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First Student, Inc. v. State

Supreme Court of Washington, En Banc

November 14, 2019

FIRST STUDENT, INC, Petitioner,
v.
STATE OF WASHINGTON, DEPARTMENT OF REVENUE, Respondent.

          JOHNSON, J.

         This case involves an issue of statutory interpretation regarding the applicability of a tax classification. First Student Inc., a school bus contractor, seeks reversal of a Court of Appeals decision affirming a summary judgment dismissal of its business and occupation (B&O) tax refund action. At issue is whether First Student's transportation of students qualifies as transporting persons "for hire" such that it is subject to the public utility tax (PUT), under RCW 82.16.010(6) and (12), rather than the general B&O tax, under RCW 82.04.290(2).[1] We affirm the Court of Appeals.

         FACTUAL AND PROCEDURAL HISTORY

         First Student is a registered Washington business that owns and operates school buses. These buses are primarily used to provide transportation services for schoolchildren through contracts with various school districts. Since First Student registered as a business in 1990, it has consistently reported its income under the B&O tax classification, as specified in WAC 458-20-180. In 2013, First Student requested a letter ruling from the Department of Revenue (Department) contending that First Student should have been taxed under the PUT rather than the B&O tax. The Department declined to change its interpretation that school buses are subject to the B&O tax and not the PUT, an interpretation that has evidently remained consistent for more than 70 years.

         First Student submitted refund requests to the Department for B&O taxes paid regarding its school bus services provided to school districts for the time period between December 1, 2008 and December 31, 2014. The Department denied the refund requests, and First Student appealed through the administrative review process, ultimately resulting in a denial of First Student's refund request.

         First Student filed an appeal of the administrative decision in superior court and moved for summary judgment, seeking a determination that First Student's provision of transportation services to school districts was taxable under the PUT rather than the B&O tax; the Department requested summary judgment, seeking the opposite relief. The trial court found no genuine issues of material fact and granted summary judgment in favor of the Department, denying First Student's motion for summary judgment. First Student appealed.

         The Court of Appeals affirmed the trial court and, in its analysis, consulted dictionary definitions in existence at the time of enactment of the statutes for the ordinary meaning of "for" and "hire" and consulted a 1951 Black's Law Dictionary entry for the technical meaning of "for hire or reward," concluding the meaning of "for hire" was ambiguous. First Student, Inc. v. Dep't of Revenue, 4 Wn.App. 2d 857, 423 P.3d 921 (2018). In resolving this ambiguity, the Court of Appeals afforded deference to the long-standing Department interpretation that school bus operators were excluded from the PUT and properly taxed under the B&O tax. We granted review. First Student, Inc. v. Dep't of Revenue, 193 Wn.2d 1001, 438 P.3d 129(2019).

         ANALYSIS

         Our review of a trial court's legal conclusions in a tax refund action is de novo. Simpson Inv. Co. v. Dep't of Revenue, 141 Wn.2d 139, 148, 3 P.3d 741 (2000). When interpreting statutes, we derive legislative intent solely from the plain language of the statute, considering the text of the provision, the context of the statute, related provisions, amendments to the provision, and the statutory scheme as a whole. Cashmere Valley Bank v. Dep't of Revenue, 181 Wn.2d 622, 631, 334 P.3d 1100 (2014). A statutory provision is ambiguous when it is fairly susceptible to two or more reasonable interpretations. Dep 't of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 12, 43 P.3d 4 (2002).

         The goal of construing statutory language is to carry out the intent of the legislature; in doing so, we avoid strained, unlikely, or unrealistic interpretations. Simpson, 141 Wn.2d at 148, 149. Unless the statute expresses a contrary intent, we may resort to an applicable dictionary definition to determine the plain and ordinary meaning of a word that is not otherwise defined by the statute. Am. Legion Post No. 32 v. City of Walla Walla, 116 Wn.2d 1, 8, 802 P.2d 784 (1991). When '"the legislature uses a term well known to the common law, it is presumed that the legislature intended [it] to mean what it was understood to mean at common law.'" Ralph v. Dep't of Nat. Res., 182 Wn.2d 242, 248, 343 P.3d 342 (2014) (quoting N.Y. Life Ins. Co. v. Jones, 86 Wn.2d 44, 47, 541 P.2d 989 (1975)).

         Generally, Washington's B&O tax applies to the act or privilege of engaging in business activities. RCW 82.04.220. Business activities not explicitly taxed elsewhere in the statutory scheme are subject to the general statutory tax rate. RCW 82.04.290(2). However, PUT businesses are not subject to the B&O tax, and the tax rate differs for those businesses. RCW 82.04.310(1).

         The businesses of "motor transportation" and "urban transportation" are subject to the PUT. Under the PUT, "[t]here is levied and . . . collected from every person a tax" for the privilege of engaging in defined businesses, with a tax rate of 0.6 percent for "[u]rban transportation businesses]" and a tax rate of 1.8 percent for "[m]otor transportation . . . businesses." Former RCW 82.l6.020(1)(d), (f) (2011).

         "Motor transportation business" is defined in relevant part as "the business (except urban transportation business) of operating any motor propelled vehicle by which persons or property of others are conveyed for hire." RCW 82.16.010(6).[2] "Urban transportation business" is defined in relevant part as "the business of operating any vehicle for public use in the conveyance of persons or property for hire." RCW 82.16.010(12) (the definition also requires the operation be entirely within a city or town or occur between cities or towns no more than five miles apart). "For hire" is not defined, in whole or in part, within chapter 82.16 RCW. The meaning of the term "for hire" is the focal point of the dispute in this case.

         In its administration of RCW 82.16.010, the Department adopted a regulation in 1970 excluding school buses from the definitions of "motor transportation business" and "urban transportation business." WAC 458-20-180. This WAC adopted and continued the Washington State Tax Commission's previous classification that excluded school buses from these PUT definitions. Compare Wash. State Tax Comm'n Rules and Regulations, Rule 180 (1956), with WAC 458-20-180.[3] This interpretation has remained unchanged and had remained unchallenged since its adoption in 1943. Instead of directly challenging the validity of WAC 458-20-180 under the Administrative Procedure Act, [4] ch. 34.05 RCW, First Student asserts that the Department's regulatory exclusion of school buses from the PUT definitions ...


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