Appeal from Thurston Superior Court. Docket No: 10-2-00513-4. Date filed: 01/06/2012. Judge signing: Honorable Wm Thomas Mcphee.
Scott L. Jensen and Jay A. Boelter (of Brownstein Rask ) and Philip A. Talmadge (of Talmadge / Fitzpatrick ), for appellant.
Robert W. Ferguson, Attorney General, and David M. Hankins and Charles E. Zalesky, Assistants, for respondent.
Authored by Lisa Worswick. Concurring: Jill M Johanson, J. Robin Hunt.
[178 Wn.App. 758] Worswick, C.J.
¶ 1 Space Age Fuels, Inc., an Oregon corporation, appeals summary judgment dismissing its claim for a refund of business and occupation tax payments. [178 Wn.App. 759] Space Age argues that the dormant commerce clause  prohibits Washington from taxing its activities because they lack a substantial nexus with Washington. We disagree and affirm.
¶ 2 Space Age Fuels Inc. is a retail and wholesale seller of fuel. Space Age is incorporated in Oregon and maintains its principal place of business in Clackamas, Oregon. Although all of its retail fuel stations are in
Oregon, approximately 40 of its wholesale customers are in Washington.
¶ 3 Upon a wholesale customer's request, Space Age quotes fuel prices via telephone, fax, or e-mail. Once it receives an order, Space Age delivers fuel to wholesale customers using vehicles it owns and operates.
¶ 4 Because delivery is " another profit center," Space Age marks up its fuel prices to account for delivery costs. Clerk's Papers (CP) at 297. Thus, Space Age charges more for deliveries made at longer distances. Before transferring fuel from its delivery vehicle into a customer's storage tank, a Space Age employee will " stick the tank," i.e., measure its contents to ensure the tank can hold the fuel. When Space Age uses specialized vehicles to pump fuel into aboveground storage tanks for some customers, it charges more for this extra pumping service.
¶ 5 But Space Age's activities in Washington are limited. Space Age makes " no effort to secure new customers for its fuel in Washington" because it believes its wholesale customers base their purchases solely on price. CP at 54. Thus, no Space Age employees have visited Washington to solicit sales or assess a customer's needs. Further, Space Age does not own or lease any real property in Washington, and it has [178 Wn.App. 760] no Washington-based employees or assets. Instead, Washington customers contact Space Age.
¶ 6 The Washington State Department of Revenue audited Space Age's books and records for the period between January 1, 2004, and June 30, 2007. During that time, Space Age grossed over $48 million from 1,675 recorded sales to wholesale customers in Washington.  Between July 1, 2005, and the end of the audit period, Space Age's vehicles drove 141,491 miles on Washington roadways.
¶ 7 The Department determined that Space Age owed $235,834 in unpaid business and occupation (B& O) taxes for its wholesaling activities in Washington during the audit period.  The ...