Aventis Pharm., Inc. v. State

• Decision Date: 16 October 2018
• Docket Number: No. 50641-6-II,50641-6-II
• Citation: 428 P.3d 389
• Court: Washington Court of Appeals
• Parties: AVENTIS PHARMACEUTICAL, INC., and Sanofi-Aventis US, LLC, Appellants, v. STATE of Washington Department of Revenue, Respondent.

428 P.3d 389

AVENTIS PHARMACEUTICAL, INC., and Sanofi-Aventis US, LLC, Appellants,

v.STATE of Washington Department of Revenue, Respondent.

No. 50641-6-II

Court of Appeals of Washington, Division 2.

FILED October 16, 2018

Garry George Fujita, Eisenhower Carlson PLLC, 1201 Pacific Ave. Ste. 1200, Tacoma, WA, 98402-4395, for Appellants.

Heidi A. Irvin, Attorney Generals Office/Revenue & Finance D, Department of Revenue A.g. Office, Attorney at Law, 7141 Cleanwater Lane Sw, Po Box 40123, Olympia, WA, 98504-0123, for Respondent.

PUBLISHED OPINION

Melnick, J.

¶ 1 Aventis Pharmaceuticals, Inc. (Aventis) and Sanofi-Aventis US, LLC (Sanofi) appeal from the trial court’s order granting summary judgment to the Department of Revenue (DOR). They contend that the trial court erred by interpreting the preferential business and occupation (B&O) tax on warehousing and reselling prescription drugs to apply only to wholesalers that sell either to retailers or health care providers, and not to wholesalers that sell to other wholesalers. They also argue that DOR’s interpretation of the tax is unconstitutional and that their buyers met the requirements of the statute.

¶ 2 We conclude that the prescription drug wholesaler B&O tax rate applies only to wholesalers who sell either to retailers that hold a pharmacy license or to health care providers and that the plaintiffs’ buyers did not fall into either of these categories. We affirm.

FACTS

¶ 3 Aventis, a Delaware corporation registered to do business in Washington since 1968, closed its tax account in 2006 and transferred all its business activities and employees to Sanofi, a Delaware limited liability company registered to do business in Washington since 2005. Aventis and Sanofi both engaged in the business of purchasing, warehousing, and selling prescription drugs. Both were registered with the United States Federal Drug Enforcement Administration (DEA) and licensed as pharmacy wholesalers by the Washington State Pharmacy Quality Assurance Commission (PQAC).

¶ 4 Aventis sought a refund for B&O taxes it paid from January 2002 through December 2005 and Sanofi sought a refund for B&O taxes it paid from December 2006 through June 2012. Both corporations claimed that the preferential B&O tax rate of .138 percent for warehousing and reselling prescription drugs should apply to their sales rather than the general B&O tax rate of .484 percent that they had paid. Because identical issues apply to both plaintiffs, we refer to them collectively as "Sanofi" for simplicity.

¶ 5 After Sanofi filed its refund request, DOR issued Excise Tax Advisory 3180.2013 (ETA 3180), which laid out specific requirements sellers and buyers of prescription drugs needed to meet to claim the preferential rate. DOR determined that Sanofi met the seller requirements but that the majority of its buyers, other drug wholesalers, failed to meet the buyer requirements. Accordingly, DOR denied the majority of Sanofi’s refund request.

¶ 6 At issue in this case are Sanofi’s sales to three buyers: AmerisourceBergen Drug Corporation, McKesson Corporation, and Cardinal Health Corporation. The prescription drug tax and ETA 3180 both distinguish between sales from prescription drug wholesalers to other wholesalers and sales from wholesalers to retailers. Accordingly, whether Sanofi’s buyers were wholesalers or retailers is an important issue in this case.

¶ 7 All three of Sanofi’s buyers had licenses issued by the DEA and PQAC as pharmaceutical wholesalers, but none held a pharmacy license. They all distributed prescription drugs to both retailers and hospitals. Two of them also filed B&O tax returns for "retailing" during the relevant period.

¶ 8 Sanofi appealed DOR’s denial of its refund request to the superior court on grounds that its activities fell within the purview of the preferential prescription drug tax. Both parties moved for summary judgment, and the superior court granted DOR’s motion. Sanofi appeals.

ANALYSIS

I. LEGAL PRINCIPLES

¶ 9 We review summary judgment orders de novo, performing the same inquiry as the trial court. Aba Sheikh v. Choe , 156 Wash.2d 441, 447, 128 P.3d 574 (2006). "Summary judgment is appropriate only if the pleadings, affidavits, depositions, and admissions on file demonstrate the absence of any genuine issues of material fact and that the moving party is entitled to judgment as a matter of law." Sheehan v. Cent. Puget Sound Reg’l Transit Auth. , 155 Wash.2d 790, 797, 123 P.3d 88 (2005).

¶ 10 We review questions of statutory interpretation de novo. Jametsky v. Olsen , 179 Wash.2d 756, 761, 317 P.3d 1003 (2014). In interpreting statutes, our goal is to "ascertain and carry out the legislature’s intent." Jametsky , 179 Wash.2d at 762, 317 P.3d 1003. We give effect to the plain meaning of the statute as "derived from the context of the entire act as well as any ‘related statutes which disclose legislative intent about the provision in question.’ " Jametsky , 179 Wash.2d at 762, 317 P.3d 1003 (quoting Dep’t of Ecology v. Campbell & Gwinn, LLC , 146 Wash.2d 1, 11, 43 P.3d 4 (2002) ).

¶ 11 If a statute’s meaning is plain on its face, we give effect to that meaning as an expression of legislative intent. Blomstrom v. Tripp , 189 Wash.2d 379, 390, 402 P.3d 831 (2017). However, if "after this inquiry, the statute remains ambiguous or unclear, it is appropriate to resort to canons of construction and legislative history." Blomstrom , 189 Wash.2d at 390, 402 P.3d 831. If the statute "uses plain language and defines essential terms, the statute is not ambiguous." Regence Blueshield v. Office of the Ins. Comm’r , 131 Wash. App. 639, 646, 128 P.3d 640 (2006). "A statute is ambiguous if ‘susceptible to two or more reasonable interpretations,’ but ‘a statute is not ambiguous merely because different interpretations are conceivable.’ " HomeStreet Inc. v. Dep’t of Revenue , 166 Wash.2d 444, 452, 210 P.3d 297 (2009) (quoting State v. Hahn , 83 Wash. App. 825, 831, 924 P.2d 392 (1996) ).

¶ 12 "Any doubts as to the meaning of a statute under which a tax is sought to be imposed will be ‘construed against the taxing power.’ "¹ Weyerhaeuser Co. v. Dep’t of Revenue , 106 Wash.2d 557, 566, 723 P.2d 1141 (1986) (quoting Duwamish Warehouse Co. v. Hoppe , 102 Wash.2d 249, 254, 684 P.2d 703 (1984) ).

II. STATUTORY REQUIREMENTS

¶ 13 Sanofi contends that its sales to wholesalers qualify its activities as "warehousing and reselling drugs for human use pursuant to a prescription" under the prescription drug tax, RCW 82.04.272. It claims that the statute includes sales from wholesaler to wholesaler so long as the chain of sales culminates in a sale to a person selling at retail or to a health care provider. We disagree.

A. STATUTORY LANGUAGE

¶ 14 Sanofi maintains that sales of drugs between wholesalers meet the statutory requirements for the preferential rate as long as the chain of sales culminates in a sale to a retailer or health care provider. It contends that the prescription drug tax expressly contemplates these sales by including buying of drugs "from a manufacturer or another wholesaler." We disagree.

¶ 15 RCW 82.04.272(1) provides: "Upon every person engaging within this state in the business of warehousing and reselling drugs for human use pursuant to a prescription; as to such persons, the amount of the tax shall be equal to the gross income of the business multiplied by the rate of 0.138 percent."

¶ 16 The statute defines "[w]arehousing and reselling drugs for human use pursuant to a prescription" to mean:

[T]he buying of drugs for human use pursuant to a prescription from a manufacturer or another wholesaler, and reselling of the drugs to persons selling at retail ^{[2 ]} or to hospitals, clinics, health care providers, or other providers of health care services,^{[3 ]} by a wholesaler or retailer who is registered with the federal drug enforcement administration and licensed by the pharmacy quality assurance commission.

RCW 82.04.272(2)(b). The prescription drug tax rate is a preferential rate to the general wholesaler tax rate of 0.484 percent. RCW 82.04.270.

¶ 17 Per the statutory definition, to obtain the preferential rate Sanofi must (1) buy drugs for human use pursuant to a prescription, (2) from a manufacturer or another wholesaler, (3) resell to persons selling at retail or to health care providers,⁴ (4) be a wholesaler or retailer, (5) be registered with the DEA, and (6) be licensed by the PQAC. RCW 82.04.272(2)(b). The only requirement at issue in this case is number three: whether the statute required Sanofi to have sold to persons selling at retail or health care providers and, if so, whether it did so.

¶ 18 We interpret statutes so as to give effect to all the language used without rendering any portion meaningless or superfluous. G-P Gypsum Corp. v. Dep’t of Revenue , 169 Wash.2d 304, 309, 237 P.3d 256 (2010). We do not simply ignore express statutory terms. Ralph v. Dep’t of Nat. Res. , 182 Wash.2d 242, 248, 343 P.3d 342 (2014). We read statutes so as to not render any portion superfluous. Stroh Brewery Co. v. Dep’t of Revenue , 104 Wash. App. 235, 239-40, 15 P.3d 692 (2001).

¶ 19 The prescription drug tax at issue in this case defines warehousing and reselling of prescription drugs as the "buying of drugs ... from a manufacturer or another wholesaler, and reselling of the drugs to persons selling at retail or to [health care providers], by a wholesaler or retailer" who is registered with the DEA and licensed by the PQAC. RCW 82.04.272(2)(b). It then applies a preferential rate to persons engaging in the business of warehousing and reselling prescription drugs. RCW 82.04.272(1). Sanofi’s proposed interpretation of the statute would omit from the definition the requirement that the drugs be resold "to persons selling at retail or [to health care providers]."

¶ 20 Sanofi’s claim that the chain of sale must merely culminate in a sale to a retailer or health care provider is unpersuasive. The majority of drugs sold "for human...