First Student, Inc. v. State

• Citation: 451 P.3d 1094
• Decision Date: 14 November 2019
• Docket Number: No. 96694-0,96694-0
• Parties: FIRST STUDENT, INC., Petitioner, v. State of Washington, DEPARTMENT OF REVENUE, Respondent.
• Court: United States State Supreme Court of Washington

451 P.3d 1094

FIRST STUDENT, INC., Petitioner,

v.State of Washington, DEPARTMENT OF REVENUE, Respondent.

No. 96694-0

Supreme Court of Washington.

Argued September 12, 2019

Filed November 14, 2019

Brett S. Durbin, Lane Powell PC, 1420 5th Avenue, Suite 4200, Seattle, WA 98101-2375, for Petitioner.

Cameron Gordon Comfort, Jessica E. Fogel, Attorney General's Office/Revenue Division, P.O. Box 40123, Olympia, WA 98504-0123, for Respondent.

Brett S. Durbin, Lane Powell PC, 1420 5th Avenue, Suite 4200, Seattle, WA 98101-2375, for Amicus Curiae (Durham School Services LP).

Robert Lee Mahon, III, Erin Earl, Perkins Coie LLP, 1201 3rd Avenue, Suite 4900, Seattle, WA 98101-3095, for Amicus Curiae (National Association for Pupil Transportation).

JOHNSON, J.

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

FACTUAL AND PROCEDURAL HISTORY

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

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

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

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

ANALYSIS

¶6 Our review of a trial court’s legal conclusions in a tax refund action is de novo. Simpson Inv. Co. v. Dep’t of Revenue, 141 Wash.2d 139, 148, 3 P.3d 741 (2000). When interpreting statutes, we derive legislative intent solely from the plain language of the statute, considering the text of the provision, the context of the statute, related provisions, amendments to the provision, and the statutory scheme as a whole.

Cashmere Valley Bank v. Dep’t of Revenue, 181 Wash.2d 622, 631, 334 P.3d 1100 (2014). A statutory provision is ambiguous when it is fairly susceptible to two or more reasonable interpretations. Dep’t of Ecology v. Campbell & Gwinn, LLC, 146 Wash.2d 1, 12, 43 P.3d 4 (2002).

¶7 The goal of construing statutory language is to carry out the intent of the legislature; in doing so, we avoid strained, unlikely, or unrealistic interpretations. Simpson, 141 Wash.2d at 148, 149, 3 P.3d 741. Unless the statute expresses a contrary intent, we may resort to an applicable dictionary definition to determine the plain and ordinary meaning of a word that is not otherwise defined by the statute. Am. Legion Post No. 32 v. City of Walla Walla, 116 Wash.2d 1, 8, 802 P.2d 784 (1991). When " ‘the legislature uses a term well known to the common law, it is presumed that the legislature intended [it] to mean what it was understood to mean at common law." ’ Ralph v . Dep’t of Nat. Res., 182 Wash.2d 242, 248, 343 P.3d 342 (2014) (quoting N.Y. Life Ins. Co. v. Jones , 86 Wash.2d 44, 47, 541 P.2d 989 (1975) ).

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

¶9 The businesses of "motor transportation" and "urban transportation" are subject to the PUT. Under the PUT, "[t]here is levied and ... collected from every person a tax" for the privilege of engaging in defined businesses, with a tax rate of 0.6 percent for "[u]rban transportation business[es]" and a tax rate of 1.8 percent for "[m]otor transportation ... businesses." Former RCW 82.16.020(1)(d), (f) (2011).

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

¶11 In its administration of RCW 82.16.010, the Department adopted a regulation in 1970 excluding school buses from the definitions of "motor transportation business" and "urban transportation business." WAC 458-20-180. This WAC adopted and continued the Washington State Tax Commission’s previous classification that excluded school buses from these PUT definitions. Compare Wash. State Tax Comm’n Rules and Regulations, Rule 180 (1956), with WAC 458-20-180.³ This interpretation has remained unchanged and had remained unchallenged since its adoption in 1943. Instead of directly challenging the validity of WAC 458-20-180 under the Administrative Procedure Act,⁴ ch. 34.05 RCW, First Student asserts that the Department’s regulatory exclusion of school buses from the PUT definitions of "motor transportation business" and "urban transportation business" is contrary to the plain language of RCW 82.16.010 ; First Student contends this language is unambiguous.

¶12 The Court of Appeals rejected First Student’s arguments as to ambiguity, finding the meaning of "for hire" to be ambiguous. The court concluded that it was unclear whether the legislature intended the term "for hire" to be given its ordinary or technical meaning. It concluded that the ordinary meaning of the term "for hire" could be understood as "effecting the engagement or purchase of labor or services for compensation or wages," while the technical meaning, derived from a Black’s Law Dictionary entry for "for hire or reward," contemplated the passengers being directly responsible for any compensation paid. First Student, 4 Wash. App. 2d at 867, 868, 423 P.3d 921. While the court noted that the technical definition of "for hire" could not be harmoniously applied to other enterprises defined in RCW 82.16.010 that do not transport people, this lack of harmony is present only when the term is defined without regard to its surrounding context; yet, the term "for hire" is not amenable to a mechanical definition separated from its surrounding context.

¶13 The variability and inherent ambiguity the term "for hire" can have is illustrated in Allen v. City of Bellingham, 95 Wash. 12, 163 P. 18 (1917). Allen involved the regulation of jitney buses, which were similar to modern day buses, charging individuals a small fare to ride between fixed points. Despite concluding the ordinance in question was a valid regulation of jitney buses, which were defined by the subject ordinance as "used in the occupation of carrying persons for hire ," this court stated that a jitney bus differed from a taxicab because the jitney bus "is never for hire at all; all that is offered is a seat and an opportunity to ride to some point within the limit of its operations." Allen, 95 Wash. at 15, 32, 163 P. 18 (emphasis added). This differing usage of the term "for hire" shows that the meaning of the term "for hire" cannot be separated from its surrounding context.

¶14 While there is no "for hire" entry in ordinary dictionaries existing at the time of the statutory amendments, definitions exist for both "for" and "hire." "For" has many potential definitions, each...