Detection, Inc. (MDI) seeks reversal of summary judgment in
which the trial court held, based on this court's ruling
in Morpho Detection, Inc. v. Department of Revenue,
194 Wn.App. 17, 371 P.3d 101, review denied, 186
Wn.2d 1010, 380 P.3d 502 (2016), that MDI is liable for use
tax under RCW 82.04.190(6). Because this court's
published decision clearly erred in reaching a factual issue
not briefed to the court, we conclude our prior decision
should be modified to narrow its holding to the issue
properly presented to it. We thus reverse summary judgment.
Washington State Department of Revenue (DOR) assessed use tax
on MDI's sale of explosive detection machines (EDMs) to
the United States -Transportation Security Administration
(TSA) that were deployed in the Seattle-Tacoma (Sea-Tac) and
Spokane airports. MDI paid the assessment and sought a $5.3
million refund under RCW 82.32.180, claiming it was not a
"consumer" subject to the use tax under RCW
82.12.020(1)(a). The term "consumer" is defined
in relevant part in RCW 82.04.190(6):
Any person engaged in the business of constructing,
repairing, decorating, or improving new or existing buildings
or other structures under, upon, or above real property of or
for the United States, any instrumentality thereof, . . .
including the installing or attaching of any article of
tangible personal property therein or thereto, whether or not
such personal property becomes a part of the realty by virtue
of installation ....
alleged two separate legal bases for its refund request.
First, it alleged the airports in which its EDMs were used
were not the "real property of or for the United
States." Second, MDI claimed it did not construct,
repair, decorate, or improve any new or existing buildings or
structures, and did not incorporate, install, or attach the
EDMs to any building or structure in Washington.
2014 Summary Judgment Motion
2014, MDI filed a motion for summary judgment. MDI first
argued it was not engaged in the business of
"constructing, repairing, decorating, or improving new
or existing buildings or other structures." It
anticipated DOR would argue that MDI installed the EDMs at
the airports and that this installation work made MDI a
company in the business of "constructing, repairing,
decorating or improving any building."
indicated in footnotes to its summary judgment motion that
the parties disputed the meaning of the word
"installing" as used in RCW 82.04.190(6) and
"whether MDI's activities amount to
'installing.'" But it recognized that
"[f]or purposes of this motion, all disputed facts must
be assumed in [DOR's] favor." It informed the trial
court that, for purposes of its motion, the court must assume
MDI installed the EDMs at the airports even though MDI and
DOR disputed this fact. But it argued "the mere
installation of EDMs alone does not make MDI a person in the
business of constructing, repairing, decorating or improving
any building," even if the EDMs "improved" the
airport buildings where they were deployed.
support of its motion, MDI presented evidence that its EDMs
were manufactured and sold to TSA in California and shipped
to TSA in Texas. TSA then deployed some of the equipment to
airports in states other than Washington before TSA brought
41 EDMs to the Sea-Tac airport and another 5 to the Spokane
airport. Because each EDM is large and needs to be partially
disassembled before shipment, MDI agreed to reassemble each
machine at any airport in the United States at which TSA
deployed them and to assist with testing after reassembly to
certify the machines were operational. MDI also provided
evidence that when TSA chose to purchase rigging services
from MDI, MDI subcontracted that work to unaffiliated third
parties. These third parties, and not MDI, anchored the
machines to the buildings in which they were installed.
MDI's Contracts Administrator testified that in the sales
contracts for the EDMs deployed in Washington, "the only
activities MDI performed in Washington involved assembly,
disassembly, moving, uncrating, crating, and testing of
6. MDI did not install any EDMs in Washington as the term is
7. MDI is not in the business of constructing, repairing,
decorating, or improving new or existing buildings or other
structures as those terms are normally understood. Moreover,
MDI did not construct, decorate, repair or improve any
building in Washington during the audit period.
8. MDI is in the business of manufacturing, marketing and
supporting the EDM[s] it sells. All of MDI's work in
Washington is consistent with this business.
anticipated, DOR argued MDI was in the business of improving
buildings. It presented evidence MDI earned millions of
dollars for work at airports after selling the EDMs. It
submitted copies of MDI prospectus filings, work proposals,
delivery orders, installation checklists, and invoices, all
of which it contended evidenced MDI's provision of a
significant amount of installation services. It argued
"even if the court were to agree with [MDI] that a
company must engage in some threshold amount of improvement
activity to trigger the use tax, a question of fact would
exist as to whether [MDI] meets that threshold."
second argument on summary judgment was that RCW 82.04.190(6)
only applies if the construction work occurs on property
belonging to the United States government. It presented
evidence from the General Counsel to the Spokane Airport and
a Project Manager for the Port of Seattle who both testified
that the United States government had no property interest in
the airports. But DOR argued the tax statute applied to any
work on real property when that work is done for the United
States, regardless of whether the real property on which the
work is performed belongs to the United States government.
Because the federal government paid for MDI's work, DOR
argued, the work was "for" the United States within
the meaning of RCW 82.04.190(6). DOR asked the trial court to
deny MDI's motion and "grant partial summary
judgment to [DOR], as the nonmoving party, on the legal
issues that [MDI] raises."
trial court granted summary judgment to MDI on this second
issue only. It ruled:
1. Regarding the issue of whether [MDI] was "engaged in
the business of constructing, decorating, or improving new or
existing buildings or other structures," a genuine issue
of material fact exists that precludes summary judgment.
2. Regarding the issue of whether any such work occurred
"under, upon, or above real property of or for the
United States," no genuine issue of material fact exists
and [MDI] is ...