Echo Global Logistics, Inc. v. State
| Decision Date | 01 August 2022 |
| Docket Number | 83548-3-I |
| Citation | 514 P.3d 704 |
| Parties | ECHO GLOBAL LOGISTICS, INC., Appellant, v. State of Washington, DEPARTMENT OF REVENUE, Respondent. |
| Court | Washington Court of Appeals |
Renee Elizabeth Rothauge, Perkins Coie LLP, 1120 NW Couch St. Fl. 10, Portland, OR, 97209-4128, Robert Lee Mahon III, Perkins Coie LLP, 1201 3rd Ave., Ste. 4900, Seattle, WA, 98101-3095, for Appellant.
Jessica E. Fogel, Washington Attorney Generals Office, Charles E. Zalesky, Attorney General of Washington, P.O. Box 40123, Olympia, WA, 98504-0123, for Respondent.
PUBLISHED OPINION
Hazelrigg, J. ¶ 1 Echo Global Logistics, Inc. appeals a determination by the Board of Tax Appeals, arguing it is subject to a public utility tax rather than a business & occupation tax. Because Echo fails to demonstrate the Board erroneously interpreted or applied the law, we affirm.
FACTS
¶ 2 Echo Global Logistics, Inc. (Echo) is a freight broker; it contracts with motor carriers and customers to facilitate and coordinate the transportation of goods nationally. In November 2014, the Department of Revenue (Department) performed a desk examination of Echo's business and occupation (B&O) tax returns and reclassified the freight broker under the "service and other" business classification for tax purposes. Echo appealed this determination to the Board of Tax Appeals (Board), arguing it was subject to the public utility tax (PUT), not a B&O tax, despite the fact that it had been paying B&O tax for approximately four years at that point. The Department moved for summary judgment, which was granted. Echo then appealed to the Clark County Superior Court, which affirmed the Board's decision. Echo timely appealed.
ANALYSIS
¶ 3 This court reviews decisions by the Board under the Administrative Procedure Act (APA).1 Steven Klein, Inc. v. Dep't of Revenue, 183 Wash.2d 889, 895, 357 P.3d 59 (2015) (citing RCW 82.03.180 ). "Under the APA, we may grant relief from an agency order when ‘[t]he agency has erroneously interpreted or applied the law.’ " Id. (quoting RCW 34.05.570(3)(d) ). We apply the APA " ‘directly to the record before the agency, sitting in the same position as the superior court.’ " Dep't of Revenue v. Bi-Mor, Inc., 171 Wash. App. 197, 201–02, 286 P.3d 417 (2012) (quoting Honesty in Envtl. Analysis & Legis. (HEAL) v. Cent. Puget Sound Growth Mgmt. Hr'g Bd., 96 Wash. App. 522, 526, 979 P.2d 864 (1999) ). If the Board dismissed an administrative appeal on summary judgment, "we overlay the APA ‘error of law’ standard of review with the summary judgment standard, and review an agency's interpretation or application of the law de novo while viewing the facts in the light most favorable to the nonmoving party." Bi-Mor, Inc., 171 Wash. App. at 202, 286 P.3d 417.
¶ 4 Echo first asserts it is a motor transportation business under RCW 82.16.010(6) because it "operate[s]" motor vehicles by " ‘exert[ing] power or influence’ over a motor vehicle by contracting with a third party." The Department responds Echo does not "operate" a motor vehicle because it merely "arrang[es] for transportation by a third party" rather than physically moving goods.
¶ 5 Statutory interpretation is a question of law reviewed de novo. Puget Sound Energy v. Dep't of Revenue, 158 Wash. App. 616, 620, 248 P.3d 1043 (2010). The court's "objective is to ascertain and carry out the legislature's intent." Id. "Generally, Washington's B & O tax applies to the act or privilege of engaging in business activities," unless those activities are "explicitly taxed elsewhere in the statutory scheme." First Student, Inc. v. Dep't of Revenue, 194 Wash.2d 707, 711, 451 P.3d 1094 (2019) (citing RCW 82.04.220, .290(2)). Businesses that are subject to the PUT are not subject to the B&O tax under RCW 82.04.310(1). Id. RCW 82.16.020(1)(f) lists businesses subject to the PUT, including "[m]otor transportation, railroad, railroad car, and tugboat businesses." "Motor transportation business" is defined in RCW 82.16.010(6) as:
[T]he business (except urban transportation business) of operating any motor propelled vehicle by which persons or property of others are conveyed for hire, and includes, but is not limited to, the operation of any motor propelled vehicle as an auto transportation company (except urban transportation business), common carrier, or contract carrier as defined by RCW 81.68.010 and 81.80.010.
RCW 81.80.010 in turn defines the terms "common carrier" and "contract carrier." A common carrier is "any person who undertakes to transport property for the general public by motor vehicle for compensation," and a contract carrier "includes all motor vehicle operators not included under the terms ‘common carrier’ and ‘private carrier,’ " in addition to "any person who under special and individual contracts or agreements transports property by motor vehicle for compensation." RCW 81.80.010(1), (2). "[B]rokers and forwarders" are explicitly included as "common carriers" and "contract carriers." RCW 81.80.010(3).
¶ 6 While interpreting a statute, this court " ‘endeavor[s] to effectuate the legislature's intent by applying the statute's plain meaning, considering the relevant statutory text, its context, and the statutory scheme.’ " Olympic Tug & Barge, Inc. v. Dep't of Revenue, 188 Wash. App. 949, 952, 355 P.3d 1199 (2015) (quoting Cashmere Valley Bank v. Dep't of Revenue, 181 Wash.2d 622, 631, 334 P.3d 1100 (2014) ). In a plain meaning inquiry, the court "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." First Student, Inc., 194 Wash.2d at 711, 451 P.3d 1094. After investigating the plain meaning, if "the statute remains susceptible to more than one reasonable meaning, the statute is ambiguous and it is appropriate to resort to aids to construction, including legislative history." Dep't of Ecology v. Campbell & Gwinn, L.L.C, 146 Wash.2d 1, 12, 43 P.3d 4 (2002).
¶ 7 The word "operate" is not defined by the statute. Echo and the Department submitted differing dictionary definitions: Echo cites the 1976 version of Webster's Third New International Dictionary, while the Department cites the 2002 version. Echo's cited definition for operate is "to perform a work or labor: exert power or influence: produce an effect." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE , UNABRIDGED , 1580 (1976). The Department's cited definition is "to cause to function [usually] by direct personal effort: work [as in operate] a car." WEBSTER THIRD NEW INTERNATIONAL DICTIONARY , UNABRIDGED , 1581 (2002).
¶ 8 "We employ traditional rules of grammar in discerning the plain language of the statute." Diaz v. North Star Tr., LLC, 16 Wash. App. 2d 341, 353, 481 P.3d 557 (2021). As the Department notes, "operating" is a transitive verb within the statute, with "motor transportation business" as the subject and "motor propelled vehicle" as the direct object. Echo's cited dictionary definition of "produce as effect" would alter the grammatical structure of the sentence by changing the direct object from "motor propelled vehicle" to "transportation" as the effect is the transportation of goods, rather than a motor propelled vehicle. Its other two definitions do not suffer from the same grammatical shortcoming, but also do not encompass the broad reading of "operate" that Echo asks this court to find. "[T]o perform a work or labor" or to "exert power or influence" both suggest a direct connection between the performance or exertion and the consequential result on the direct object: a motor propelled vehicle. Echo's "work or labor" or "power or influence" is the coordination and management of the movement of goods, not the impact on a motor propelled vehicle. Echo's actions are too attenuated from the physical movement of a motor propelled vehicle to reasonably fall within even its own proposed grammatically appropriate dictionary definition of "operate." Under the plain language of the statute, Echo is not a motor transportation business and the Board did not err in so holding.
¶ 9 Echo alternatively argues it falls within the scope of the PUT as a " ‘business subject to control by the state,’ " or as one " ‘declared by the legislature to be of a public service nature.’ " (Quoting RCW 82.16.010(7)(a) ).
¶ 10 Under RCW 82.16.020(1)(f), the PUT applies to "all public service businesses other than the ones mentioned above." A public service business is defined as "any business subject to control by the state, or having the powers of eminent domain and the duties incident thereto, or any business hereafter declared by the legislature to be of a public service nature." RCW 82.16.010(7)(a). "It includes, among others, without limiting the scope hereof: Airplane transportation, boom, dock, ferry, pipe line, toll bridge, toll logging road, water transportation and wharf businesses." Id.
¶ 11 Echo largely relies on article XII, section 13 of the Washington Constitution to argue it is subject to control by the state. This section governs the regulation of common carriers, holding "[a]ll railroad, canal and other transportation companies are declared to be common carriers and subject to legislative control." WASH. CONST. art. XII, § 13. The Board found freight brokers "are not subject to any meaningful control by the State, which is defined ... as the control over rates charged for services rendered." Echo alleges this was error because the legislature could constitutionally exercise control over freight brokers. The Department contends that until the legislature exercises "actual ‘control’ " over freight broker rates or services, brokers are not subject to control by the state. It avers that if this court held Echo is subject to state control based solely on some possible future exercise of the delegation authority of in the state c...
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