to offset a different type of tax. Last, it argues that the doctrine of equitable recoupment precludes Paccar from recovering its overpayment of B&O taxes.

Unlike other appeals from agency actions, there is no final agency action to review because Paccar filed an original action in superior court under RCW 82.32.180. *fn4 In reviewing an order of summary judgment, the appellate court engages in the same inquiry as the trial court. *fn5 Summary judgment is appropriate "'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" *fn6 A material fact is one upon which the outcome of the litigation depends in whole or in part. *fn7 We consider the evidence in the light most favorable to the nonmoving party. *fn8

Because this is a question of statutory interpretation, it is a question of law that we review de novo. *fn9 This court's primary objective in interpreting a statute is to ascertain and give effect to the Legislature's intent as manifested in the statute's express language. *fn10 "Absent ambiguity or a statutory definition, words in a statute should be given their plain and ordinary meaning." *fn11 "We should not and do not construe an unambiguous statute." *fn12 "If there is doubt as to the meaning of a taxing statute, it is to be construed in favor of the taxpayer and against the taxing body." *fn13 The first question presented by the DOR is whether RCW 82.32.060 allows a taxpayer to seek an offset of a deficiency assessment using an overpayment of funds when the overpayment occurred beyond the statutory refund period. In other words, did the 1982 assessment fortuitously make Paccar's overpayment refundable when it was otherwise lost under the statute because of Paccar's failure to file a timely refund application?

Paccar argues that the trial court was correct in allowing an offset of the 1977-80 overpayment. Paccar contends that it commenced its refund action in 1985, which satisfied the statute's requirement that the action ...

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