Sifferman v. Chelan Cnty.

Decision Date28 September 2021
Docket NumberNo. 54514-4-II,54514-4-II
Parties Philip Edward SIFFERMAN; Bruce Penoske and Raelyn Penoske, husband and wife; Steven R. Ramels and Jacqueline J. Ramels, husband and wife; Michael F. Lass and Diane E. Lass, Husband and Wife, Thomas H. Jansen and Sharon L. Jansen, husband and wife, and Patrick W. French; and Paradise Lake House LLC, Appellants, v. CHELAN COUNTY and its Treasurer, David Griffiths; State of Washington, Department of Revenue, Respondents.
CourtWashington Court of Appeals

Frank Raymond Siderius, Siderius Lonergan & Martin LLP, 500 Union St. Ste. 847, Seattle, WA, 98101-2394, for Appellants.

Susan E. Hinkle, Chelan County Prosecutor's Office, P.O. Box 2596, Wenatchee, WA, 98807-2596, Cameron Gordon Comfort, Atty. Generals Ofc./Revenue & Finance Divi., P.O. Box 40123, David M. Hankins, Atty. Generals Ofc./Revenue Division, 7141 Cleanwater Drive Sw, Olympia, WA, 98504-0123, for Respondents.


Cruser, J.

¶ 1 This case involves the transfer of interests in vacation homes constructed on leased land held in trust by the United States government on behalf of a Native American family. Appellants Philip Sifferman, Bruce and Raelyn Penoske, Steven and Jacqueline Ramels, Michael and Diane Lass, Thomas and Sharon Jansen, Patrick French, and Paradise Lake House LLC (collectively taxpayers) paid a real estate excise tax (REET) when they assigned their interests in subleased lots and the vacation homes constructed thereon to new sublessees. None of the parties involved in the transfer were members of the Native American family for whom the land was allotted. The taxpayers filed a suit challenging imposition of the REET on their transactions on various grounds, naming both the Department of Revenue and Chelan County (collectively DOR) as defendants.

¶ 2 The taxpayers appeal from the trial court's order dismissing their class action refund claims, dismissing their motion for summary judgment, and granting DOR's motion for summary judgment. They argue that (1) they are not obligated to meet the requirements in RCW 82.32.180 to obtain a refund of the tax they paid because their claims arise under the Uniform Declaratory Judgments Act (UDJA) ch. 7.24 RCW and RCW 82.32.150, (2) the amount of tax they paid was incorrect under state law, (3) federal law preempts imposition of the REET on transfers of subleases on Native American land, (4) imposition of the REET violated their rights to due process arising under the Washington and United States Constitutions, and (5) the trial court erred in dismissing their class action claims.

¶ 3 We hold that (1) the taxpayers were obligated to satisfy the requirements in RCW 82.32.180 because they seek refunds of taxes already paid, and RCW 82.32.150 and the UDJA do not apply to their claims, (2) under RCW 82.32.180, the taxpayers failed to meet their burden of demonstrating the correct amount of tax owed, (3) federal law does not preempt the REET as applied in this case, and (4) imposition of the REET does not violate the taxpayers’ rights to due process. Based on the foregoing, (5) we need not determine whether the trial court erred in dismissing the taxpayers’ class action claims.

¶ 4 Accordingly, we affirm.


¶ 5 Wapato Point, located on the shorelines of Lake Chelan in Chelan County, is a segment of land that was allotted to Peter Wapato or Que-til-qua-soon by the United States Government under the original Indian1 trust allotment, Moses Agreement No. 10. The allotted land is held in trust by the United States on behalf of the Wapato family and is administered by the Bureau of Indian Affairs.

¶ 6 In 1976, members of the Wapato family entered into a lease agreement with Wapato Point Resources, Inc. The parties envisioned that Wapato Point Resources would operate a resort complex on the premises comprised of motels, condominiums, and leased lots. Third parties would then sublease the condominiums or unimproved lots from Wapato Point Resources. Wright-Wapato, Inc. has since assumed responsibility over Wapato Point Resources’ role as lessee under the lease agreement with the Wapato family.

¶ 7 At present, the resort is comprised of ten separate entities called "associations," that include time-share condominium associations, full-share private residents associations, and full-share condominium associations. Clerk's Papers (CP) at 125. Unlike the time-share associations, wherein owners split a right to use a vacation property with other members, members of the full-share associations have exclusive rights to their subleased property.

¶ 8 While the Wapato Point resort complex construction was underway, Wapato Point Resources entered into an agreement with Chelan County wherein Wapato Point Resources agreed to make payments to the county "in lieu of taxes." Id. at 195. Wright-Wapato and its related entities continue to honor the agreement between Wapato Point Resources and Chelan County. The agreement was made in recognition of the fact that "under the applicable laws of the United States and of the State of Washington ... the premises, the improvements constructed or to be constructed thereon, and the said lease are all exempt from real and personal property ad valorem taxes and from the state leasehold excise tax." Id. at 194.

¶ 9 Because the anticipated construction and operation of the resort complex would require the county to expend its resources and provide services to Wapato Point, the payments represented "a fair contribution to cover all local governmental services." Id. at 195. Chelan County provides services to Wapato Point that include fire services, law enforcement, water, electricity, courts, and schools. Beyond contracting with a company for trash removal, Wright-Wapato does not provide resort residents with any services analogous to government services. Funds for the voluntary payments to the county are raised from dues collected from the resort's sublessees.

¶ 10 In 1994, DOR addressed the complexities of assessing a REET on transfers of time-share properties at Wapato Point in a letter sent to an attorney regarding the Wapato Point Development Company. The letter stated that because the value of such improvements could not readily be determined, DOR concluded that for time-share condominium units at Wapato Point, the REET should be assessed based on 50 percent of the sales price. DOR provided instructions for completing a REET affidavit for such improvements based on 50 percent of the sales price.


¶ 11 Taxpayers Sifferman, the Ramels, and the Penoskes entered into real estate transactions in which they assigned their respective subleases and the improvements constructed thereon to their successors in interest. On the REET affidavit forms, Sifferman, the Ramels, and the Penoskes each listed a "Taxable Selling Price" for their sublease and improvements that was equivalent to the "Gross Selling Price." Id. at 102-04, 107. The REET is calculated based on the taxable selling price listed on the REET affidavit. Therefore, Sifferman, the Ramels, and the Penoskes paid their respective REETs at a rate of 1.78 percent of the total gross selling price for their leasehold properties.

¶ 12 Taxpayers Michael and Diane Lass, Thomas and Sharon Jansen, and Patrick French (the Lass owners), and Paradise Lake House LLC also entered into real estate transactions in which they assigned their subleases and the improvements constructed thereon to their successors in interest. However, unlike Sifferman, the Ramels, and the Penoskes, the Lass owners and Paradise Lake House LLC listed the "Taxable Selling Price" for their respective leasehold interests at half of the "Gross Selling Price." Id. at 105-06. Consequently, the Lass owners and Paradise Lake House LLC paid REETs at a rate of 1.78 percent based on half the gross selling price for their leasehold properties and not the total gross selling price.

¶ 13 In addition to the REET, each taxpayer paid a fee of 3.5 percent of the transaction price of their sublease transfer or assignment as required under the master lease agreement to Wright-Wapato. The fee is based on gross receipts of the sale and is paid to the beneficiaries of the Wapato family members who signed the master lease agreement as lessors of the Wapato Point trust allotment. Wright-Wapato collects the fee upon sale of a leasehold interest and remits the payment to the Wapato family beneficiaries.2

¶ 14 The improvements on the taxpayers’ subleased properties were private residences rather than condominium units. Therefore, each taxpayer transferred or assigned a sublease to a full-share private residence as opposed to a time-share condominium unit.3 The taxpayers are not members of the Wapato family, and none of the taxpayers identified themselves as members of a Native American tribe.


¶ 15 The taxpayers filed suit naming Chelan County and the Washington Department of Revenue as defendants and alleging that the REET they paid on transfers of their sublease properties on Native American land was an unlawful and unconstitutional tax. The complaint described the taxpayers’ claims as arising under RCW 82.32.1504 and the UDJA, ch. 7.24 RCW. In addition to seeking declaratory relief resolving whether the REET may be applied to transfers of subleases on Native American land, the taxpayers also requested that the trial court order the county and the State to refund the taxpayers for the alleged unlawfully assessed tax. The complaint further included a request that the trial court certify a class of similarly situated and unnamed taxpayers under CR 23(b).

¶ 16 DOR moved to dismiss the class action refund claims, arguing that a claim for a refund of a REET that has already been paid falls within the exclusive scope of RCW DOR asserted that, following the Supreme Court's decision in Lacey Nursing Center, Inc. v. Department of Revenue , 128...

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