Opinions: out-of-state taxes and defendant competency
Dot Foods, Inc. v. WA Dep’t of Revenue, No. 81022-2. Illinois company Dot Foods sells consumer products such as dry foods, sauces, and refrigerated foods to a subsidiary, which sells the products to Washington customers which in turn use Dot products as ingredients for products that are later sold to grocery stores and other retail outlets.
For years Dot Foods qualified for an exemption from the Washington business & occupation tax as an out-of-state seller. In 1999, the state Department of Revenue amended its interpretation of the qualifications for the out-of-state exemption. In order to qualify for the exemption, out-of-state sellers could never sell any consumer products that anyone will eventually sell in a permanent retail establishment anywhere in the chain of distribution. The Department of Revenue then determined that Dot Foods should pay the B&O tax for sales that occurred between 2000 and 2003. Dot paid the tax and then filed suit against the Department to recover a refund.
The Department argued that Dot should not qualify for the B&O tax exemption because its sales included non-consumer products, and some products eventually ended up in permanent retail establishments. The trial court ruled in the Department’s favor. The Court of Appeals affirmed the trial court, holding that Department’s new interpretation of the statute was reasonable.
The questions before the Supreme Court are (1) whether an out-of-state seller qualifies for the B&O tax exemption when it sells some non-consumer products, and (2) if so, does such a seller qualify for the B&O tax exemption when some of its products ultimately end up in permanent retail establishments?
The Supreme Court, with Justice Charles Johnson writing the 5-vote majority, ruled in favor of Dot Foods. The court said that the law (RCW82.04.423(1)(d) requires out-of-state sellers to make sales “exclusively” through a seller’s representative, but that “exclusively” does not mandate that all sales consist of consumer products. Additionally, the court rejected the argument that Dot loses its exemption because some of its products end up in retail stores. “The wording of the statute has not changed since its enactment; only the Department’s interpretation and application of the statute have changed. Considering the foregoing, we reject the Department’s interpretation. To do otherwise would add words to and rewrite an unambiguous statute.”
Justice Johnson took the Department of Revenue to task for its argument that its interpretation of the statute is entitled to judicial deference. “The Department’s argument for deference is a difficult one to accept, considering the Department’s history interpreting the exemption. Initially, and shortly after the statutory enactment, the Department adopted an interpretation which is at odds with its current interpretation. One would think that the Department had some involvement or certainly awareness of the legislature’s plans to enact this type of statute.”
Justice Debra Stephens and three other justices dissented, writing that the out-of-state exemption from the B&O tax should be interpreted narrowly and that by allowing Dot Foods to claim the exemption the majority decision “expands the exemption well beyond its intended scope.”
State v. Heddrick, No. 80841-4. In 2004, Steven Ray Heddrick, Jr., was charged with felony harassment. While awaiting trial, Heddrick was allegedly involved in an altercation with jailhouse staff, which resulted in a subsequent charge of custodial assault. Concerns about Heddrick’s competency for trial arose several times. Eventually the trial court determined that Heddrick was competent to stand trial without conducting an evidentiary hearing, without having written competency evaluations, and without entering a written competency order. Heddrick argues that the trial court failed to follow proper procedures in declaring him competent to stand trial, and that he was denied a lawyer during the competency hearing.
The Supreme Court ruled that Heddrick, through his appointed counsel, waived completion of the statutory competency procedures. Additionally, the court ruled that Heddrick did not suffer a complete denial of counsel during a critical stage in the proceedings. Justice Susan Owens wrote the unanimous opinion.
