Port of Seattle v. State, Dept. of Revenue

Citation1 P.3d 607,101 Wash.App. 106
Decision Date09 June 2000
Docket NumberNo. 25336-4-II.,25336-4-II.
CourtCourt of Appeals of Washington
PartiesPORT OF SEATTLE, Appellant, v. STATE of Washington, DEPARTMENT OF REVENUE, Respondent.

John Thomas Piper, Robert Lee Mahon, Donald Michael Young, Bogle & Gates, Seattle, for Appellant.

Christine O. Gregoire, Attorney General, and Anne Elizabeth Egeler, Cameron Gordon

Comfort, Assistant Attorneys General, Olympia, for Respondent.


The Port of Seattle (the Port) appeals from a summary judgment dismissal of its claim for a refund under RCW 82.04.050(7) of certain retail sales taxes paid on construction projects for the expansion of the Seattle-Tacoma International Airport Terminal (Sea-Tac airport). Because the statute containing a tax exemption for "mass public transportation terminal(s)" refers only to ground transportation, we hold that the Legislature did not intend to give a tax exemption for an airport terminal. Also, we hold that the Department of Revenue never advised the Port that it was entitled to a tax exemption for its terminal. Thus, the Port cannot demonstrate reliance upon a previous opinion of the Department that would prevent a retroactive reversal of a previous ruling. We affirm.

The facts are essentially undisputed. The taxpayer, the Port, is a political subdivision of the State. It owns and operates the Sea-Tac airport. Between January 1988 and December 1993, the Port expanded and improved the airport parking garage and the passenger terminal in a number of construction projects. During the course of construction, the Port sought advice from the Department of Revenue (the Department) as to whether the parking garage projects were entitled to an exemption from the definition of "retail sale" for tax purposes under WAC 458-20-171 and RCW 82.04.050(7).

In a series of letters, Department information specialists advised the Port that the parking garage expansion and various associated projects (taxi driver lounge, rental car lobby, bus shelters, and a ground transportation monitoring system) were exempt from sales taxes under the statute. The Port nonetheless paid a small amount of taxes on certain aspects of the parking garage expansion, but it paid, without protest, the full retail sales taxes on contracts for the terminal improvements.

In December 1992, however, the Port filed a request for a tax refund, arguing that all of the terminal and parking garage projects were subject to the sales tax exemption in RCW 82.04.050(7) for a "mass public transportation terminal or parking facility." The Department concluded that the Sea-Tac airport did not qualify for the tax treatment provided in RCW 82.04.050(7). In its final determination, the Department denied the Port's request for a refund of $10,576,000 plus interest.

The Port appealed to superior court, and both sides moved for full or partial summary judgment. The trial court agreed with the Department that the airport terminal improvement projects were not exempt from the retail sales tax under RCW 82.04.050(7). Because, however, the Department agreed during oral argument to abide by its previous advice to the Port regarding the parking garage, the court ordered the Department to refund the taxes the Port had paid on the garage expansion, amounting to $44,781. The trial court dismissed the Port's claim for a refund of taxes paid on the terminal projects.

The Port appealed directly to the Supreme Court. The Supreme Court denied direct review and transferred the case to this court.

I. RCW 82.04.050(7)

Generally, the sale of materials, labor, and services to build, repair, or improve a building or structure is a taxable event subject to retail sales tax. RCW 82.08.020;1 RCW 82.04.050. RCW 82.04.050(7),2 however, creates a limited exception stating that a retail sale shall not include the sale of or charge made for labor or services for

the building, repairing, or improving of any street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind.

RCW 82.04.050(7). Under this provision, when any of the enumerated construction projects are performed, no retail sales tax is charged for labor or services. Construction materials are still taxed on the contractor, who is the consumer under RCW 82.04.190(3). The contractor's public customer, i.e. the Port, is not subject to any retail sales tax on the construction contracts. RCW 82.04.050(7); RCW 82.04.190. The net result is a partial tax subsidy for the kinds of transportation infrastructure specified in the statutes—with the contractor paying sales tax on the materials and the public customer exempt from all retail sales taxes.

In this case, the Port contends that it is not required to pay retail sales tax under RCW 82.04.050(7) for construction on the Sea-Tac airport terminal and that it is entitled to a refund of the retail sales tax paid. The parties dispute whether the term "mass public transportation terminal" includes airport terminals and whether mass transportation "vehicles" includes airplanes. These terms are not defined in the statute.3

The court's purpose in construing a statute is to ascertain and give effect to the intent and purpose of the Legislature. State v. Williams, 62 Wash.App. 336, 338, 813 P.2d 1293, review denied, 117 Wash.2d 1027, 820 P.2d 511 (1991). To determine legislative intent, we look first to the language of the statute. Lacey Nursing v. Department of Revenue, 128 Wash.2d 40, 53, 905 P.2d 338 (1995). Undefined statutory terms are given their usual and ordinary meaning. Nationwide Ins. v. Williams, 71 Wash.App. 336, 342, 858 P.2d 516 (1993), review denied, 123 Wash.2d 1022, 875 P.2d 635 (1994). Each provision of the statute should be read in relation to the other provisions, and the statute should be construed as a whole. In ascertaining the meaning of a particular word as used in a statute, a court must consider both the statute's subject matter and the context in which the word is used. Chamberlain v. Department of Transp., 79 Wash.App. 212, 217, 901 P.2d 344 (1995). When a statutory term is undefined, we may look to a dictionary for its ordinary meaning. See State v. Sunich, 76 Wash.App. 202, 206, 884 P.2d 1 (1994)


Further, while tax statutes generally are interpreted in favor of the taxpayer, exemption statutes are construed strictly against the taxpayer, and the taxpayer has the burden of establishing any exemption. See Sacred Heart Medical Center v. Department of Revenue, 88 Wash.App. 632, 637, 946 P.2d 409 (1997)

. Although the Port asserts that the statutes at issue are definitions, not exemptions, and thus narrow construction is inappropriate, these statutes do exempt the public customer from retail sales taxes on labor and services, while the contractor is required to pay retail sales tax only on construction materials. RCW 82.04.050(7); RCW 82.04.190(3); WAC 458-20-171. In addition, the Port cites no authority that supports its contention that definitions cannot also be exemptions. Thus, the statute is plainly an "exemption" statute and is to be strictly construed against the Port.

A. Mass Public Transportation Terminal

The Port argues that the term "mass public transportation terminal" includes airport terminals. This might appear at first blush to be a reasonable construction. Notably, the Port separates this phrase from its context in the statute and asserts, without citation to authority, that each word should be analyzed separately followed by a harmonization of the words.4 Nonetheless, the common understanding of this phrase could reasonably include the Sea-Tac airport terminal, which is undoubtedly used for transportation, is open to the public, and services mass amounts of people. But, common understanding does not necessarily reflect legislative intent.

We are to construe the statute as a whole and consider the subject matter and the context in which particular words are used. See Chamberlain, 79 Wash.App. at 217,

901 P.2d 344. The well recognized rules of statutory construction, noscitur a sociis and ejusdem generis, suggest an alternative construction of "mass public transportation terminal." Under the doctrine of noscitur a sociis, "the meaning of words may be indicated or controlled by those with which they are associated." State v. Jackson, 137 Wash.2d 712, 729, 976 P.2d 1229 (1999) (quoting Ball v. Stokely Foods, Inc., 37 Wn.2d 79, 87-88, 221 P.2d 832 (1950); see also Shurgard Mini-Storage v. Department of Revenue, 40 Wash.App. 721, 727, 700 P.2d 1176 (1985). In applying this doctrine to determine the meaning of a word in a series, "[i]t is ... familiar policy in the construction of terms of a statute to take into consideration the meaning naturally attaching to them from the context, and to adopt the sense of the words which best harmonizes with the context." Jackson, 137 Wash.2d at 729,

976 P.2d 1229 (citations omitted).

Under the doctrine of ejusdem generis, "specific words or terms modify and restrict the interpretation of general words or terms where both are used in sequence." State v. Reader's Digest Ass'n Inc., 81 Wash.2d 259, 279, 501 P.2d 290 (1972); see also State v. Stockton, 97 Wash.2d 528, 532, 647 P.2d 21 (1982)

. "The ejusdem generis rule is generally applied to general and specific words clearly associated in the same sentence in a pattern such as `[specific], [specific], or [general]' or `[general], including [specific] and [specific].'" Southwest Wash. Chapter, Nat'l Elec. Contractors Ass'n v. Pierce County, 100 Wash.2d 109, 116, 667 P.2d 1092 (1983).

The term "mass public transportation terminal" is found in a list of structures that support ground transportation: "street, place, road,...

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