Court: Qualcomm can pay lower tax rate
Qualcomm, Inc. v. Dept of Revenue, No. 83673-6. Qualcomm Inc. is seeking a refund of retail sales taxes it paid after a Department of Revenue ruling. Qualcomm sells communications system OmniTRACS to trucking companies to assist them with tracking and managing vehicles. After an audit, the Department of Revenue determined that Qualcomm was improperly paying the lower business and occupations (B & O) internet service tax rate, and DOR assessed Qualcomm $900,573 based on its assumption that the tracking portion of Qualcomms system is a network telephone service, which is taxed at a higher rate. The Court of Appeals (Div. 2) upheld the Department of Revenue assessment.
The Supreme Court (Justice Tom Chambers writing the majority) adopted the "primary purpose of the purchaser rule" when a service involves both the collection and processing of data and the transmission of data to determine which rate should apply. The court determined that the primary purpose of the purchasers of the OmniTRACS system is to obtain the data generated by the system. Thus, the court held that the lower information services tax rate applies, and overturned the Court of Appeals.
Justice Mary Fairhurst dissented. While she agreed with the majority on its articulation of the primary purpose test, she disagreed with its application in this case.
