Petition for Writ of Certiorari — Kalama Chemical, Inc. v. Washington
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' upreme Cont 18 .
(\) FILED
001734 may 152008
No.
mie OFFICE OF THE CLERK
In The
Supreme Court of the United States
¢
KALAMA CHEMICAL, INC. and
ADVANCED TECHNOLOGY LABORATORIES, INC.,
Petitioners,
VS.
STATE OF WASHINGTON,
Respondent.
*
On Petition For Writ Of Certiorari To The
Court Of Appeals Of The
State Of Washington, Division II
¢
PETITION FOR WRIT OF CERTIORARI
°
FRANKLIN G. DinceEs*
GEOFFREY P. KNUDSEN
THe Dinces Law Firm
4607 Saddleback Drive
Gig Harbor, WA 98332
(253) 858-1400
Counsel For Petitioners
Kalama Chemical, Inc.
and Advanced Technology
Laboratories, Inc.
*Counsel of Record
sy
QUESTIONS PRESENTED
1. Is it a taking when a State compels the payment of
discriminatory taxes without a predeprivation hearing
and fails to provide a remedy after this Court holds, in a
prior case involving these same Petitioners, that the dis-
criminatory taxes are unconstitutional?
2. May the remedy for discriminatory taxes on manufac-
turers engaged in interstate, but not intrastate, commerce
leave the discrimination in place?
3. May a State offer at the time discriminatory taxes are
paid a refund remedy and then not provide that remedy
after this Court holds the discriminatory taxes uncon-
stitutional?
li
PARTIES TO THE PROCEEDINGS
The caption contains the names of all parties to the
proceedings.
RULE 29.6 LISTING
The parent company of Petitioner, Kalama Chemical,
Inc. is PMD Group Inc. The parent company of Petitioner,
Advanced Technology Laboratories, Inc. is Koninklijke
Philips Electronics N.V.
ili
TABLE OF CONTENTS
Page
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SN Oe IES & nou dewd ddeddccudscaeid sevenseces iii
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Opinions and Orders Entered In This Case ........ 1
gece che laphh euhs bb6sb.cbandnesbesn 1
Constitutional and Statutory Provisions Involved... 1
SE OE ME NI, vec des ceduccccesddssedecuta 2
Reasons For Granting The Writ.................... 10
I. The State Court’s Decision Denying Peti-
tioners’ Property Was Taken Conflicts With
Relevant Decisions of This Court............ 10
II. The Remedy Provided By Washington’s Courts
Is Inadequate and Inconsistent With Decisions
SPE Te5N 4 ctaddue Gens dd neat acsecasss 15
A. Washington’s Credit Remedy Provides
SEE SENN be 6SeGccetneecbasedsdneseses 15
B. Just Compensation Is The Only Permis-
sible Remedy For A Taking.............. 16
C. The Facial Discrimination This Court Held
Unconstitutional In Tyler II Remains In
th ccln ee Peel yet Oe caaeaecdw +6000 6% 17
D. At The Time Of Payment, Washington
Offered These Petitioners A Refund Rem-
I a SO eke es 24
iv
TABLE OF CONTENTS - Continued
Page
Appendices
Appendix A: Opinion of The State of Washington
Court of Appeals, Division I].............0ss000. Al
Appendix B: Other Relevant Opinions and Orders
BR BOD GOOD nc ccecccassnccecsctcaneinveasadweeces Bl
Appendix C: Order Denying Petition For Review ....C1
Appendix D: Washington State Statutes Involved ....D1
Appendix E: OGher Material ..2......sccseesscscecss El
Vv
TABLE OF AUTHORITIES
Page
FEDERAL CASES
Armco Inc. v. Hardesty, 467 U.S. 638 (1984) ....... 18, 19
Atchison T. & S.F.R.Co. v. O’Connor, 223 U.S. 280
CRORE oi.ck shades canedadeeusn dawn kasee ea urie eee 13
Brushaber v. Union Pacific Railroad, 240 U.S. 1
CRGEET bs tccdccdccetehs cus Maeve pine cues eeaus neces 13
Carpenter v. Shaw, 280 U.S. 363 (1930)............... 13
Compania General De Tabacos De Filipinas v. Collec-
tor of Internal Revenue, 275 U.S. 87 (1927) ......... 16
Dryden v. Madison County, 522 U.S. 1145 (1998)...... 23
Etlor @&. Tacoma, 220 US. TAB CIPIS) oo cccccevsscas 6, 23
First English Evangelical Lutheran Church of Glendale v.
County of Los Angeles, 482 U.S. 304 (1987).... 11, 12, 17
Forbes Pioneer Boat Line v. Board of Commissioners,
258 U.S. 338 (1922) ........ eee e cece ence ce cenees 6, 23
Gaar, Scott & Co. v. Shannon, 223 U.S. 468 (1912) .... 13
McKesson Corp. v. Florida Alcohol & Tobacco Div.,
eit ee oe. re £¢ 7,13, 3,2
Monongahela Navigation Co. v. United States, 148
CS Die LOE cv bau eanekssddny canescens ne wese 12
Montana National Bank of Billings v. Yellowstone
County, 276 US. 499 (39ZB) occ scccscccisnsasvss 13, 19
Iowa-Des Moines National Bank v. Bennett, 284 U.S.
Fae CROSS) a ok kar cokne cdnsdstnaesixe eis 13, 20, 21
Myles Salt Co. v. Board of Commissioners, 239 U.S. |
GD CPO 6 oe vckias net dunaxencsesea kent iaovessaens 13
Newsweek, Inc. v. Florida, 522 U.S. 442 (1998) ...... 7; ae
vi
TABLE OF AUTHORITIES - Continued
Page
Olson v. United States, 292 U.S. 246 (1934)........... 16
Parratt v. Taylor, 451 U.S. 527 (1981)...............5. 12
Regional Rail Reorganization Act Cases, 419 U.S. 102
(UOTE) co cccerecccccvocccetsdecnceacspancnsesnageses 12
Reich v. Collins, 513 U.S. 106 (1994) ........... 7, 22, 23
San Diego Gas & Electric Co. v. San Diego, 450 U.S.
GER CEUGE) occ cccccsccescccesécncscncnecabueseat 11, 12
Steward Machine Co. v. Davis, 301 U.S. 548 (1937).... 13
Tyler Pipe Industries, Inc. v. Department of Revenue,
GES UB. GBS CERT D 0 es tccccticndiacecs 4, 5, 17, 18, 19
United States v. 564.54 Acres of Land, 441 U.S. 506
(IGFD) oo cccccvcccccvdoccecasveuseseeeuaensseudeees 16
United States v. Mississippi Tax Comm'n, 412 US.
DEB (REFS) oo veccccuncctseucck seushvcscumeensauumas 13
Village of Norwood v. Baker, 172 U.S. 269 (1898) ...... 13
Ward v. Love County, 253 U.S. 17 (1920) ............. 13
Williamson County Regional Planning Comm'n v.
Hamilton Bank, 473 U.S. 172 (1979).......... Seekip aa
State Cases
Digital Equipment Corporation v. Department of Rev-
enue, 129 Wn.2d 177, 916 P.2d 933 (1996)........ 6, 14
Tyler Pipe Industries, Inc. v. Department of Revenue,
96 Wn.2d 785, 638 P.2d 1213 (1982).......... 3, 4, 22
National Can Corp. v. Department of Revenue, 105
Wn.2d 327, 715 P.2d 128, corrected, 732 P.2d 134
1 ei 4, 10
Vii
TABLE OF AUTHORITIES —- Continued
Page
-—~ National Can Corp. v. Department of Revenue, 109
Wn.2d 878, 749 P.2d 1286 (1988) .............. passim
Pederson's v. Transamerica Ins., 83 Wn. App. 432,
Se Be We SR cacecancccausesshacatuevacanas 17
CONSTITUTIONAL PROVISIONS
Tee GD GOD bo n.n6 0 conv cwadadeabecsiddcdvats 1
ee es IS 4. 5 cc cccedawddeuesBscunnane 2, 11
The Fourteenth Amendment ...........-.-.--+-++. 2, 11
STATUTES
RCW 4.56.10 Loebacdedetucdetnndaavecndssesannnanel 2, 17
ae MM obec cbdvedencevccarcetecdeskskeeese 2, 17
IL i Cesc a samen sctasedetdsaeneeanns 2, 4, 17
See I dare Son cuKbks deckeanes sada utes weaken 2, 4
PA GEL a nckcisnacsasecedbatnuscavecvenasnan 2, 4
ee IED ce ceddasndicductdieepsncsukauns i
RCW 82.04.440 (former, amended 1987) ............ 2,4
Ge EL s Gancnchdeancdnssneeséeasaonads 2, 10, 18
ee CE 5 o.ca nd beadnskkescdsdensvVisestuinnes 2,3
See MRI, 6.009 Sed ckcdbisdndcncuscanansacas >
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ase MIL Sas Suabsddaedavdcabacenssncseeas 2, 3, 22
ee MN a 666 ce ccabepganesddonteccnotunws 2, 3, 22
Viii
TABLE OF AUTHORITIES - Continued
Page
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OPINIONS AND ORDERS ENTERED IN THIS CASE
The Opinion of the Court of Appeals of the State of
Washington, Division II, that gives rise to this petition is
published at Kalama Chemical v. State, 102 Wn. App. 577, 9
P.3d 236 (2000) and is found in App. A. An unpublished
Order of the Court of Appeals of the State of Washington,
Division II calling for additional briefing is reprinted in
App. B. The Order of the Washington Supreme Court
denying Petitioners’ petition for review is published at
143 Wn.2d 1006, 20 P.3d 944 (2001) and is found in App.
C. The Opinion and Orders of the trial court in this case
are unpublished. They are reprinted in App. B.
¢
JURISDICTION
The Opinion of the Court of Appeals of the State of
Washington sought to be reviewed is dated September 15,
2000. The Washington State Supreme Court denied Peti-
tioners’ petition for review on March 6, 2001. This Court
has jurisdiction to review this petition and the Court of
Appeals decision pursuant to 28 U.S.C. § 1257.
+
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
United States Constitutional Provisions
Art. I, § 8 (The Commerce Clause): “The Congress
shall have power. . . To regulate Commerce . . . among
the several States... .”
Amend. V (The Takings Clause): “[NJor shall private
property be taken for public use, without just compensa-
tion.”
Amend. XIV (The Due Process Clause): “[NJor shall
any State deprive any person of life, liberty, or property
without due process of law... . ”
Washington State Statutes!
RCW 4.56.110
RCW 19.52.020
RCW 82.04.240
RCW 82.04.250
RCW 82.04.270
RCW 82.04.4286
RCW 82.04.440 (former, amended 1987)
RCW 82.04.440
RCW 82.32.050
RCW 82.32.060
RCW 82.32.090
RCW 82.32.150
RCW 82.32.180
RCW 82.32.210
RCW 82.32.215
RCW 82.32.220
STATEMENT OF THE CASE
This case concerns what minimally adequate remedy
is required when interstate commerce is coerced into
1 Reprinted in App. D.
paying unconstitutionally discriminatory taxes and what
remedy and cause of action exists when a State fails to
provide such a minimally adequate remedy.
<< -SOCU
Kalama Chemical, Inc. (“Kalama”) and Advanced
Technology Laboratories, Inc. (“ATL”), Petitioners, both
manufactured products in Washington that they sold out-
side the State. For the privilege of manufacturing, both
companies were coerced into paying Washington manu-
facturing business and occupation taxes for the period
January 1, 1980 through July 23, 1987. App. A at A2. That
is, if the taxes were not paid the companies were subject
to penalties, interest and business closure. Washington
State provided no meaningful opportunity for a hearing
prior to payment of the taxes.3 At the time the taxes were
paid, the statutory remedy for payment of unconstitu-
tional taxes was a refund.* See, App. A at A3.
2 See, RCW 82.32.050, RCW 82.32.090, RCW 82.32.150, RCW
82.32.210, RCW 82.32.215 and RCW 82.32.220. See generally,
McKesson Corp. v. Florida Alcohol & Tobacco Div., 496 U.S. 18 at 38
n.21 (1990) (“We have long held that, when a tax is paid in order
to avoid financial sanctions or a seizure of real or personal
property, the tax is paid under ‘duress’ in the sense that the
State has not provided a fair and meaningful predeprivation
procedure.”).
3 See, Tyler Pipe Industries, Inc. v. Department of Revenue, 96
Wn.2d 785, 791, 638 P.2d 1213 (1982) (“Tyler I”) (Denying
injunctive relief because the “statutory scheme at issue provides
the legal remedy of a refund suit. ...”); See also, RCW 82.32.150
and RCW 82.32.180.
4 National Can Corp. v. Department of Revenue, 109 Wn.2d
878, 880-81, 749 P.2d 1286 (1988); See also, RCW 82.04.4286 and
RCW 82.32.060.
Petitioners, along with a number of other companies,
previously sought a refund of the taxes paid between |
January 1, 1980 and June 19, 1985 in National Can Corp. v.
Department of Revenue, 105 Wn.2d 327, 715 P.2d 128, cor-
rected, 732 P.2d 134 (1986) (National Can 1) vacated, Tyler
Pipe Industries, Inc. v. Department of Revenue, 483 U.S. 232
(1987) (Tyler II).> In that action, this Court held the Wash-
ington manufacturing tax imposed on Petitioners uncon-
stitutionally discriminatory.
The constitutional defect with the tax is plain. The
manufacturing tax would not have been imposed on Peti-
tioners if they sold their products in Washington. Former
RCW 82.04.440 (amended 1987). See aiso, RCW 82.04.240,
RCW 82.04.250 and RCW 82.04.270. The manufacturing
tax was only imposed on companies manufacturing in
Washington and selling outside the State. Companies that
manufactured in Washington and sold locally were not
subject to the manufacturing tax. Instead, they were sub-
ject to one of the State’s selling taxes. The State argued
that the selling taxes imposed on local commerce com-
pensated for the manufacturing taxes imposed solely on
interstate commerce. As manufacturing and selling are
not substantially equivalent events, this Court rejected
the State’s proffered defense and held the manufacturing
tax to be facially discriminatory. Tyler II, 483 U.S. at
240-44.
Washington’s tax system was also held to be inter-
nally inconsistent. A Washington manufacturer selling in
> Tyler Pipe II was a consolidated appeal from National Can I
and Tyler I.
Washington only paid the selling tax. But, if Washington’s
tax system was applied in every state, a Washington
manufacturer selling outside the State would pay Wash-
ington’s manufacturing tax and would also pay a selling
tax in the state of sale. Thus, interstate commerce bore a
heavier tax burden than local commerce. This lack of
internal consistency resulted in Washington’s tax being
unfairly apportioned as well as discriminatory.® Tyler II,
483 U.S. at 247-48.
On remand, the Washington Supreme Court applied
Tyler II prospectively only and denied Petitioners any
retroactive relief. National Can Corp. v. Department of Reve-
nue, 109 Wn.2d 878, 749 P.2d 1286 (1988) (“National Can
II”). After the denial of any retroactive relief by the
Washington Supreme Court, Petitioners sought review in
this Court of their rights to a refund of the taxes paid
prior to June 19, 1985. This Court denied that petition for
certiorari.
After the denial of the petition for certiorari, these
Petitioners filed this action in Washington State Superior
Court. In this action, Petitioners claim that the denial of
any retroactive remedy by the Washington Supreme
Court was the final step necessary to complete the State’s
taking of Petitioners’ property without just compensa-
tion. Thus, in this action Petitioners seek relief for Wash-
ington State committing the constitutional tort of a
6 The Court went on to discuss in the context of
Washington’s selling taxes how a credit system might cure the
lack of internal consistency. Tyler II, 483 U.S. at 249.
taking.” The property taken by Washington was (i)
money; (ii) the vested right to a statutory refund of that
money; and (iii) the substantive due process right to a
clear and certain remedy for the illegal forced payment of
the money”. Petitioners also seek for the first time in this
action a refund of the unconstitutional taxes they paid
between June 19, 1985 and July 23, 1987.1!
Prior to this action being heard by the trial court, the
Washington Supreme Court overruled its National Can II
decision in Digital Equipment Corporation v. Department of
Revenue, 129 Wn.2d 177, 916 P.2d 933 (1996).12 This Court
7 Petitioners raised the federal question of a taking
requiring just compensation in their complaints. App. E.
8 ATL was coerced into paying approximately $1,148,000 to
the State in illegal taxes during the period January 1, 1980
through June 19, 1985. Kalama was similarly coerced into
paying approximately $511,000 during the same time period.
See, App. A at A3.
9 See generally, Ettor v. Tacoma, 228 U.S. 148 (1913) (Repeal of
a statute requiring Tacoma to compensate for damage that
already has occurred deprived damaged party of vested right)
and see, Forbes Pioneer Boat Line v. Board of Commissioners, 258
U.S. 338 (1922) (State legislature cannot take away a right to
recover money that is due when the legislative act is passed).
10 McKesson Corp. v. Florida Alcohol & Tobacco Div., 496 U.S.
18 (1990). At a minimum “the State’s duty under the Due
Process Clause to provide a ‘clear and certain remedy’ requires
it to ensure that the tax as actually imposed on petitioner and its
competitors during the contested tax period does not deprive
petitioner of tax moneys in a manner that discriminates against
interstate commerce.” Id. at 43.
11 Petitioners’ complaints raised the refund claim for taxes
paid between June 19, 1985 and July 23, 1987. See, App. E.
12 Digital held that a retroactive remedy was appropriate
and in the context of an out-of-state manufacturer selling in
also announced its decisions in McKesson Corp. v. Florida
Alcohol & Tobacco Div., 496 U.S. 18 (1990) (At a minimum
“the State’s duty under the Due Process Clause to pro-
vide a ‘clear and certain remedy’ requires it to ensure that
the tax as actually imposed on petitioner and its competi-
tors during the contested tax period does not deprive
petitioner of tax moneys in a manner that discriminates
against interstate commerce”), Reich v. Collins, 513 U.S.
106 (1994) (States may not bait and switch by offering a
refund remedy at the time of payment and then deny a
refund at the postdeprivation hearing), and Newsweek,
Inc. v. Florida, 522 U.S. 442 (1998).
The trial court held that Petitioners’ refund claims for
taxes paid between June 19, 1985 and July 23, 1987 were
barred by collateral estoppel and that their claims for just
compensation for their property taken by the State were
barred by res judicata. App. B at B4. Inconsistent with its
holding that collateral estoppel barred the refund claim,
the trial court still awarded Petitioners credits for certain
selling taxes they paid to other states on products manu-
factured between June 19, 1985 and July 23, 1987. App. B
at B4-B5. In National Can II, the decision that formed the
basis for the collateral estoppel decision of the trial court,
Petitioners were awarded no such relief.
After the application of the credit remedy afforded
by the trial court, Petitioners still were subject to the
manufacturing tax. Local commerce was still exempt from
the manufacturing tax for the periods involved in the
Washington awarded credits for certain taxes paid to other
states.
litigation. Neither the trial court nor any statute has ever
imposed the manufacturing tax on Washington manufac-
turers selling in Washington for the time periods
involved in this case. Thus, the Washington manufactur-
ing tax paid by these Petitioners remained facially dis-
criminatory.
Petitioners timely appealed to the Court of Appeals
of the State of Washington, Division II. After oral argu-
ment, the Court of Appeals entered an Order calling for
additional briefing from both parties on the following
issues:
(1) Under W.R. Grace v. State, 137 Wn.2d 580,
973 P.2d 1011 (1999), are Kalama and ATL enti-
tled to credits for B&O taxes paid to Washington
between 1980 and 1985?
(2) If taxpayers are entitled to apply for credits
for the period 1980 to 1985, what affect, if any,
does this have on the takings claim?
In crafting its remedy, the Court of Appeals did not
distinguish between taxes paid between June 19, 1985 and
July 23, 1987 for which refund is being sought and the
taxes paid between January 1, 1980 and June 19, 1985 on
which the takings claim is based. Rather the Court of
Appeals concluded that “Kalama and ATL are entitled to
credits, not refunds, for B&O manufacturing taxes paid
between 1980 and 1987 if they paid manufacturing or
selling taxes to other jurisdictions for the same products.”
App. A at A5.35
13 While the Court of Appeals affirmed the trial court, its
grant of credits for the entire period January 1, 1980 through
Again, after application of the more time-expansive
credit remedy afforded by the Court of Appeals, Peti-
tioners still were subject to the manufacturing tax. Local
commerce was still exempt from the manufacturing tax
for all time periods involved in the litigation. Neither a
court nor a statute has ever imposed the manufacturing
tax on Washington manufacturers selling in Washington
for any time period involved in this case. Thus, the Wash-
ington manufacturing tax actually imposed on these Peti-
tioners remains facially discriminatory.
The Court of Appeals concluded that the providing
of credits in this case resulted in the State not taking
Petitioners’ property without just compensation. It
rejected Petitioners’ claim for a return of the illegal taxes
with interest reasoning that the “constitutional problem
with the tax before 1987 was that it could discriminate
against interstate manufacturers who might be subject to
a comparable tax on goods in another state.” The Court of
Appeals held that the “1987 two-way credit system elimi-
nated this constitutional defect . . . (citations omit-
ted)... [a]Jnd because the credit system was intended to
be, and has been held to be, retroactive, Kalama and ATL
have suffered no discriminatory double taxation.” App. A
at A6é.'4
July 23, 1987 enlarged the remedy provided by the trial court
and is inconsistent with the trial court’s holding that the takings
claim was barred by res judicata. The trial court had awarded no
relief for the period before June 19, 1985. The relief awarded by
both the trial court and the Court of Appeals is inconsistent with
holding that the refund claim is barred by collateral estoppel.
14 The 1987 credit system imposed the manufacturing tax
prospectively on all parties manufacturing in Washington and (a)
10
Petitioners timely petitioned the Washington
Supreme Court for review of the Court of Appeals’ deci-
sion. On March 6, 2001, the Washington Supreme Court
denied the Petition without further opinion.
ze
REASONS FOR GRANTING THE WRIT
The State Court’s Decision Denying That Peti-
tioners’ Property Was Taken Without Just Compen-
sation Conflicts With Relevant Decisions of This
Court.
Petitioners were required to pay unconstitutional
taxes. Petitioners fully exhausted their state law pro-
cedural remedies to recover their money in National Can I
and National Can II. In National Can II, the State denied
Petitioners any remedy for coercing Petitioners to pay the
unconstitutional taxes. At the moment the Washington
Court’s decision became final, Petitioners’ cause of action
for the constitutional tort accrued.
The denial of any retroactive remedy in National Can
II was the final State action necessary for Washington
provided credits to Washington’s selling tax if the goods were
sold in Washington and (b) provided credits to the
manufacturing tax if the goods were sold outside of Washington
and a tax substantially equivalent to Washington’s selling taxes
was imposed on the Washington manufacturer by the foreign
state. While the legislature intended to have the credits apply
retroactively, the legislation did not require, and no court has
required, that the manufacturing tax be retroactively imposed on
Washington manufacturers selling in Washington. See RCW
82.04.440.
11
State to take Petitioners’ property without just compensa-
tion. The property taken was (i) money; (ii) the vested
right to a statutory refund of that money; and (iii) the
substantive due process right to a clear and certain rem-
edy for the illegal forced payment of the money. Thus,
ATL and Kalama are here seeking just compensation.
The Fifth Amendment to the United States Constitu-
tion provides: “[N]or shall private property be taken for
public use, without just compensation.”15
The Amendment does not prohibit the taking of
property. Rather, the Amendment only requires that
states provide just compensation for taking property. First
English Evangelical Lutheran Church of Glendale v. County of
Los Angeles, 482 U.S. 304 at 314-15 (1987) (“[T]he Amend-
ment makes clear that it is designed not to limit govern-
mental interference with property rights per se, but rather
to secure compensation in the event of otherwise proper
interference amounting to a taking.”) Williamson County
Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172
at 194 (1985) (“The Fifth Amendment does not proscribe
the taking of property; it proscribes taking without just
compensation.”).
The Fifth Amendment is a self-executing provision of
the Constitution. The Amendment limits governmental
power to take property by providing a specific remedy,
15 “The Fifth Amendment applies against the States
through the Fourteenth Amendment.” Williamson County
Regional Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 175 n.1
(1979). See also, San Diego Gas & Electric Co. v. San Diego, 450 U.S.
621, 623 n.1 (1981).
12
just compensation for such state action.’ Thus, a state .
cannot change the remedy for a taking. See generally,
Regional Rail Reorganization Act Cases, 419 U.S. 102, 151
(1974) and Monongahela Navigation Co. v. United States, 148
U.S. 312, 326-27 (1893). Whenever there is a taking, the
remedy must be just compensation.
States are not required to pay just compensation in
advance of or contemporaneous with a taking. “Instead,
the Constitution is satisfied by the provision of meaning-
ful postdeprivation process. Thus, the State’s action is not
‘complete’ in the sense of causing a constitutional injury
‘unless or until the State fails to provide an adequate
postdeprivation remedy for the property loss’.” Wil-
liamson County, 473 U.S. at 195. See also, Parratt v. Taylor,
451 U.S. 527 (1981). Stated differently, compensation must
first be sought through the procedures the State has pro-
vided before a claim for just compensation is ripe. See,
Williamson County, 473 U.S. at 194; see also, First English,
482 U.S. at 312 n.6.
In this case, the State required Petitioners to turn
over their property when it forced them to pay illegal
taxes. Petitioners then sought relief through the refund
procedures the State provided. Having been denied relief,
and only by being denied relief, Petitioners’ constitu-
tional tort cause of action became justiciable.!”
16 See generally, First English Evangelical Lutheran Church of
Glendale v. County of Los Angeles, 482 U.S. 304, 315-16 (1987) and
San Diego Gas & Electric. Co. v. San Diego, 450 U.S. 621, 655 n.21
(1981) (Brennan, J. dissenting).
17 Thus, res judicata cannot bar Petitioners’ tort claim as the
claim did not accrue until after National Can II was decided.
13
Evaluating Petitioners’ tort claim is relatively easy.
Petitioners’ property was taken under color of state tax
law. It has long been understood that taxes are paid
under duress whenever the state does not provide a fair
and meaningful predeprivation hearing and payment is
required to avoid penalties, interest and business closure.
See, McKesson Corp. v. Florida Alcohol & Tobacco Div., 496
U.S. 18, 38 n.21 (1990); United States v. Mississippi Tax
Comm'n, 412 U.S. 363, 368 (1973); Ward v. Love County, 253
U.S. 17, 23 (1920); Gaar, Scott & Co. v. Shannon, 223 U.S.
468, 471 (1912) and Atchison T. & S.F.R.Co. v. O'Connor,
223 U.S. 280, 285-86 (1912). Here, payment was made to
avoid penalties, interest and business closure. Payment
was also required as a condition of challenging the illegal
tax. Thus, the State illegally and forcibly seized Peti-
tioners’ property.’®
Consistent with Washington State procedure, Peti-
tioners paid the illegal taxes and sought to obtain a
remedy through court action. They successfully demon-
strated the taxes were illegal. Nevertheless, the Washing-
ton Supreme Court denied them any relief. In hindsight,
18 It is of no import that the taking arose under color of a
State tax law. The supposed taxing authority for the State’s
illegal act does not alter the constitutional obligation of the
State. See generally, Myles Salt Co. v. Board of Commissioners, 239
U.S. 478 (1916); Village of Norwood v. Baker, 172 U.S. 269, 278
(1898); Brushaber v. Union Pacific Railroad, 240 U.S. 1, 24-25
(1915); Steward Machine Co. v. Davis, 301 U.S. 548 (1937); Atchison
T. & S.F.R.Co. v. O’Connor, 223 U.S. 280, 287 (1912); Ward v. Love
County, 253 U.S. 17, 24 (1920); Carpenter v. Shaw, 280 U.S. 363,
369 (1930); Montana National Bank of Billings v. Yellowstone
County, 276 U.S. 499, 504-05 (1928); lowa-Des Moines National
Bank v. Bennett, 284 U.S. 239, 247 (1931).
14
even the Washington Supreme Court knows the denial of
relief was wrong.!9 More importantly, it was also the final
step necessary to complete the State’s taking of Peti-
tioners’ property without just compensation. At that
moment, the constitutional cause of action for a taking
arose. The constitutional tort now being complete, the
State’s obligation to pay just compensation is constitu-
tionally mandated.
The State Court of Appeals was clearly concerned
with Petitioners’ takings claim. By Order, it required
additional briefing after oral argument on the issue. Spec-
ifically, the State Court wanted to know whether granting
Petitioners credits would defeat their takings claim. App.
B.
After the additional briefing, the State Court of
Appeals concluded that the granting of credits in this
case defeated the takings claim. The State Court reasoned
“because the constitutional flaw in the statute was not a
lack of state authority to impose it, the tax, before 1987,
was not a nullity. (citation omitted). It follows that the
State has not taken Kalama’s and ATL’s property without
just compensation. The State was entitled to collect the
manufacturing tax from Kalama and ATL between 1980
and 1987 so long as Kalama and ATL were not subject to
out-of-state taxation on the same activity.” App. A at A6.
19 The Washington Supreme Court overruled its National
Can II decision in Digital Equipment Corporation v. Department of
Revenue, 129 Wn.2d 177, 916 P.2d 933 (1996).
15
The State Court erred in failing to recognize that
according to the decisions of this Court the constitutional
tort of a taking accrued at the time the State Supreme
Court denied any remedy in National Can II.2° The pros-
ecution of that case was the complete exhaustion of the
State law procedures for relief.2!
Once those procedures were exhausted, it became too
late for the State to avoid the taking, and the concomitant
obligation to pay just compensation.
Il. The Remedy Provided By Washington’s Court of
Appeals Is Inadequate and Inconsistent With Deci-
sions of This Court.
A. Washington’s Credit Remedy Provides Little
Relief.
The remedy afforded Petitioners by the Court of
Appeals decision for both their takings claim (related to
taxes paid between January 1, 1980 and June 19, 1985)
and their refund claim (related to taxes paid between
June 19, 1985 and July 23, 1987) is a credit to the tax paid
for the amount of similar gross receipt manufacturing or
20 For the reasons expressed in Part II, C, supra, the Court of
Appeals also erred in concluding that retroactive credits alone
cured the discrimination.
21 The failed prosecution of the state law causes of action is
why the State argued and the trial court agreed that the takings
claim was barred by res judicata. But for Petitioners’ federal
cause of action for a taking, Petitioners would not now be able
to state any claim for relief for the time period related to the
takings claim.
— — —
16
selling taxes that the Petitioners paid to other jurisdic-
tions on the same goods.
Petitioner, ATL paid Washington manufacturing
taxes of $1,628,000 and in addition paid $6,591 of similar
gross receipt selling and/or manufacturing taxes to other
jurisdictions on the same products. The decision of the
Court of Appeals would result in a refund to ATL of only
$6,591 plus refund interest. Petitioner, Kalama paid
approximately $869,000 of Washington manufacturing
taxes and did not pay any similar gross receipt selling
and/or manufacturing taxes on the same goods to other
jurisdictions. The decision of the Court of Appeals would
result in Kalama receiving no refund.
B. Just Compensation Is The Only Permissible
Remedy For A Taking.
While the compensation for legal taxes is the enjoy-
ment of living in a civilized society, Compania General De
Tabacos De Filipinas v. Collector of Internal Revenue, 275 U.S.
87, 100 (1927) or the enjoyment of a privilege that a State
could otherwise withhold, the Constitution provides that
the compensation for property illegally taken by the gov-
ernment must be “just compensation.” In giving content
to the just compensation requirement, the Supreme Court
has required the owner to be returned to as good a
position pecunarily as if his property had not been taken.
United States v. 564.54 Acres of Land, 441 U.S. 506, 510
(1979); Olson v. United States, 292 U.S. 246, 255 (1934).
Here, there is no difficulty in valuing the property
taken. It was money. The compensation for money must
.
17
be the same amount of money.?2 In addition, Washington
law provides for 12% interest on liquidated claims. See
generally, RCW 4.56.110, RCW 19.52.020 and Pederson’s v.
Transamerica Ins., 83 Wn. App. 432, 922 P.2d 126 (1996).
Petitioners’ just compensation claim is for a liquidated
amount. This Court has held that-where property is taken
and later returned, compensation for the temporary
deprivation of the property must be made. First English,
482 U.S. at 320, 321. Compensation for the temporary
deprivation of money is interest. Thus, Petitioners are
entitled to a return of the amount of money the State
illegally obtained plus interest at the rate of 12% from the
date of the taking. No other compensation will be just,
and the Constitution requires just compensation.
C. The Facial Discrimination This Court Held
Unconstitutional In Tyler II Remains In Place.
Petitioners are Washington manufacturers selling
goods outside the State. Petitioners were required to pay
the Washington manufacturing tax. RCW 82.04.240. Other
22 The other property taken by the State, the vested right to
a statutory refund of the money and the substantive due process
right to a clear and certain remedy for the illegal forced
payment of the money, are similarly equal in value to the money.
At first glance, returning the money taken with interest appears
to fully compensate for the taking of the other property. On
further examination, however, it may be appropriate to
compensate Petitioners for their costs and fees in being forced to
litigate their entitlement to relief. Such an additional award
appears to be part of just compensation as it is necessary to
return Petitioners to the status quo ante the denial of the vested
statutory right and the substantive due process right to a clear
and certain remedy.
18
Washington manufacturers not engaging in interstate
commerce did not have to pay that tax. Former RCW
82.04.440 (amended 1987). Petitioners would not have
had to pay the manufacturing tax if they sold their goods
in Washington.
Only subjecting Washington manufacturers who
engaged in interstate commerce to the manufacturing tax
violates the Commerce Clause. “[A] State may not tax a
transaction or incident more heavily when it crosses state
lines than when it occurs entirely within the State.”
Armco Inc. v. Hardesty, 467 U.S. 638, 642 (1984) quoted in
Tyler II, 483 U.S. at 240-41.25
The State Court failed to recognize that imposing the
manufacturing tax only on interstate commerce was a
reason the tax was unconstitutionally discriminatory. The
only constitutional defect the State Court observed “was
that it (the tax) could discriminate against interstate man-
ufacturers who might be subject to a comparable tax on
goods in another state.” App. A at A6.
The granting of credits solved the lack of internal
consistency, but credits fail to remedy the discrimination
resulting from only imposing the manufacturing tax on
23 The fact that Washington subjected Washington
manufacturers selling in the State to a selling tax is of no import.
Manufacturing and selling are not substantially equivalent
events so that a tax on one can compensate for the lack of a tax
on the other. Thus, the tax imposed on these Petitioners is
facially discriminatory and unconstitutional. See, Tyler II, 483
U.S. at 240-44.
19
interstate commerce. Credits do not result in a Washing-
ton manufacturer selling locally paying the manufactur-
ing tax that Petitioners were forced to pay. Credits do not
result in either Kalama or ATL not paying the manufac-
turing tax. Thus, even after application of the credits,
Washington’s manufacturing tax remains discriminatory
in hindsight because the State will tax the event of manu-
facturing goods sold in interstate commerce but not the
event of manufacturing goods sold locally.24 Armco and
Tyler II are directly on point.
As it leaves the manufacturing tax facially discrimi-
natory, the credit remedy is an insufficient remedy
according to:
(i) McKesson, 496 U.S. at 43 (“[T]he State’s duty
under the Due Process Clause to provide a ‘clear and
certain remedy’ requires it to ensure that the tax as actu-
ally imposed on petitioner and its competitors during the
contested tax period does not deprive petitioner of tax
moneys in a manner that discriminates against interstate
commerce ... ”) and
(ii) Montana National Bank of Billings v. Yellow-
stone County, 276 U.S. 499 (1928) (holding that a party
forced to pay a discriminatory tax is entitled to a refund
of the excess tax paid - unless the disparity is removed in
some other manner).
24 The State Court wrote, “the credit system was intended
to be, and has been held to be, retroactive”, and the State Court
retroactively applied the credits, but not the manufacturing tax.
App. A at A6. Thus, the tax remains only imposed on interstate
commerce.
20
Therefore, the credit remedy actually applied by the State
is impermissible.
Today, a full refund with interest is the only permiss-
ible remedy that can retroactively cure the manufacturing
tax discrimination. Petitioners, Washington manufac-
turers selling in interstate commerce, cannot be subject to
a tax they would not pay if they only engaged in local
commerce. Even if the State had at one time the oppor-
tunity to correct that inequality by imposing the manu-
facturing tax retroactively on Washington manufacturers
selling locally,25 the time for that potential course of
action has long passed. _
It has been more than 12 years since National Can II.
The State has shown no willingness to retroactively
impose the manufacturing tax. A similar problem arose in
Iowa-Des Moines National Bank v. Bennett, 284 U.S. 239
(1931). As explained in McKesson, 496 U.S. at 35-36:
The Court held unanimously that the State of
Iowa’s taxation of the shares of state and
national banks at a higher rate than those of
competing domestic corporations violated the
Equal Protection Clause. With respect to the
banks’ claim for a refund of excess taxes paid,
Justice Brandeis explained
‘The [banks’] rights were violated, and the
causes of action arose, when taxes at the lower
rate were collected from their competitors. It
may be assumed that all ground for a claim for
refund would have fallen if the State, promptly
25 For the reasons expressed in Part II, D, supra, the State
never had the right to deny the statutory refund remedy.
21
upon discovery of the discrimination, had
removed it by collecting the additional taxes
from the favored competitors. By such collection
the [banks’] grievances would have been
redressed, for these are not primarily over-
assessment. The right invoked is that to equal
treatment; and such treatment will be attained if
either their competitors’ taxes are increased or
their own reduced.’
But the State did not elect to set matters right by
collecting additional taxes from the banks’ com-
petitors for the four tax years encompassed by
the suit. And the Court found it ‘well settled’
that the banks could not be ‘remitted to the
necessity of awaiting such action by the state
officials upon their own initiative.’ .The Court
held, therefore, that the banks were ‘entitled to
obtain in these suits refund of the excess of
taxes exacted from them’. (citations omitted).
Like the taxpayer in Iowa-Des Moines National Bank,
Petitioners can no longer be made to await the retroactive
imposition of the manufacturing tax against all Washing-
ton manufacturers who sold goods locally. Therefore,
Petitioners are entitled to obtain in this action a refund of
the unconstitutional taxes exacted from them during the
second time period (June 19, 1985 through July 23, 1987)
in addition to just compensation for the taxes paid during
the first time period (January 1, 1980 through June 19,
1985).
22
D. At The Time Of Payment, Washington Offered
These Petitioners A Refund Remedy.
At the time the illegal taxes were coerced from Peti-
tioners, the statutory remedy was a refund. National Can
‘Corp. v. Department of Revenue, 109 Wn.2d 878, 880-81, 749
P.2d 1286 (1988) (“If the taxes were collected in violation
of the constitution, then the state refund statutes would
mandate refunds.”); See also, RCW 82.04.4286 and RCW
82.32.060.
The State’s offering of a refund remedy was not an
act of generosity. The State wished to avoid predepriva-
tion remedies. Washington State provides no meaningful
opportunity for a hearing prior to payment of taxes and
injunctions generally may not be obtained so long as the
clear and certain remedy of a refund exists.?®
In Reich v. Collins, 513 U.S. 106 (1994), Georgia held
out what plainly appeared to be a clear and certain post-
deprivation remedy, a tax refund, and then declared, only
after the disputed taxes had been paid, that no such
remedy existed. Although states may maintain remedial
schemes that are exclusively predeprivation, exclusively
postdeprivation, or hybrid and may reconfigure their
schemes over time to fit changing needs, Reich made clear
that states may not “bait and switch” by reconfiguring
after payment. States cannot offer a refund at the time of
26 See, Tyler Pipe Industries, Inc. v. Department of Revenue, 96
Wn.2d 785, 791, 638 P.2d 1213 (1982) (Denying injunctive relief
because the “statutory scheme at issue provides the legal
remedy of a refund suit. ...”); See also, RCW 82.32.150 and RCW
82.32.180.
tt ts
~
i i i a eee a wee as
23
payment and then claim that remedy is unavailable after
the postdeprivation hearing finds the tax illegal.
Following Reich, the Court issued its per curiam deci-
sion in Newsweek, Inc. v. Florida, 522 U.S. 442 (1998).
Newsweek again involved a situation where a state offered
a refund remedy at the time of payment and then after
payment developed an alternative remedy. Again, the
Court rejected the alternative. Newsweek, “who reason-
ably relied on the apparent availability of a postpayment
refund when paying the tax” had to be afforded that
remedy. States may not “bait and switch”. Fundamental
fairness and due process compel states that have chosen
statutory schemes offering refund remedies and no pre-
deprivation relief to provide the refund remedy on which
taxpayers reasonably rely.?” Id.
The law is now clear enough that the State wrote
below: “States cannot ‘bait and switch’ by offering a
postdeprivation remedy, and then withdrawing that rem-
edy after the taxes are paid.”28 App. E at E9. But that is
27 The Court followed Newsweek with its vacation of a
Florida State court decision in Dryden v. Madison County, 522
U.S. 1145 (1998). The Reich, Newsweek and Dryden series of cases
are entirely consistent with the vested right analysis of the
Court’s earlier decisions in Ettor v. Tacoma, 228 U.S. 148 (1913)
(Repeal of a statute requiring Tacoma to compensate for damage
that already has occurred deprived damaged party of vested
right) and Forbes Pioneer Boat Line v. Board of Commissioners, 258
U.S. 338 (1922) (State legislature cannot take away a right to
recover money that is due when the legislative act is passed).
28 The State then argued that the credit remedy was an
appropriate remedy. The State misses the point. Having offered
a refund remedy, that particular remedy cannot be withdrawn.
24
exactly what Washington has done. It offered ATL and
Kalama a refund remedy when they paid the illegal tax.
Once the tax was declared unconstitutional, however, the
State withdrew the remedy. First, in National Can II, it
afforded no retroactive remedy. Now, it offers a different
retroactive remedy, limited credits. The Court’s prior
decisions make clear that ATL and Kalama must receive
the refund remedy that was reasonably relied upon. But,
unless the Court grants certiorari, the State will have
avoided predeprivation hearings by promising the clear
and certain remedy of a refund, and then after being
successfully challenged, the State will have avoided pro-
viding that remedy by switching remedies.
Ill. CONCLUSION
For the reasons expressed above, this petition for
writ of certiorari to review the decision of the Court of
Appeals of the State of Washington should be granted.
DATED this 14 day of May, 2001.
FRANKLIN G. DINCES
Counsel of Record
Otherwise, the State will have baited taxpayers with the
promise of a clear and certain remedy, a refund, and then
switched the remedy that is available. Switching remedies
results in the State’s remedy being unclear and uncertain.
Al
APPENDIX A
IN THE COURT OF APPEALS OF THE
STATE OF WASHINGTON
DIVISION II
KALAMA CHEMICAL, INC. and
ADVANCED TECHNOLOGY
LABORATORIES, INC.,
Appellants,
No. 24358-0-II
v.
STATE OF WASHINGTON,
Respondent.
PUBLISHED
OPINION
Filed: SEP 15 2000
)
)
)
)
)
)
)
)
)
)
ARMSTRONG, C.J. - Kalama Chemical, Inc. and
Advanced Technology Laboratories, Inc. (ATL), two com-
panies that manufacture products sold primarily out of
the state, sued the State of Washington for taking their
property without just compensation and for not refund-
ing taxes paid. The takings claim is based upon Washing-
ton Business & Occupation (B&O) taxes collected
between 1980 and 1985. The United States Supreme Court
found the taxes to be unconstitutional under the Com-
merce Clause. Tyler Pipe Indus., Inc. v. Department of Reve-
nue, 483 U.S. 232, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987)
(Tyler Pipe II). But on remand, the Washington Supreme
Court denied the taxpayers a refund, holding that Tyler
Pipe II applied prospectively only. National Can Corp. v.
Department of Revenue, 109 Wn.2d 878, 749 P.2d 1286
(1988) (National Can IT), overruled by Digital Equip. Corp. v.
Department of Revenue, 129 Wn.2d 177, 916 P.2d 933 (1996).
|
|
A2
In response to National Can II, the Washington Legislature
amended the refund statute, providing a tax credit rather
than a refund for taxes unlawfully collected. Kalama and
ATL contend that the State’s collection of the taxes fol-
lowed by the court’s holding in National Can II amounted
to an unconstitutional taking, requiring just compensa-
tion. Kalama and ATL also claim a refund, under RCW
82.32.180, for B&O taxes paid between June 20, 1985, and
July 23, 1987.
The trial court granted summary judgment for the
State, ruling that res judicata barred the claim for taxes
paid between 1980 and 1985 and that collateral estoppel
barred the claim for taxes paid between 1985 and 1987.
The issues raised have been decided by the Washington
Supreme Court. Kalama and ATL are limited to a credit
for taxes unlawfully collected; the credit scheme applies
to taxes paid between 1980 and 1987; and the credit
system does not violate the Commerce Clause. We affirm.
FACTS
Kalama and ATL manufacture products in Washing-
ton, which are primarily sold in other states. Both com-
panies paid Washington manufacturing B&O taxes from
January 1, 1980, through July 23, 1987. The taxes, accord-
ing to Kalama and ATL, were paid “under threat of
penalties, interest and business closure.”
Both parties, along with a number of other com-
panies, sought a refund of B&O taxes paid through June
19, 1985, in National Can Corp. v. Department of Revenue,
105 Wn.2d 327, 732 P.2d 134 (1986) (National Can I),
vacated, Tyler Pipe II, 483 U.S. 232. The Washington
A3
Supreme Court held that the B&O tax statute, RCW
82.04.440, did not violate the Commerce Clause. National
Can I, 105 Wn.2d at 330, 343. On appeal, the United States
Supreme Court held that the Washington B&O tax dis-
criminated against interstate commerce in violation of the
Commerce Clause. Tyler Pipe II, 483 U.S. at 248.1 On
remand, our Supreme Court held that Tyler Pipe II applied
prospectively only. National Can II, 109 Wn.2d at 895.
Therefore, Kalama and ATL’s request for retroactive
relief, in the form of a tax refund, was denied. National
Can II, 109 Wn.2d at 895.
In 1989, Kalama and ATL filed their current com-
plaints seeking just compensation and a refund of taxes
paid. Kalama seeks compensation for approximately
$511,000 paid between 1980 and 1985, as well as a refund
for approximately $358,000 paid between 1985 and 1987.
ATL seeks compensation for approximately $1,148,000
paid between 1980 and 1985, as well as a refund for
approximately $480,000 paid during 1985 and 1987.
Kalama did not pay any gross receipts taxes to other
states during this time period. ATL claims to have paid
$6,591 in gross receipts taxes to other states during this
period.
At the time Kalama and ATL paid the taxes, a tax-
payer could sue for a refund of taxes wrongly collected.
Former RCW 82.32.180 (1987). In 1987, the Washington
Legislature responded to the holding in Tyler Pipe II by
amending the B&O tax exemption statute and replacing
1 Tyler Pipe II was a consolidated appeal from National Can
I, 105 Wn.2d 327 and Tyler Pipe Indus., Inc. v. Department of
Revenue, 105 Wn.2d 318, 715 P.2d 123 (1986) (Tyler Pipe I).
A4
the multiple activities exemption with a two-way credit
scheme.? Former RCW 82.04.440 (1987). The two-way
credit scheme applies retroactively. Laws of 1987, 2d Ex.
Sess., ch. 3, § 3. See also W.R. Grace & Co. v. Department of
Revenue, 137 Wn.2d 580, 584, 973 P.2d 1011, cert. denied,
120 S. Ct. 371 (1999).
ANALYSIS
I. Summary Judgment Standard of Review
When reviewing an order of summary judgment, we
engage in the same inquiry as the trial court. Wilson v.
Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982). Sum-
mary judgment is appropriate only if the pleadings, affi-
davits, depositions, and admissions on file demonstrate
the absence of any genuine issues of material fact, and
the moving party is entitled to judgment as a matter of
law CR 56(c). Here, the summary judgment involves only
questions of law.
II. Refund of B&O taxes paid between
January 1980 and July 23, 1987
Kalama and ATL, relying on United States Supreme
Court cases decided after National Can II, argue that
Washington must refund unconstitutional taxes. Wash-
ington, according to Kalama and ATL, may not hold out a
2 In a one-way credit scheme a taxpayer would receive
credit against the manufacturing tax for wholesale tax paid to
another state. A two-way credit scheme adds a credit against
wholesale taxes for manufacturing taxes paid to another state to
the one-way credit scheme.
AS
refund as an available remedy at the time the taxes are
paid, and then deny the refund after the taxes are paid.
See Newsweek, Inc. v. Florida, 522 U.S. 442, 118 S. Ct. 904,
139 L. Ed. 2d 888 (1998); Reich v. Collins, 513 U.S. 106, 115
S. Ct. 547, 130 L. Ed. 2d 454 (1994).
The same argument was rejected by our Supreme
Court in W.R. Grace. The court held that the “bait and
switch” arguments of Newsweek do not apply because the
“credits provided in the 1987 remedial statute are the
appropriate remedy in this instance.” W.R. Grace, 137
Wn.2d at 599. And the credit system applies retroactively
to taxes paid before 1987. W.R. Grace, 137 Wn.2d at 603.
Thus, Kalama and ATL are entitled to credits, not
refunds, for B&O manufacturing taxes paid between 1980
and 1987 if they paid manufacturing or selling taxes to
other jurisdictions for the same products.3
Kalama and ATL contend, however, that W.R. Grace is
not controlling for the taxes paid between 1980 and 1985.
They argue that W.R. Grace was an action for a refund and
the action here is a new, independent action under the
Fifth Amendment for a taking without just compensation.
And, according to Kalama and ATL, the only just com-
pensation for collecting an unconstitutional tax is the
same amount of money plus interest. This argument
assumes that the manufacturing tax, as it existed before
1987, was a nullity as a result of the United States
Supreme Court decision holding it unconstitutional.
American Nat'l Can Corp. v. Department of Revenue, 114
3 The State concedes that Kalama and ATL are entitled to
credits for taxes paid to other states since 1980.
A6
Wn.2d 236, 787 P.2d 545 (1990); Digital, 129 Wn.2d 177;
and W.R. Grace, 137 Wn.2d 580, teach otherwise.
The constitutional problem with the tax before 1987
was that it could discriminate against interstate manufac-
turers who might be subject to a comparable tax on goods
sold in another state. Tyler II, 483 U.S. at 248. The 1987
two-way credit system eliminated this constitutional
defect. American Nat'l Can, 114 Wn.2d at 249; Digital, 129
Wn.2d at 194; W.R. Grace, 137 Wn.2d at 603-04. And
because the credit system was intended to be, and has
been held to be, retroactive, Kalama and ATL have suf-
fered no discriminatory double taxation. Finally, because
the constitutional flaw in the statute was not a lack of
State authority to impose it, the tax, before 1987, was not
a nullity. W.R. Grace, 137 Wn.2d at 595-96. It follows that
the State has not taken Kalama and ATL’s property with-
out just compensation. The State was entitled to collect
the manufacturing tax from Kalama and ATL between
1980 and 1987 so long as Kalama and ATL were not
subject to out-of-state taxation on the same activity. The
retroactive credit system prevents such double taxation.
Kalama and ATL are entitled to a credit for any compara-
ble tax paid out-of-state on the same goods during the
same period.
We affirm.
/s/ Armstrong, C.J.
ARMSTRONG, CJ.
A7
We concur:
/s/ Houghton, J.
HOUGHTON, J.
/s/ Bridgewater, J.
BRIDGEWATER, J.
Bl
APPENDIX B
IN THE COURT OF APPEALS OF THE
STATE OF WASHINGTON
DIVISION II
No. 24358-0-II
ORDER CALLING FOR
ADDITIONAL BRIEFING
Filed:
January 24, 2000
KALAMA CHEMICAL,
INC. and ADVANCED
TECHNOLOGY
LABORATORIES, INC.
Appellants,
|
|
|
|
|
|
v. |
STATE OF |
WASHINGTON, |
DEPARTMENT OF |
REVENUE, |
|
Respondent.
Pursuant to RAP 10.1H, this court requests additional
briefing from the parties, addressing the following ques-
tions:
(1) Under W.R. Grace v. State, 137 Wn.2d 580, 973
P.2d 1011 (1999), are Kalama and ATL entitled to credits
for B&O taxes paid to Washington between 1980 and
1985?
(2) If taxpayers are entitled to apply for credits for
the period 1980 to 1985, what affect, if any, does this have
on their takings claims?
The supplemental brief of appellants is due 30 days
from the date of this order. Respondent’s reply to the
supplemental brief is due 20 days after appellants’ brief is
B2
filed. The supplemental briefs shall not exceed 15 pages
in length.
IT IS SO ORDERED.
DATED this 24th day of January, 2000.
/s/ {Illegible]
ACTING CHIEF JUDGE
cc: Franklin G. Dinces
Anne E. Egeler
B3
IN THE SUPERIOR COURT OF WASHINGTON
FOR THURSTON COUNTY
KALAMA CHEMICAL No. 89-2-02968-2
)
INC., and ) No. 89-2-02926-7
ADVANCED ) (Consolidated)
TECHNOLOGY )
Summary Judgment Order
LABORATORIES, INC. ) Dismissing Action With
Plaintiffs, Prejudice
V. ) (Filed Feb. 1, 1999)
STATE OF )
WASHINGTON,
Defendant. )
)
This matter came before the Court for hearing on
Plaintiffs’ motions for summary judgment on July 31,
1998 and again on September 18, 1998. The Court has
previously denied Plaintiffs’ motions at the hearing on
September 18 and by Order dated October 7, 1998. Con-
sistent with its previous order and decisions, the Court
now enters a final summary judgment order dismissing
this action with prejudice.
In dismissing this action, the Court has considered its
Order of October 7, 1998, the oral arguments of counsel at
the hearings on September 18 and July 31, 1998, and the
following pleadings and papers filed in these consoli-
dated actions:
1. Plaintiff’s Motions for partial Summary Judgment
and Memoranda in Support Thereof dated August 10,
1998 and June 19, 1998;
B4
2. Defendant’s Memoranda In Opposition To Plain-
tiff’s Motions dated September 4, 1998 and July 20, 1998;
3. Plaintiffs’ Rebuttal Memorandum filed Septem-
ber 9, 1998 and July 23, 1998;
4. The Declaration of John Hagen dated October 29,
1997;
5. The Declaration of Tracy Day dated September 8,
1998;
6. The Stipulation and Order regarding Consolida-
tion dated November 6, 1998 and
7. The Complaints and Amended Complaints filed
herein -
Based on the oral arguments of Counsel and the
pleadings, papers and evidence presented, the Court now
finds:
1. No genuine issue of material fact exists with
respect to Plaintiffs’ claims;
2. Defendant is entitled, as a matter of law, to a
summary judgment dismissing Plaintiffs’ action with
prejudice.
3. For the reasons stated at the hearing, Plaintiffs’
claim for just compensation for taxes paid between Janu-
ary 1, 1980 and June 19, 1985 is barred by res judicata;
4. Plaintiffs’ claim for a refund of, or just compensa-
tion for, taxes paid between June 19, 1985 and July 1987 is
barred by collateral estoppel;
5. The State of Washington has agreed to pay Plain-
tiff Advanced Technology Laboratories a credit for the
BS
amount of gross receipts taxes paid to other jurisdictions
between June 19, 1985 and July 1987. The amount of such
a credit is $2,621.00.
- 6. Plaintiff Advanced Technology Laboratories is
entitled to interest on the credit referred to above at the
statutory rate set forth in RCW 82.32.060.
Therefore, the Court enters an Order requiring the
State of Washington to pay Advanced Technology Labo-
ratories a refund of $2,621.00 plus statutory interest.
The Court further Orders that Plaintiffs’ causes of
action otherwise be dismissed with prejudice.
IT IS SO ORDERED this 1 day of Feb., 1999.
/s/ Christine Pomeroy
JUDGE
Presented by:
CHRISTINE O. GREGOIRE
Attorney General
/s/ Anne Egeler
Anne Egeler, WSBA # 20258
Assistant Attorney General
Attorneys for Defendant
Department of Revenue
400 General Admin., Bldg.
P.O. Box 40123
Olympia, WA 98504
(360) 753-5528
Es oS eg SRA th ON? le
f
Oe Pe ee ee TNS eee ee a” ye eee ig tee, Cee
B6
Approved as to Form
Notice of Presentation Waived
The Dinces Law Firm
/s/ Franklin G. Dinces
Franklin G. Dinces, WSBA #13473
Attorney for Plaintiffs,
Advanced Technology Laboratories,
Inc. and
Kalama Chemical, Inc.
Suite 1300, 720 Olive Way
Seattle, WA 98101
(206) 713-1287
B7
IN THE SUPERIOR COURT OF THE
STATE OF WASHINGTON
IN AND FOR THURSTON COUNTY
KALAMA CHEMICAL, )
INC., ) NO. 98-2-02968-2
Plaintiff, ) ORDER DENYING
a8 MOTION FOR PARTIAL
SUMMARY JUDGMENT
STATE OF )
WASHINGTON )
DEPARTMENT OF )
REVENUE, ‘
Defendant. )
)
This matter having come before the Court for hearing
on July 31, 1998, on Plaintiff's Motion For Partial Sum-
mary Judgment and the Court having reviewed and con-
sidered Plaintiff's Motion For Partial Summary Judgment,
Memorandum In Support Thereof, Declaration of John W.
Hagen, Defendant’s Response to Motion for Summary
Judgment together with its Exhibits, Plaintiff's Rebuttal
Memorandum in Support of Motion For Partial Summary
Judgment and the Court having considered the records
and files herein together with the parties’ oral arguments
by counsel the Court now finds:
1. There are no genuine issues of material fact with
respect to Plaintiff’s claim for just compensation for taxes
paid between January 1, 1980 and June 19, 1985.
2. For the reasons stated in the attached oral opin-
ion, Plaintiff's claim is barred by res judicata and-coHeat-
erat-estoppet CAP 10/7/98
B8
THEREFORE IT IS HEREBY ADJUDGED, ORDERED
AND DECREED that Plaintiff’s motion for partial sum-
mary judgment filed June 24, 1998 is denied.
DONE IN OPEN COURT this 7 day of September
Oct., 1998.
/s/ C. Pomeroy
CHRISTINE A. POMEROY,
JUDGE
Presented by:
CHRISTINE O. GREGOIRE
Attorney General
/s/ Anne Egeler
ANNE E. EGELER, WSBA No. 20258
Assistant Attorney General
Counsel for Defendant
Department of Revenue
Approved as to form and
notice of presentation waived:
THE DINCES LAW FIRM
FRANKLIN G. DINCES
WSBA No. 13473
Counsel for Plaintiff
Ka.ama Chemcial
B9
Superior Court of the State of Washington
For Thurston County
[Names And Address Omitted In Printing]
[SEAL]
October 8, 1998
(Filed Oct. 8, 1998)
Mr. Franklin G. Dinces
Attorney at Law
4607 Saddleback Dr. NW
Gig Harbor, WA 98332
Ms. Anne E. Egeler
Assistant Attorney General
PO Box 40123
Olympia, WA 98504-0123
Letter Opinion
Re: Kalama Chemical, Inc. v. State/Dep’t. of Revenue
Thurston County Cause No. 98-2-62968-2
9-2-2968-2
Dear Counsel:
The Court reviewed the transcript and the arguments
of the July 31, 1998 hearing and although the Court did
include collateral estopped in its oral opinion upon
reconsideration will delete it as a basis to reject the “tak-
ing” and “just compensation” arguments for the tax years
1980 - 1985. The Court will uphold the ruling on “res
judicata”. I have signed the order presented, a copy of
which is attached to this letter opinion.
For the tax years 1985 --1987 the Court will deny
summary judgment on the basis of collateral estopped.
This Court finds plaintiffs argument attempt to relitigate
B10
essentially the same issues which have been before the
Washington State and U.S. Supreme Courts, which
Kalama was a party to. National Can II, 109 Wn.2d 878
(1988) cert denied, 486 U.S. 1040 (1988).
This Court agrees with the state Attorney General
that the cases of Newsweek, Inc v. Florida, 118 S. Ct. 904
(1998) and Dryden v. Madison County, 118 S. Ct. 1162
(1998) are distinguishable. This is not a “bait and switch”
case as in Newsweek. Following the Tyler Pipe decision, the
state of Washington offered a post deprivation remedy in
the form of a credit to those taxpayers who have paid
taxes to other jurisdictions and as seen in the McKesson
Corp v. Florida Alcohol & Tobacco Division, 496 US 18
(1990), the U.S. Supreme Court gives to states the flex-
ibility in responding to its determination.
I'll sign Findings of Fact, Conclusion of Law and
Order upon presentation.
Very truly yours,
/s/ Christine A. Pomeroy
Christine A. Pomeroy
Judge
Attachments
cc: Court File
Bil
IN THE SUPREME COURT OF WASHINGTON
FOR THURSTON COUNTY
KALAMA CHEMICAL
INC., and ADVANCED
TECHNOLOGY
LABORATORIES, INC.
Plaintiffs,
No. 89-2-02968-2
No. 89-2-02926-7
(Consolidated)
Stipulation and Order
vs.
STATE OF WASHINGTON
Defendant.
)
)
)
)
)
)
)
)
)
)
)
STIPULATION OF THE PARTIES
(Filed Nov. 6, 1998)
Each of the parties to Kalama Chemical, Inc. v. State of
Washington, Department of Revenue, Thurston County No.
89-2-02968-2 and each of the parties in Advanced Technol-
ogy Laboratories, Inc. v. State of Washington, Department of
Revenue, Thurston County No. 89-2-02926-7, stipulate and
agree to the following:
1. Except for the identity of the plaintiffs and the
amount and/or kind of taxes paid by the plaintiffs to
Defendant and other jurisdictions all facts material to the
resolution of both actions are identical.
2. All legal issues raised by plaintifts in one action
have been raised in the other action.
3. It is in the interests of both parties that the mat-
ters be consolidated into one action for purposes of deci-
sion, appeal and otherwise. Such consolidation will also
result in a judicial economy.
B12
4. The arguments made by both parties in regard to
the various motions already brought in Kalama Chemical,
Inc. v. State of Washington, Department of Revenue,
Thurston County No. 89-2-02968-2 would be made by
both parties in the other action.
ORDER
THIS MATTER having come before the Court upon
the stipulation of the parties pursuant to CR 42, and for
good cause shown, it is hereby ORDERED that:
1. Advanced Technology Laboratories, Inc. v. State of
Washington, Department of Revenue, Thurston County No.
89-2-02926-7 is consolidated into Kalama Chemical, Inc. v.
State of Washington, Department of Revenue, Thurston
County No. 89-2-02968-2.
2. All pleadings and other papers previously filed
in Advanced Technology Laboratories, Inc. v. State of Wash-
ington, Department of Revenue, Thurston County No.
89-2-02968-2.
3. All motions, briefs and other papers filed in
Kalama Chemical, Inc. v. State of Washington, Department of
Revenue, Thurston County No. 89-2-02968-2 on behalf of
plaintiff Kalama Chemical, Inc. shall be deemed to have
been filed on behalf of plaintiff Advanced Technology
Laboratories, Inc. Specifically, Advanced Technology Lab-
oratories, Inc. shall be deemed to have raised every legal
and factual argument raised by Kalama Chemical, Inc.
4. All further proceedings in either action shall be
filed solely in Kalama Chemical, Inc. v. State of Washington,
Department of Revenue, Thurston County No. 89-2-02968-2.
B13
5. The date of trial set for Advanced Technology Labo-
ratories, Inc. v. State of Washington, Department of Revenue,
Thurston County No. 89-2-02926-7 is hereby stricken.
IT IS SO ORDERED this 6th day of November, 1998.
/s/ Christine A. Pomeroy
JUDGE
Presented by:
CHRISTINE O. GREGOIRE
Attorney General
/s/ Cindy R. Evans WSBA #27309 for
Anne Egeler, WSBA # 20258
Assistant Attorney General
Attorneys for Defendant
Department of Revenue
400 General Admin. Bldg.
P.O. Box 40123
Olympia, WA 98504
(360) 753-5528
Approved as to Form
Notice of Presentation Waived
The Dinces Law Firm
/s/ Franklin Dinces
Franklin G. Dinces, WSBA #13473
Attorney for Plaintiffs,
Advanced Technology Laboratories,
Inc. and
Kalama Chemical, Inc.
Suite 1300, 720 Olive Way
Seattle, WA 98101
(206) 713-1287
Cl
APPENDIX C
THE SUPREME COURT OF WASHINGTON
KALAMA CHEMICAL, INC. and )
ADVANCED TECHNOLOGY ) NO. 70301-9
LABORATORIES, INC., ) aaa
Petitioners, C/A NO.
v. ) 24358-0-II
STATE OF WASHINGTON, (Filed
Respondent. ) Mar. 6, 2001)
)
Department I of the Court considered this matter at
its March 6, 2001, Motion Calendar, and unanimously
agreed that the following order be entered.
IT IS ORDERED:
That the Petition for Review is denied.
DATED at Olympia, Washington this 6th day of
March, 2001.
/s/ Gerry J. Allfauden
CHIEF JUSTICE
D1
APPENDIX D
4.56.110 Interest on judgments. Interest on judg-
ments shall accrue as follows:
(1) Judgments founded on written contracts, pro-
viding for the payment of interest until paid at a specified
rate, shall bear interest at the rate specified in the con-
tracts: PROVIDED, That said interest rate is set forth in
the judgment.
(2) All judgments for unpaid child support that
have accrued under a superior court order or an order
entered under the administrative procedure act shall bear
interest at the rate of twelve percent.
(3) Except as provided under subsections (1) and (2)
of this section, judgments shall bear interest from the
date of entry at the maximum rate permitted under RCW
19.52.020 on the date of entry thereof: PROVIDED, That
in any case where a court is directed on review to enter
judgment on a verdict or in any case where a judgment
entered on a verdict is wholly or partly affirmed on
review interest on the judgment or on that portion of the
judgment affirmed shall date back to and shall accrue
from the date the verdict was rendered.
19.52.020 Highest rate permissible — Setup charges.
(1) Any rate of interest shall be legal so long as the rate of
interest does not exceed the higher of: (a) Twelve percent
per annum; or (b) four percentage points above the
equivalent coupon issue yield (as published by the Board
D2
of Governors of the Federal Reserve System) of the aver-
age bill rate for twenty-six week treasury bills as deter-
mined at the first bill market auction conducted during
the calendar month immediately preceding the later of (i)
the establishment of the interest rate by written agree-
ment of the parties to the contract, or (ii) any adjustment
in the interest rate in the case of a written agreement
permitting an adjustment in the interest rate. No person
shall directly or indirectly take or receive in money,
goods, or things in action, or in any other way, any
greater interest for the loan or forbearance of any money,
goods, or things in action.
(2)(a) In any loan of money in which the funds
advanced do not exceed the sum of five hundred dollars,
a setup charge may be charged and collected by the
lender, and such setup charge shall not be considered
interest hereunder.
(b) The setup charge shall not exceed four percent
of the amount of funds advanced, or fifteen dollars,
whichever is the lesser, except that on loans of under one
hundred dollars a minimum not exceeding four dollars
may be so charged.
(3) Any loan made pursuant to a commitment to
lend at an interest rate permitted at the time the commit-
ment is made shall not be usurious. Credit extended
pursuant to an open-end credit agreement upon which
interest is computed on the basis of a balance or balances
outstanding during a billing cycle shall not be usurious if
D3
on any one day during the billing cycle the rate at which
interest is charged for the billing cycle is not usurious.
82.04.220 Business and occupation tax imposed.
There is levied and shall be collected from every person a
tax for the act or privilege of engag:ng in business activ-
ities. Such tax shall be measured by the application of
rates against value of products, gross proceeds of sales,
or gross income of the business, as the case may be.
82.04.230 Tax upon extractors. Upon every person
engaging within this state in business as an extractor; as
to such persons the amount of the tax with respect to
such business shall be equal to the value of the products,
including byproducts, extracted for sale or for commer-
cial or industrial use, multiplied by the rate of 0.484
percent.
The measure of the tax is the value of the products,
including byproducts, so extracted, regardless of the
place of sale or the fact that deliveries may be made to
points outside the state.
| 82.04.240 Tax on manufacturers. Upon every person
except persons taxable under RCW 82.04.260 (1), (2), (4),
(5), or (6) engaging within this state in business as a
D4
manufacturer; as to such persons the amount of the tax
with respect to such business shall be equal to the value
of the products, including byproducts, manufactured,
multiplied by the rate of 0.484 percent.
The measure of the tax is the value of the products,
including byproducts, so manufactured regardless of the
place of sale or the fact that deliveries may be made to
points outside the state.
82.04.250 Tax on retailers. (Effective until July 1,
2001.) (1) Upon every person except persons taxable
under RCW 82.04.260(5) or subsection (2) of this section
engaging within this state in the business of making sales
at retail, as to such persons, the amount of tax with
respect to such business shall be equal to the gross pro-
ceeds of sales of the business, multiplied by the rate of
0.471 percent.
(2) Upon every person engaging within this state in
the business of making sales at retail that are exempt
from the tax imposed under chapter 82.08 RCW by reason
of RCW 82.08.0261, 82.08.0262, or 82.08.0263, as to such
persons, the amount of tax with respect to such business
shall be equal to the gross proceeds of sales of the busi-
ness, multiplied by the rate of 0.484 percent.
82.04.270 Tax on wholesalers, distributors. (Effective
until July 1, 2001.) Upon every person except persons
TiS S37 oe) oer ae
DS
taxable under RCW 82.04.260(5) engaging within this
state in the business of making sales at wholesale; as to
such persons the amount of tax with respect to such
business shall be equal to the gross proceeds of sales of
such business multiplied by the rate of 0.484 percent.
82.04.4286 Deductions — Nontaxable business. In
computing tax there may be deducted from the measure
of tax amounts derived from business which the state is
prohibited from taxing under the Constitution of this
state or the Constitution or laws of the United States.
Pre July 23, 1987 version
82.04.440 Persons taxable on multiple activities.
Every person engaged in activities which are within the
purview of the provisions of two or more of sections
RCW 82.04.2230 to 82.04.290, inclusive, shall be taxable
under each paragraph applicable to the activities engaged
in: Provided, That persons taxable under RCW 82.04.250 or
82.04.270 shall not be taxable under RCW 82.04.230,
82.04.240 or subsection (2), (3), (4), (5), or (7) of RCW
82.04.260 with respect to extracting or manufacturing of
the products so sold, and that persons taxable under
RCW 82.04.240 or RCW 82.04.260 subsection (4) shall not
D6
be taxable under RCW 82.04.230 with respect to extract-
ing the ingredients of the products so manufactured.
ee ee
Post July 23, 1987 version
82.04.440 Persons taxable on multiple activities -
Credits. (1) Every person engaged in activities which are
within the purview of the provisions of two or more of
sections RCW 82.04.230 to 82.04.290, inclusive, shall be
taxable under each paragraph applicable to the activities
engaged in.
(2) Persons taxable under RCW 82.04.250 or
82.04.270 shall be allowed a credit against those taxes for
any (a) manufacturing taxes paid with respect to the
manufacturing of products so sold in this state, and/or
(b) extracting taxes paid with respect to the extracting of
products so sold in this state or ingredients of products
so sold in this state. Extracting taxes taken as credit under
subsection (3) of this section may also be taken under this
subsection, if otherwise allowable under this subsection.
The amount of the credit shall not exceed the tax liability
arising under this chapter with respect to the sale of those
products.
(3) Persons taxable under RCW 82.04.240 or
82.04.260 subsection (4) shall be allowed a credit against
those taxes for any extracting taxes paid with respect to
extracting the ingredients of the products so manufac-
tured in this state. The amount of the credit shall not
exceed the tax liability arising under this chapter with
respect to the manufacturing of those products.
D7
(4) Persons taxable under RCW 82.04.230, 82.04.240,
or subsection (2), (3), (4), (5), or (7) of RCW 82.04.260 with
respect to extracting or manufacturing products in this
state shall be allowed a credit against those taxes for any
(i) gross receipts taxes paid to another state with respect
to the sales of the products so extracted or manufactured
in this state, (ii) manufacturing taxes paid with respect to
the manufacturing of products using ingredients so
extracted in this state, or (iii) manufacturing taxes paid
with respect to manufacturing activities completed in
another state for products so manufactured in this state.
The amount of the credit shall not exceed the tax liability
arising under this chapter with respect to the extraction
or manufacturing of those products.
(5) For the purpose of this section:
(a) “Gross receipts tax” means a tax:
(i) Which is imposed on or measured by the gross
volume of business, in terms of gross receipts or in other
terms, and in the determination of which the deductions
allowed would not constitute the tax an income tax or
value added tax; and
(ii) Which is also not, pursuant to law or custom,
separately stated from the sales price.
(b) “State” means (i) the state of Washington, (ii) a
state of the United States other than Washington, or any
political subdivision of such other state, (iii) the District
of Columbia, and (iv) any foreign country or political
subdivision thereof.
(c) “Manufacturing tax” means a gross receipts tax
imposed on the act or privilege of engaging in business as
D8
a manufacturer, and includes (i) the taxes imposed in
RCW 82.04.240 and subsections (2), (3), (4), (5), and (7) of
RCW 82.04.260, and (ii) similar gross receipts taxes paid
to other states.
(d) “Extracting tax” means a gross receipts tax
imposed on the act or privilege of engaging in business as
an extractor, and includes the tax imposed in RCW
82.04.230 and similar gross receipts taxes paid to other
states.
(e) “Business”, “manufacturer”, “extractor”, and
other terms used in this section have the meanings given
in RCW 82.04.020 through 82.04.212, notwithstanding the
use of those terms in the context of describing taxes
imposed by other states.
82.32.050 Deficient and delinquent payments - Pen-
alties and interest — Limitations. If upon examination of
any returns or from other information obtained by the
department it appears that a tax or penalty has been paid
less than that properly due, the department shall assess
against the taxpayer such additional amount found to be
due and as to assessments made on and after May 1, 1965,
including assessments for additional tax or penalties due
prior to that date shall add thereto interest at the rate of
nine percent per annum from the last day of the year in
which the deficiency is incurred until date of payment.
The department shall notify the taxpayer by mail of the
additional amount and the same shall become due and
shall be paid within ten days from the date of the notice,
D9
or within such further time as the department may pro-
vide. If payment is not received by the department by the
due date specified in the notice, or any extension thereof,
the department shall add a penalty of ten percent of the
amount of the additional tax found due. If the depart-
ment finds that all or any part of the deficiency resulted
from an intent to evade the tax payable hereunder, a
further penalty of fifty percent of the additional tax
found to be due shall be added.
No assessment or correction of an assessment for
additional taxes due may be made by the department
more than four years after the close of the tax year, except
(1) against a taxpayer who has not registered as required
by this chapter, (2) upon a showing of fraud or of misrep-
resentation of a material fact by the taxpayer, or (3) where
a taxpayer has executed a written waiver of such limita-
tion.
82.32.060
(1) If, upon receipt of an application by a taxpayer
for a refund or for an audit of the taxpayer’s records, or
upon an examination of the returns or records of any
taxpayer, it is determined by the department that within
the statutory period for assessment of taxes, penalties, or
interest prescribed by RCW 82.32.050 any amount of tax,
penalty, or interest has been paid in excess of that prop-
erly due, the excess amount paid within, or attributable
to, such period shall be credited to the taxpayer’s account
or shall be refunded to the taxpayer, at the taxpayer’s
D10
option. Except as provided in subsections (2) and (3) of
this section, no refund or credit shall be made for taxes,
penalties, or interest paid more than four years prior to
the beginning of the calendar year in which the refund
application is made or examination of records is com-
pleted.
(2) The execution of a written waiver under RCW
82.32.050 or 82.32.100 shall extend the time for making a
refund or credit of any taxes paid during, or attributable
to, the years covered by the waiver if, prior to the expira-
tion of the waiver period, an application for refund of
such taxes is made by the taxpayer or the department
discovers a refund or credit is due.
(3) Notwithstanding the foregoing limitations there
shall be refunded or credited to taxpayers engaged in the
performance of United States government contracts or
subcontracts the amount of any tax paid, measured by
that portion of the amounts received from the United
States, which the taxpayer is required by contract or
applicable federal statute to refund or credit to the United
States, if claim for such refund is filed by the taxpayer
with the department within one year of the date that the
amount of the refund or credit due to the United States is
finally determined and filed within four years of the date
on which the tax was paid: PROVIDED, That no interest
shall be allowed on such refund.
(4) Any such refunds shall be made by means of
vouchers approved by the department and by the issu-
ance of state warrants drawn upon and payable from
such funds as the legislature may provide. However,
taxpayers who are required to pay taxes by electronic
SOE a eae
D11
funds transfer under RCW 82.32.080 shall have any
refunds paid by electronic funds transfer.
(5) Any judgment for which a recovery is granted
by any court of competent jurisdiction, not appealed
from, for tax, penalties, and interest which were paid by
the taxpayer, and costs, in a suit by any taxpayer shall be
paid in the same manner, as provided in subsection (4) of
this section, upon the filing with the department of a
certified copy of the order or judgment of the court.
(a) Interest at the rate of three percent per annum
shall be allowed by the department and by any court on
the amount of any refund, credit, or other recovery
allowed to a taxpayer for taxes, penalties, or interest paid
by the taxpayer before January 1, 1992. This rate of inter-
est shall apply for all interest allowed through December
31, 1998. Interest allowed after December 31, 1998, shall
be computed at the rate as computed under RCW
82.32.050(2). The rate so computed shall be adjusted on
the first day of January of each year for use in computing
interest for that calendar year.
(b) For refunds or credits of amounts paid or other
recovery allowed to a taxpayer after December 31, 1991,
the rate of interest shall be the rate as computed for
assessments under RCW 82.32.050(2) less one percent.
This rate of interest shall apply for all interest allowed
through December 31, 1998. Interest allowed after Decem-
ber 31, 1998, shall be computed at the rate as computed
under RCW 82.32.050(2). The rate so computed shall be
adjusted on the first day of January of each year for use
in computing interest for that calendar year.
D12
82.32.090 Late payment - Penalties. If payment of
any tax due is not received by the department of revenue
by the due date, there shall be assessed a penalty of five
percent of the amount of the tax; and if the tax is not
received within thirty days after the due date, there shall
be assessed a total penalty of ten percent cf the amount of
the tax; and if the tax is not received within sixty days
after the due date, there shall be assessed a total penalty
of twenty percent of the amount of the tax. No penalty so
added shall be less than two dollars.
If payment of any tax is received within the first ten
days of the month next succeeding the month in which
the tax is payable, the amount of such pay:nent shall be
credited to, and shal! be treated for all purposes as hav-
ing been collected during, the fiscal year which includes
the month preceding the month in which such due date
falls. Effective June 30, 1985, and thereafter if the pay-
ment of any tax is received during the first ten days in
July, the amount of such payment shall be credited to,
and shall be treated for all purposes as having been
collected during, the preceding fiscal year.
If a warrant be issued by the department of revenue
for the collection of taxes, increases, and penalties, there
shall be added thereto a penalty of five percent of the
amount of the tax, but not less than five dollars.
Notwithstanding the foregoing, the aggregate of pen-
alties imposed under this chapter for failure to file a
return, late payment of any tax, increase, or penalty, or
D13
issuance of a warrant shall not exceed twenty-five per-
cent of the tax due, or seven dollars, whichever is greater.
82.32.150 Contest of tax - Prepayment required -
Restraining orders and injunctions barred. All taxes,
penalties, and interest shall be paid in full before any
action may be instituted in any court to contest all or any
part of such taxes, penalties, or interest. No restraining
order or injunction shall be granted or issued by any
court or judge to restrain or enjoin the collection of any
tax or penalty or any part thereof, except upon the
ground that the assessment thereof was in violation of the
Constitution of the United States or that of the state.
82.32.170 Reduction of tax after payment — Petition —
Conference —- Determination by department. Any per-
son, having paid any tax, original assessment, additional
assessment, or corrected assessment of any tax, may
apply to the department within the time limitation for
refund provided in this chapter, by petition in writing for
a correction of the amount paid, and a conference for
examination and review of the tax liability, in which
petition he shall set forth the reasons why the conference
should be granted, and the amount in which the tax,
interest, or penalty, should be refunded. The department
shall promptly consider the petition, and may grant or
deny it. If denied, the petitioner shall be notified by mail
Ea gA Re Soe 2 Stee rg OY ee
D14
thereof forthwith; if a conference is granted, the depart-
ment shall notify the petitioner by mail of the time and
place fixed therefor. After the hearing the department
may make such determination as may appear to it just
and lawful, and shall mail a copy of its determination to
the petitioner.
82.32.180 Court appeal - Procedure. Any person,
except one who has failed to keep and preserve books,
records, and invoices as required in this chapter and
chapter 82.24 RCW, having paid any tax as required and
feeling aggrieved by the amount of the tax may appeal to
the superior court of Thurston county, within the time
limitation for a refund provided in chapter 82.32 assess-
ment, and a conference for examination and review of the
assessment. The petition shall set forth the reasons why
the correction should be granted and the amount of the
tax, interest, or penalties, which the petitioner believes to
be due. The department shall promptly consider the peti-
tion and may grant or deny it. If denied, the petitioner
shall be notified by mail thereof forthwith. If a conference
is granted, the department shall fix the time and place
therefor and notify the petitioner thereof by mail. After
the conference the department may make such deter-
mination as may appear to it to be just and lawful and
shall mail a copy of its determination to the petitioner. If
no such petition is filed within the twenty day period the
assessment covered by the notice shall become final.
The procedures provided for herein shall apply also
to a notice denying, in whole or in part, an application for
D15
a pollution control tax exemption and credit certificate,
with such modifications to such procedures established
by departmental rules and regulations as may be neces-
sary to accommodate a claim for exemption or credit.
82.32.210 Tax warrant — Filing — Lien —- Effect. If any
tax, increase, or penalty or any portion thereof is not paid
within fifteen days after it becomes due, the department
of revenue may issue a warrant under its official seal in
the amount of such unpaid sums, together with interest
thereon at the rate of one percent of the amount of such
warrant for each thirty days or portion thereof after the
date of such warrant. If, however the department of
revenue believes that a taxpayer is about to cease busi-
ness, leave the state, or remove or dissipate the assets out
of which taxes or penalties might be satisfied and that
any tax or penalty will not be paid when due, it may
declare the tax or penalty to be immediately due and
payable and may issue a warrant immediately.
The department shall file a copy of the warrant with
the clerk of the superior court of any county of the state
in which real and/or personal property of the taxpayer
may be found. Upon filing, the clerk shall enter in the
judgment docket, the name of the taxpayer mentioned in
the warrant and in appropriate columns the amount of
the tax or portion thereof and any increases and penalties
for which the warrant is issued and the date when the
copy is filed, and thereupon the amount of the warrant so
docketed shall become a specific lien upon all goods,
D16
wares, merchandise, fixtures, \equipment, or other per-
sonal property used in the conduct of the business of the
taxpayer against whom the wafrant is issued, including
property owned by third persots who have a beneficial
interest, direct or indirect, in the operation of the busi-
ness, and no sale or transfer of the personal property in
any way affects the lien. The lier, shall not be superior,
however, to bona fide interests of third persons which
had vested prior to the filing of the warrant when the
third persons do not have a beneficial interest, direct or
indirect, in the operation of the business, other than the
securing of the payment of a debt or the receiving of a
regular rental on equipment: Provided, however, That the
phrase “bona fide interests of third persons” does not
include any mortgage of real or personal property or any
other credit transaction that results in the mortgagee or
the holder of the security acting as trustee for unsecured
creditors of the taxpayer mentioned in the warrant who
executed the chattel or real property mortgage or the
document evidencing the credit transaction. The amount
of the warrant so docketed shall thereupon aiso become a
lien upon the title to and interest in all other real and
personal property of the taxpayer against whom it is
issued the same as a judgment in a civil case duly dock-
eted in the office of the clerk. The warrant so docketed
shall be sufficient to support the issuance of writs of
garnishment in favor of the state in the manner provided
by law in the case of judgments wholly or partially unsat-
isfied.
D17
82.32.215 Revocation of certificate of registration. If
any warrant issued under this chapter is not paid within
thirty days after it has been filed with the clerk of the
superior court, or if any taxpayer is delinquent, for three
consecutive reporting periods, in the transmission to the
department of revenue of retail sales tax collected by him,
the department of revenue may, by order issued under its
office seal, revoke the certificate of registration of the
taxpayer against whom the warrant was issued, and, if
the order is entered, a copy thereof shall be posted in a
conspicuous place at the main entrance to the taxpayer’s
place of business and shall remain posted until such time
as the warrant has been paid. Any certificate so revoked
shall not be reinstated, nor shall a new certificate of
registration be issued to the taxpayer, until the amount
due on the warrant has been paid, or provisions for
payment satisfactory to the department of revenue have
been entered, and until the taxpayer has deposited with
the department of revenue such security for payment of
any taxes, increases, and penalties, due or which may
become due in an amount and under such terms and
conditions as the department of revenue may require, but
the amount of the security shall not be greater than one-
half the estimated average annual liability of the tax-
payer.
82.32.220 Execution of warrant — Levy upon property
- Satisfaction. The department of revenue may issue an
order of execution, pursuant to a filed warrant, under its
official seal directed to the sheriff of the county in which
D18
the warrant has been filed, commanding him to levy
upon and sell the real and/or personal property of the
taxpayer found within his county, or so much thereof as
may be necessary, for the payment of the amount of the
warrant, plus the cost of executing the warrant, and
return the warrant to the department of revenue and pay
to it the money collected by virtue thereof within sixty
days after the receipt of the warrant. The sheriff shall
thereupon proceed upon the same in all respects and with
like effect as prescribed by law with respect to execution
or other process issued against rights or property upon
judgments of the superior court.
The sheriff shall be entitled to fees as provided by
law for his services in levying execution on a superior
court judgment and the clerk shall be entitled to a filing
fee as provided by law, which shall be added to the
amount of the warrant.
The proceeds received from any sale shall be credited
upon the amount due under the warrant and when the
final amount due is received, together with interest, pen-
alties, and costs, the judgment docket shall show the
claim for taxes to be satisfied and the clerk of the court
shall so note upon the docket. Any surplus received from
any sale of property shall be paid to the taxpayer or to
any lien holder entitled thereto. If the return on the
warrant shows that the same has not been satisfied in
full, the amount of the deficiency shall remain the same
as a judgment against the taxpayer which may be col-
lected in the same manner as the original amount of the
warrant.
El
APPENDIX E
SUPERIOR COURT OF WASHINGTON
FOR THURSTON COUNTY
KALAMA CHEMICAL, INC. ) No. 89-2-02968-2
Plaintiff, . COMPLAINT FOR JUST
COMPENSATION AND
) FOR REFUND OF
STATE OF WASHINGTON, ) TAXES
ate aoc | Lee
WASHINGTON,
Defendants.
Vv.
)
)
)
)
Plaintiff alleges:
1. Plaintiff Kalama Chemical, Inc. is a corporation
duly organized and existing under the laws of the State of
Washington and has paid all fees due to the State of
Washington.
2. Defendant Department of Revenue is an adminis-
trative agency of the State of Washington responsible for
the collection of Washington state excise taxes.
3. In Tyler Pipe Indus. v. Washington Dep't of Rev., 483
U.S. 232, 107 S. Ct. 2810, 97 L.Ed.2d 199 (1987), the United
States Supreme Court held that the manufacturing busi-
ness and occupation (“B&O”) tax of the State of Washing-
ton that was imposed at all times between January 1, 1980
and June 23, 1987 was unconstitutional as applied to
taxpayers in the position of plaintiff.
4. Plaintiff was a party before the court in Tyler Pipe.
E2
5. For activities performed between December 1,
1979 and June 23, 1987, plaintiff involuntarily paid under
threat of penalties, interest and business closure, $869,119
pursuant to the manufacturing B&O tax that was held
unconstitutional in Tyler Pipe. Of that amount, $511,016
was paid between January 1, 1980 and June 19, 1985 and
was the amount sought as a refund by plaintiff in Tyler
Pipe. The remaining $358,103 was paid after June 19, 1985
and no refund action has been brought previously by
plaintiff to recover such amount.
6. National Can Corp. v. Dep't of Rev., 109 Wash.2d
878, 749 P.2d 1286, appeal dismissed and cert denied, 108 S.
Ct. 2030 (1988), denied plaintiff a refund of the manufac-
turing taxes it paid between January 1, 1980 and June 19,
1985.
7. The Fifth Amendment to the United States Con-
stitution, which applies to the states through the Four-
teenth Amendment, provides in pertinent part that:
No person shall . . . be deprived of life,
liberty, or property, without due process of law;
nor shall private property be taken for public
use, without just compensation.
8. Article I, §16 of the Washington Constitution pro-
vides in pertinent part that:
No private property shall be taken... for public
or private use without just compensation having
first been made...
9. The State of Washington’s refusal to refund the
unconstitutional manufacturing B&O tax payments pur-
suant to the Washington Supreme Court’s decision in
National Can Corp. v. Dep't of Revenue, constituted a taking
oa eS ae
E3
of defendant’s property for which just compensation is
required within the meaning of the Fifth Amendment to
the United States Constitution and Article I, §16 of the
Washington Constitution.
10. RCW 82.04.4286 provides a deduction from the
measure of the B&O tax for amounts derived from busi-
ness which the state is prohibited from taxing under the
Constitution of the United States.
11. Plaintiff is entitled under RCW 82.04.4286 to a
refund of the taxes it paid between June 19, 1985 and June
23, 1987. In the alternative, such amounts were also taken
from plaintiff without just compensation as described in
paragraph 9.
12. The statutory rate of interest of tax refunds is 3
percent. Such a rate is confiscatory and discriminatory in
violation of the Fourteenth Amendment to the United
States Constitution and Article I, Section 12 of the Wash-
ington State Constitution. Other litigants receive prejudg-
ment interest at the rate of 12 percent per annum and the
true cost of money exceeds 3 percent.
WHEREFORE, plaintiff prays for:
1. An order requiring defendant to refund the
$358,103 of taxes paid between June 19, 1985 and June 23,
1987 plus 12 percent interest thereon from the date paid
to the date refunded.
2. Just compensation equal to the amount of money
taken from plaintiff between January 1, 1980 and June 19,
1985 ($511,016) plus reasonable interest.
3. Plaintiff’s reasonable costs and disbursements
herein.
E4
4. Such other and further relief as this Court deems
appropriate.
DATED this 27 day of December, 1989.
STOEL RIVES BOLEY JONES & GREY
By: /s/ Franklin G. Dinces
Franklin G. Dinces
Peter R. Jarvis
Attorneys for Plaintiff
E5
SUPERIOR COURT OF WASHINGTON-
FOR THURSTON COUNTY
ADVANCED TECHNOLOGY ) No. 89-2-02926-7
LABORATORIES, INC., FIRST AMENDED
Plaintiff, COMPLAINT FOR
JUST COMPENSA-
TION AND FOR
REFUND OF TAXES
(Filed Dec. 28, 1989)
V.
STATE OF WASHINGTON,
and DEPARTMENT OF
REVENUE, STATE OF
WASHINGTON,
Defendants.
me mee eee eee ee”
Plaintiff alleges:
1. Plaintiff Advanced Technology Laboratories, Inc.
is a corporation duly organized and existing under the
laws of the State of Washington and has paid all fees due
to the State of Washington.
2. Defendant Department of Revenue is an adminis-
trative agency of the State of Washington responsible for
the collection of Washington state excise taxes.
3. In Tyler Pipe Indus. v. Washington Dep’t of Rev., 483
U.S. 232, 107 S. Ct. 2810, 97 L.Ed.2d 199 (1987), the United
States Supreme Court held that the manufacturing busi-
ness and occupation (“B&O”) tax of the State of Washing-
ton that was imposed at all times between January 1, 1980
and June 23, 1987 was unconstitutional as applied to
taxpayers in the position of plaintiff.
4. Plaintiff was a party before the court in Tyler Pipe.
E6
5. Between January 1, 1980 and June 23, 1987, plain-
tiff involuntarily paid under threat of penalties, interest
and business closure, $1,628,129.46 pursuant to the manu-
facturing B&O tax that was held unconstitutional in Tyler
Pipe. Of that amount, $1,148,055.65 was paid between
January 1, 1980 and June 19, 1985 and was the amount
sought as a refund by plaintiff in Tyler Pipe. The remain-
ing $480,073.81 was paid between June 19, 1985 and June
23, 1987 and no refund action has been brought previ-
ously by plaintiff to recover such amount.
6. National Can Corp. v. Dep’t of Rev., 109 Wash.2d
878, 749 P.2d 1286, appeal dismissed and cert denied, 108 S.
Ct. 2030 (1988), denied plaintiff a refund of the manufac-
turing taxes it paid between January 1, 1980 and June 19,
1985.
7. The Fifth Amendment to the United States Con-
stitution, which applies to the states through the Four-
teenth Amendment, provides in pertinent part that:
No person shall . . . be deprived of life,
liberty, or property, without due process of law;
nor shall private property be taken for public
use, without just compensation.
8. Article I, §16 of the Washington Constitution pro-
vides in pertinent part that:
No private property shall be taken . . . for public
or private use without just compensation having
first been made...
9. The State of Washington’s refusal to refund the
unconstitutional manufacturing B&O tax payments pur-
suant to the Washington Supreme Court’s decision in
National Can Corp. v. Dep’t of Revenue, constituted a taking
E7
of defendant’s property for which just compensation is
required within the meaning of the Fifth Amendment to
the United States Constitution and Article I, §16 of the
Washington Constitution.
10. RCW 82.04.4286 provides a deduction from the
measure of the B&O tax for amounts derived from busi-
ness which the state is prohibited from taxing under the
Constitution of the United States.
11. Plaintiff is entitled under RCW 82.04.4286 to a
refund of the taxes if paid between June 19, 1985 and June
23, 1987. In the alternative, such amounts were also taken
from plaintiff without just compensation as described in
paragraph 9.
12. The statutory rate of interest for tax refunds is 3
percent. Such a rate is confiscatory and discriminatory in
violation of the Fourteenth Amendment to the United
States Constitution and Article I, Section 12 of the Wash-
ington State Constitution. Other litigants receive prejudg-
ment interest at the rate of 12 percent per annum and the
true cost of money exceeds 3 percent.
WHEREFORE, plaintiff prays for:
1. An order requiring defendant to refund the
$480,073.81 of taxes paid between June 19, 1985 and June
23, 1987, plus 12 percent interest thereon from the date
paid to the date refunded.
2. Just compensation equal to the amount of money
taken from plaintiff between January 1, 1980 and June 19,
1985 ($1,148,055.65) plus reasonable interest.
3. Plaintiff’s reasonable costs and disbursements
herein.
E8
4. Such other and further relief as this Court deems
appropriate.
DATED this [illegible] day of December, 1989.
STOEL RIVES BOLEY JONES & GREY
By: /s/,Franklin G. Dinces
Franklin G. Dinces
Peter R. Jarvis
Attorneys for Plaintiff
t
(a4
E9
IN THE SUPERIOR COURT OF WASHINGTON
FOR THURSTON COUNTY
KALAMA CHEMICAL, No. 89-2-02968-2
)
Plaintiff, Response to Motion
) for Summary
-VS- )
Judgment
STATE OF WASHINGTON, | )
DEPARTMENT OF REVENUE,’
Defendant. )
)
D. The Newsweek and Dryden Cases Are Clearly Dis-
tinguishable.
Kalama is now relying on an additional case, News-
week, Inc. v. Florida, ___ U.S. __, 118 S.Ct. 904, 139 L.Ed.2d
888 (1998). Florida law exempted newspapers, but not
magazines, from sales tax. After the law was struck
down, Newsweek filed a tax refund claim. Florida’s
refund statutes were ambiguous. One statute permitted
taxpayers to contest a tax before paying it. Id., 139 L.Ed.2d
at 890. However, a second statute allowed taxpayers to
seek a refund after paying the tax. Id. at 891. The state
court denied Newsweek’s refund request because the
company could have challenged the tax before paying it.
The U.S. Supreme Court reversed. States cannot “bait and
switch” by offering a postdeprivation remedy, and then
withdrawing that remedy after the taxes are paid. Id.
E10
Following the ruling in Newsweek, the court vacated a
second Florida tax refund case and remanded it for recon-
sideration in light of Newsweek. Dryden v. Madison Cy., __
U.S. __, 118 S. Ct. 1162, 140 L. Ed. 2d 173 (1998).°
It is difficult to understand why Kalama cites News-
week and Dryden. In sharp contrast to Florida, Washington
has not engaged in “bait and switch” tactics. It has
always offered a postdeprivation remedy. Following Tyler
Pipe, the Legislature provided a postdeprivation remedy
in the form of the 1987 credit law. As the state Supreme
Court noted in American Nat'l Can, the remedy was not
illusory. The state refunded substantial sums to taxpayers
who had paid gross receipts taxes to other jurisdictions.
Unlike the taxpayers who were entitled to a refund,
Kalama has not suffered harm by paying a gross receipts
tax to another jurisdiction. Newsweek did not overrule the
Court’s decision in McKesson. Therefore, Newsweek, can-
not be contorted to stand for the proposition that states
are required to provide a windfall refund to taxpayers
who have never suffered an injury.
Furthermore, as Kalama concedes, the decision in
Newsweek is based on Reich v. Collins, 516 U.S. 106, 115 S.
Ct. 547, 130 L. Ed. 2d 454 (1994). Reich was decided before
the state Supreme Court issued its opinion in Digital. In
fact, Digital relied on Reich and the “bait and switch”
argument in its briefs and oral argument to the state
Supreme Court and in its Petition for Certiorari to the
5 The Newsweek and Dryden opinions were issued before
Kalama filed its first motion.
E11
U.S. Supreme Court.® the argument was unsuccessful
with both Courts.
6 See Digital’s Opening Brief to the Washington Supreme
Court at 31-33 (May 3, 1995); Transcript of Oral Argument at 18,
36-40; Petition for Writ of Certiorari at 22-23 (Feb. 6, 1997).
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.