This opinion was filed for record 

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SUSAN L. CARLSON 

SUPREME COURT CLERK 

IN THE SUPREME COURT OF THE STATE OF WASHINGTON 

A VNET, INC., 

Petitioner, 

v. 

WASHINGTON DEPARTMENT OF 

REVENUE, 

Respondent. 

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) 

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No. 92080-0 

EnBanc 

Filed _l_~c_;v·_·_c'. _3_2_0_16 __ 

MADSEN, C.J.-Avnet Inc. is a New York corporation, headquartered in 

Arizona, and is a major distributor of electronic components and computer technology 

worldwide. A vnet sells products through its headquarters in Arizona and through its 

many regional sales offices, including one in Redmond, Washington. Following an audit, 

the Washington State Department of Revenue (Department) determined that from 2003 to 

2005, Avnet underreported its business and operations (B&O) tax liabilities by failing to 

include its national and drop-shipped sales in its tax filings. "National sales" are 

delivered to a Washington facility owned by Avnet's customer, even though the customer 

placed the order from an office outside Washington. "Drop-shipped sales" are slightly 
No. 92080-0 

different in that they are delivered to a third party in Washington at the request of Avnet' s 

customer-usually Avnet's buyer's customer. This case requires us to evaluate whether 

national and drop-shipped sales are subject to Washington's B&O tax under the dormant 

commerce clause and the Department former "Rule 193" (i.e., former WAC 458-20-193 

(1992)). U.S. CONST. art. I,§ 8, cl. 3. We hold that neither the dormant commerce 

clause nor Rule 193 bar the imposition of a B&O tax to Avnet's national and dropshipped sales delivered in Washington. 

FACTS 

Avnet is "one of the largest distributors of electronic components, computer 

products and embedded technology serving customers globally." Clerk's Papers (CP) at 

424; see also CP at 194-95. From 2003 through 2005, Avnet earned more than $200 

million in revenue from its wholesale of goods shipped into Washington from an out-ofstate warehouse. Approximately $80 million of its gross receipts came from national and 

drop-shipped sales. In a "national sale," Avnet makes a wholesale sale to a customer 

with branch offices in multiple states. The products are delivered to the customer at its 

Washington branch, but the goods are billed to the customer's out-of-state office. For 

example, a corporation purchases products for delivery to its offices in Seattle, 

Washington, but directs Avnet to send the bill to its corporate headquarters in Delaware. 

In a "third-party drop shipment" or "drop shipment," an out-of-state customer places a 

wholesale order and directs Avnet to deliver the product to its customer in Washington. 

For example, a Montana corporation places an order with Avnet and-instead of having 

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No. 92080-0 

it shipped to Montana and then reshipping it to Spokane-directs that it be delivered to 

its customer in Spokane. 

Avnet has 35 offices in the United States, including an office in Redmond, 

Washington. Although all of Avnet's products ship from distribution centers outside 

Washington, there is no difference between the products ordered through the Arizona 

branch or the Washington branch, and the staff in the Redmond office are able to serve its 

Washington customers whose orders are placed elsewhere. During the relevant period, 

Avnet employed over 40 employees at its branch office in Redmond, Washington. 

Although the Redmond office was not involved in the specific national and drop-shipped 

sales at issue, its presence and business activities in Washington was extensive. Of the 

over 40 employees, 16 to 18 were account managers who managed customer account 

portfolios that were each estimated to generate $4 million in annual sales revenue. The 

Redmond branch also employed sales and marketing representatives, engineers, and 

technology consultants. Avnet's Washington employees were instrumental in marketing 

and selling products, establishing and improving customer relations, providing design 

services to help with the development of new products, and offering technical and 

engineering support to its Washington customers. 

The Department audited Avnet's taxes and concluded that from 2003 to 2005, 

Avnet underreported its B&O tax liabilities. In particular, the Department found Avnet 

failed to include national and drop-shipped sales in its tax filings. The Department 

auditor assessed Avnet $556,037 in taxes and interest. Avnet appealed to the 

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No. 92080-0 

administrative appeals division of the Department. The appeals division affirmed the 

Department's tax assessment. Avnet paid the tax assessment under protest and filed a 

refund action in Thurston County Superior Court. The superior court ruled that the 

national sales, but not the drop-shipped sales, were subject to the B&O tax. Both Avnet 

and the Department cross appealed the superior court's ruling. The Court of Appeals 

held that Avnet's B&O tax liability included both national and drop-shipped sales. 

Avnet, Inc. v. Dep'tofRevenue, 187 Wn. App. 427,448-49,348 P.3d 1273 (2015). 

Avnet petitioned this court for review, which we granted. Avnet, Inc. v. Dep 't of 

Revenue, 184 Wn.2d 1026, 364 P.3d 120 (2016). Avnet argues that the dormant 

commerce clause bars the imposition of a B&O tax on its national and drop-shipped sales 

into Washington, which do not utilize the Redmond office in the placing or completion of 

the sale. Alternatively, even if the taxes are constitutionally permissible, Avnet maintains 

that under these facts, Rule 193 prevented the Department from assessing the taxes. At 

issue is whether Avnet carried its burden of proving that its national and drop-shipped 

sales are sufficiently dissociated from its in-state activities to avoid B&O tax liability by 

showing that its Redmond office played no part in the sales. Additionally, we must 

determine whether Rule 193 barred the B&O taxes and, if so, whether the Department 

was bound to follow an interpretive rule. 

We hold that merely showing that an in-state office was not involved in the 

placing or completion of a national or drop-shipped sale is insufficient to dissociate from 

the bundle of in-state activities that are essential to establishing and holding the market 

4 
No. 92080-0 

for its products. We also hold that under the plain language of Rule 193, imposition of 

the B&O taxes to Avnet's national and drop-shipped sales was proper, and therefore 

decline to address whether an agency is bound by its interpretive rules. 

STANDARD OF REVIEW 

Questions of law on appeal from summary judgment are reviewed de novo. 

Dreiling v. Jain, 151 Wn.2d 900,908, 93 P.3d 861 (2004) (citing Rivett v. City of 

Tacoma, 123 Wn.2d 573, 578, 870 P.2d 299 (1994)). We interpret statutes so as to 

implement the legislature's intent. Dep 't of Ecology v. Campbell & Gwinn, LLC, 146 

Wn.2d 1, 9, 43 P.3d 4 (2002). "When its meaning is in doubt, a tax statute 'must be 

construed most strongly against the taxing power and in favor of the taxpayer."' Lamtec 

Corp. v. Dep 't of Revenue, 170 Wn.2d 83 8, 842-43, 246 P.3d 788 (2011) (quoting Ski 

Acres, Inc. v. Kittitas County, 118 Wn.2d 852, 857, 827 P.2d 1000 (1992)). However, 

courts presume taxes are valid. !d. at 843. Avnet therefore bears the burden of proving 

an exemption applies. !d.; RCW 82.32.180 ("the burden shall rest upon the taxpayer to 

prove that the tax as paid by the taxpayer is incorrect"); Gen. Motors Corp. v. 

Washington, 377 U.S. 436,441, 84 S. Ct. 1564, 12 L. Ed. 2d 430 (1964) ('"a taxpayer 

claiming immunity from a tax has the burden of establishing his exemption."' (quoting 

Norton Co. v. Dep 't of Revenue, 340 U.S. 534, 537, 71 S. Ct. 377, 95 L. Ed. 517 (1951 ))), 

overruled on different grounds by Tyler Pipe Indus., Inc. v. Wash. State Dep 't of 

Revenue, 483 U.S. 232, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987). Ifthere is ambiguity in 

a provision providing an exemption or deduction, the court must strictly construe the 

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No. 92080-0 

provision against the taxpayer. Simpson Inv. Co. v. Dep't of Revenue, 141 Wn.2d 139, 

149-50, 3 P.3d 741 (2000). 

ANALYSIS 

Washington's B&O Tax Structure 

Washington imposes a gross receipts, or B&O, tax on wholesalers "for the act or 

privilege of engaging in business activities." Former RCW 82.04.220 (1961); 1 

see also 

Ford Motor Co. v. City of Seattle, 160 Wn.2d 32, 39, 156 P.3d 185 (2007). Every person 

who conducts business activities in Washington "with the object of gain, benefit, or 

advantage to the taxpayer or to another person or class, directly or indirectly" and who 

"has a substantial nexus with this state" must pay a percentage of its gross receipts of any 

resulting proceeds. Former RCW 82.04.140 (1961); former RCW 82.04.220; Lamtec, 

170 Wn.2d at 843. This court has held that "it is obvious that the legislature intended to 

impose the business and occupation tax upon virtually all business activities carried on 

within the state." Time Oil Co. v. State, 79 Wn.2d 143, 146, 483 P.2d 628 (1971). The 

B&O tax is to be imposed as broadly as constitutionally allowed. See Coast Pac. 

Trading, Inc. v. Dep 't of Revenue, 105 Wn.2d 912, 917-18, 719 P.2d 541 (1986) ("This 

court has ruled repeatedly that when the Legislature enacted the business and occupation 

tax the Legislature intended 'to tax all business activities not expressly excluded'." 

1 In 2010, the legislature rewrote this provision to read: 

There is levied and collected from every person that has a substantial nexus with 

this state a tax for the act or privilege of engaging in business activities. The tax 

is measured by the application of rates against value of products, gross proceeds 

of sales, or gross income of the business, as the case may be. 

LAWS OF 2010, 1st Spec. Sess., ch. 23, § 102. We do not consider the impact, if any, of the 

revision of the statute. 

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No. 92080-0 

(quoting Rena-Ware Distribs., Inc. v. State, 77 Wn.2d 514, 517, 463 P.2d 622 (1970))); 

RCW 82.04.4286 ("In computing tax there may be deducted from the measure of tax 

amotmts derived from business which the state is prohibited from taxing under the 

Constitution of this state or the Constitution or laws of the United States."); see also 

Steven Klein, Inc. v. Dep 't of Revenue, 183 Wn.2d 889, 896, 357 P.3d 59 (2015). 

For wholesale sales, the statute imposes a B&O tax "equal to the gross proceeds of 

the sales of such business multiplied by the rate of0.484 percent." RCW 82.04.270. The 

statute defmes "sale" as "any transfer of the ownership of, title to, or possession of 

property for a valuable consideration." RCW 82.04.040(1). The Department's 

administrative rule, WAC 458-20-103, also defines when a sale takes place: 

For the purpose of determining [B&O] tax liability of persons selling 

tangible personal property, a sale talces place in this state when the goods 

sold are delivered to the buyer in this state, irrespective of whether title to 

the goods passes to the buyer at a point within or without this state. 

"A tax on an out -of-state corporation must satisfy both the requirements of the due 

process clause of the Fourteenth Amendment and the commerce clause." Lamtec, 170 

Wn.2d at 843 (citing Quill Corp. v. North Dakota, 504 U.S. 298, 305, 112 S. Ct. 1904, 

119 L. Ed. 2d 91 (1992)). Avnet challenges the imposition of the tax under only the 

dormant commerce clause. 

The dormant commerce clause "prevents state regulation of interstate commercial 

activity even when Congress has not acted ... to regulate that activity" but does not 

"relieve those engaged in interstate commerce from their just share of state tax burden." 

BLACK'S LAW DICTIONARY 325 (I Oth ed. 20 14) (see subentry for "commerce clause"); 

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No. 92080-0 

W. Live Stock v. Bureau of Revenue, 303 U.S. 250, 254, 58 S. Ct. 546, 82 L. Ed. 823 

(1938). Under modern dormant commerce clause jurisprudence, a state tax on an out-ofstate corporation must (1) be "applied to an activity with a substantial nexus with the 

taxing State," (2) be "fairly apportioned," (3) "not discriminate against interstate 

commerce," and ( 4) be "fairly related to the services provided by the State." Complete 

Auto Transit, Inc. v. Brady, 430 U.S. 274, 279, 97 S. Ct. 1076, 51 L. Ed. 2d 326 (1977); 

see also Ford, 160 Wn.2d at 48-49. "If a local taxing scheme fails any one of these four 

requirements, it is invalid." Ford, 160 Wn.2d at 48. The parties disagree as to whether 

the first requirement-a "substantial nexus" between Avnet's national and drop-shipped 

sales and the activities of its Redmond office-has been satisfied? 

In addition to the dormant commerce clause requirements, the Department has 

promulgated administrative rules interpreting the B&O tax statute. Relevant here is Rule 

193, former WAC 458-20-193, which was applicable atthe time ofthe events at issue. 

Rule 193 explains Washington's B&O tax and its application to inbound and outbound 

sales. Rule 193(7) discusses inbound sales and states that "Washington does not assert 

B&O tax on sales of goods which originate outside this state unless the goods are 

received by the purchaser in this state and the seller has nexus." Further, 

2 The dissent draws a distinction between "business nexus" and "transactional nexus" as two 

separate but interrelated tests. Dissent at 8 (citing Gen. Motors Corp. v. Washington, 377 U.S. 

436,441, 84 S. Ct. 1564, 12 L. Ed. 2d 430 (1964)). General Motors, however, draws no such 

distinction, and in our review of the case law, no other cases use the terms "business" and 

"transactional" when evaluating the nexus necessary in a dormant commerce clause analysis. 

The dissent also asserts that our reliance on Tyler Pipe and Lamtec is misplaced because both of 

those cases are about business nexus, not transactional nexus. Dissent at 11-12. But again, 

neither Tyler Pipe nor Lamtec distinguish between a "business" and a "transactional" nexus. 

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No. 92080-0 

[i]f a seller carries on significant activity in this state and conducts no other 

business in the state except the business of making sales, this person has the 

distinct burden of establishing that the instate activities are not significantly 

associated in any way with the sales into this state. Once nexus has been 

established, it will continue throughout the statutory period of RCW 

82.32.050 (up to five years), notwithstanding that the instate activity which 

created the nexus ceased. 

Rule 193(7)( c). Rule 193(7)( c) goes on to provide a nonexhaustive list of circumstances 

that would establish that the B&O tax applies to certain sales. Among those, Rule 

193(7)(c)(v) states that 

[t]he out-of-state seller, either directly or by an agent or other 

representative, performs significant services in relation to establishment or 

maintenance of sales into the state, even though the seller may not have 

formal sales offices in Washington or the agent or representative may not 

be formally characterized as a "salesperson". 

Rule 193(2)(d) specifies that '"[r]eceipt' or 'received' means the purchaser or its 

agent first either taking physical possession of the goods or having dominion or control 

over them." "Agent" is defined as "a person authorized to receive goods with the power 

to inspect and accept or reject them," Rule 193(2)(e), and "nexus" is defined as "the 

activity carried on by the seller in Washington which is significantly associated with the 

seller's ability to establish or maintain a market for its products in Washington." Rule 

193(2)(f). Avnet contends that it has established that its national sales are exempt from 

taxation under Rule 193(7)(c) because none of its in-state activities were significantly 

associated in any way with the sales at issue. Avnet further argues that its drop-shipped 

sales are exempt under Rule 193(7) because Avnet's customer, the wholesale buyer, did 

not take physical possession of or exercise dominion and control over the goods in 

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No. 92080-0 

Washington, and that only Avnet's buyer's customer received the goods within the 

meaning of the rule. 

Dormant Commerce Clause 

We turn first to A vnet' s constitutional argument. A vnet asserts that it is entitled to 

"dissociate" the contested inbound sales from the tax base because the Redmond office 

was not involved in any way in those sales, i.e., the orders were placed directly with the 

company's headquarters in Arizona and the Redmond office was not involved in 

fulfilling those sales. Avnet's commerce clause challenge rests entirely on the Supreme 

Court's 1951 decision in Norton Co. v. Department of Revenue, 340 U.S. 534, 538-39,71 

S. Ct. 377, 95 L. Ed. 517 (1951). According to Avnet, Norton dictates-on substantially 

similar facts-that Washington cannot impose a B&O tax on such national and dropshipped sales. 

The question in Norton was whether the dormant commerce clause prohibited 

Illinois from imposing a B&O tax on certain out-of-state sales. Norton, 340 U.S. at 535-

36. Norton manufactured abrasive machines and supplies in Massachusetts. It also 

employed engineers in Illinois to consult with prospective customers. Norton Co. v. 

Dep 't of Revenue, 405 Ill. 314, 315, 90 N.E.2d 737 (1950). These engineers did not 

solicit or take any sales orders. !d. Nor did Norton employ any salespeople in Illinois. 

!d. Norton did, however, operate a local retail branch office and warehouse there. 

Norton, 340 U.S. at 535. Norton did not dispute Illinois's ability to tax sales it made at 

its Illinois branch. But not all sales to Illinois customers were completed at the Illinois 

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No. 92080-0 

branch. Some were placed at the Illinois branch but were forwarded to the Massachusetts 

office for acceptance or rejection. I d. at 536. Other orders were made directly to the 

Massachusetts office and shipped from Massachusetts without involvement of the Illinois 

branch or warehouse. I d. Norton challenged Illinois's B&O tax on those sales accepted 

and shipped from its Massachusetts office. 

The Court concluded that Illinois could impose a B&O tax on all sales that utilized 

the Illinois branch or warehouse, either in receiving the order or distributing the goods. 

ld. at 538. But the Court found that the orders that were sent directly to Massachusetts by 

the customer and shipped directly to the customer from Massachusetts were "so clearly 

interstate in character" that Illinois could not reasonably attribute their proceeds to the 

local business. ld. at 539 ("Income from those [sales] we think was not subject to this 

tax."). 3 According to the Court, "when, as here, the corporation has gone into the State to 

do local business by state permission and has submitted itself to the taxing power of the 

State, it can avoid taxation on some Illinois sales only by showing that particular 

3 That same year we decided B.F. Goodrich Co. v. State, 38 Wn.2d 663,231 P.2d 325 (1951). 

We applied Norton and ruled that two classes of sales fell outside the reach of our state's B&O 

tax. Id. at 674. The first class (class E sales) involved mail orders sent to Goodrich's out-ofstate office for products sold exclusively through its out-of-state salespeople and stored in its outof-state facilities. !d. at 666. The second class (class F sales) involved sales made and fulfilled 

pursuant to a contract negotiated with a national corporation outside Washington. !d. Because 

neither class of sales involved orders sent to or fulfilled by a local office or salesperson, this 

court felt "compelled" to hold that a B&O tax on either class of sales would offend the dormant 

commerce clause as interpreted by Norton. Id. at 674. We concluded that "such a tax may not 

be levied upon the proceeds from sales with which the local outlet had nothing to do." Id. at 675 

(emphasis added). We have since clarified the meaning of B. F. Goodrich, explaining that the 

relevant "local outlet" should not be construed narrowly. Chi. Bridge & Iron Co. v. Dep 't of 

Revenue, 98 Wn.2d 814, 833, 659 P.2d 463 (1983). 

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No. 92080-0 

transactions are dissociated from the local business and interstate in nature." !d. at 53 7. 

The Court then announced the test for dissociation that it has continued to apply: 

whether the taxpayer's in-state activities helped establish and maintain a market for the 

taxpayer's goods. 

In the over 60 years since Norton, the Supreme Court has addressed the issue of 

dissociation under Norton several times. See, e.g., Tyler Pipe Indus., Inc. v. Wash. State 

Dep 't of Revenue, 483 U.S. 232, 249, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987); Standard 

Pressed Steel Co. v. Dep 't of Revenue, 419 U.S. 560, 562-63, 95 S. Ct. 706, 42 L. Ed. 2d 

719 (1975); Gen. Motors, 377 U.S. at 447-48.4 The parties and amici dispute whether the 

legal rule set forth in Norton has changed or the facts of the cases have changed. 

General Motors, like Norton, involved a challenge to Washington's authority to 

impose a B&O tax on sales sent directly to General Motors' (GM) Portland office where 

they were accepted and delivered directly to dealers in Washington. Gen. Motors, 377 

U.S. at 443. Like Norton, GM also hired local employees and had a branch office in 

Seattle, and neither the employees nor the branch office were involved in the disputed 

sales. !d. at 446. The Court nevertheless upheld the tax on sales received by the Portland 

office and delivered to Washington dealers. According to the Court, there was a sufficient 

nexus between GM's "bundle of corporate activity" in Washington to satisfy imposition of 

its B&O tax to these sales. !d. at 447-48. The Court reasoned: 

Altl1ough mere entry into a State does not take from a corporation the right 

to continue to do an interstate business with tax immunity, it does not 

40verruled on different grounds by Tyler Pipe, 483 U.S. at 242-48 (holding Washington's tax 

exemption for "multiple activities" discriminates against interstate commerce). 

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No. 92080-0 

follow that the corporation can channel its operations through such a maze 

of local connections as does General Motors, and take advantage of its gain 

on domesticity, and still maintain that same degree of immunity. 

Id. at 448. 

Standard Pressed Steel also involved a challenge to Washington's B&O tax. 

There, the Department levied the tax on sales made to an in-state customer (Boeing) 

directly from Standard Press Steel (SPS), an out-of-state manufacturer, where SPS 

accepted and filled the sales, and shipped the products directly to the Washington 

customer. 419 U.S. at 561. And like the company in Norton, SPS hired an in-state 

engineer to consult with customers, but that engineer was not involved in the subject 

sales. Id. at 561. Despite the striking similarities between the sales in Standard Pressed 

Steel and the sales in Norton, the Court unanimously found that Washington's B&O tax 

on SPS's inbonnd sales to Boeing was constitutional. Id. at 561-62. The Court 

specifically rejected SPS's contentions (much like Avnet's contentions here) that Norton 

controlled. I d. at 563. Instead, the Court analogized the facts of Standard Pressed Steel 

to those in General Motors and affirmed application of Washington's B&O tax. 

Despite their different outcomes, neither Standard Pressed Steel nor General 

Motors explicitly overruled Norton. To the contrary, each decision suggested that its 

analysis of whether the taxpayer had sufficiently dissociated its sales from its efforts to 

establish and maintain a market for sales in the taxing state was consistent with Norton. 

See Standard Pressed Steel, 419 U.S. at 562-63; Gen. Motors, 377 U.S. at 440-48. 

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No. 92080-0 

Finally, in Tyler Pipe, the Supreme Court found Washington could impose a B&O 

tax on Tyler Pipe's sales in Washington even though it had no office, no property, and no 

employees in Washington. 483 U.S. at 249-51. The Court found application of a B&O 

tax to these sales did not offend the commerce clause because Tyler Pipe had hired an instate contractor to call on customers and solicit orders, and that it was through these sales 

contacts that Tyler Pipe maintained and improved its '"name recognition, market share, 

goodwill, and individual customer relations."' !d. (quoting Tyler Pipe Indus., Inc. v. 

Dep't of Revenue, 105 Wn.2d 318, 325, 715 P.2d 123 (1986), vacated, 483 U.S. 232). 

According to the Court, these local activities were necessary for the maintenance of Tyler 

Pipe's market in Washington and protection of its interests there. Id. at 250-51. In so 

holding, the Supreme Court adopted this court's formulation of the nexus test: "'[T]he 

crucial factor governing nexus is whether the activities performed in this state on behalf 

of the taxpayer are significantly associated with the taxpayer's ability to establish and 

maintain a market in this state for the sales."' Id. at 250 (quoting Tyler Pipe, 105 Wn.2d 

at 323). 

This court's B&O cases are consistent with the Supreme Court's interpretation of 

Norton. In Chicago Bridge & Iron Co. v. Department of Revenue, Chicago Bridge, an 

Illinois corporation, was in the business of designing and installing custom steel 

containers in Washington. 98 Wn.2d 814,816-17,659 P.2d 463 (1983). At issue was 

whether Washington could impose its B&O tax on sales orders that Washington 

customers placed with Chicago Bridge's Illinois office. I d. at 817. Because the 

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No. 92080-0 

negotiation and formalization of these contracts occurred outside Washington, Chicago 

Bridge argued that they were not taxable sales activities within Washington. /d. We 

disagreed. We found there was sufficient nexus between Chicago Bridge's sales and its 

in-state activities, especially when Chicago Bridge custom designed and manufactured 

each product for installation in Washington, opened a local office in Seattle from which it 

would send employees and project managers to survey project sites during the design and 

installation process, and maintained a warehouse in Tacoma for storage and access to 

equipment that would be used in the installation and maintenance of these sales. /d. at 

818-19. From these facts, we held that Chicago Bridge had failed to carry its burden of 

proving dissociation of its out-of-state sales from its in-state activities, as they helped it 

maintain a market for its products in Washington. /d. at 828-29. We reasoned that 

"although the Seattle sales office was not involved in the contract procurement, it was 

involved in the passive sense of being present, aware of the transaction, and available to 

assist if necessary. Local [Chicago Bridge] personnel were also available to resolve any 

difficulties with the product and maintain the goodwill of the customer." /d. at 828. 

In so holding, we interpreted Norton to require that a company show a complete 

absence of any connection between the local office and the underlying sales in order to 

meet its burden. /d. at 821, 833. Thus, where there is general contact between the 

taxpayer's in-state employees and its customers related to the taxpayer's products, a 

claim that such sales are dissociated will fail. /d. at 821-22 (citing Standard Pressed 

Steel and General Motors). This is because the presence and activities of these 

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No. 92080-0 

employees help the taxpayer build rapport and retain goodwill with its customers and are 

therefore too "inexorably entwined with the establishing and holding of the local market" 

to be "dissociated." !d. at 833-34, 837. 

Most recently, we confirmed our interpretation of Norton's nexus requirement in 

Lamtec, 170 Wn.2d 838. In Lamtec, a New Jersey manufacturer sold products to 

customers in Washington wholesale by telephone. Lamtec's only presence in 

Washington was through three sales representatives, who visited with its major 

Washington customers two to three times per year. Without deciding whether a physical 

presence in the taxing state was necessary, rather than sufficient, to establish nexus, we 

held that even if a physical presence was required, it was satisfied by the three sales 

representatives' occasional visits to Washington. Even though the sales representatives 

did not solicit the sales in question, we reasoned that "[t]he contacts by Lamtec's sales 

representatives were designed to maintain its relationships with its customers and to 

maintain its market within Washington State. Nor were the activities slight or incidental 

to some other purpose or activity." !d. at 851. We went on to hold that "Lamtec's 

practice of sending sales representatives to meet with its customers within Washington 

was significantly associated with its ability to establish and maintain its market." !d. 

Additionally, our construction of Norton is consistent with decisions from other 

jurisdictions. In Alaska Department of Revenue v. Sears, Roebuck & Co., Sears 

challenged the imposition of a gross receipts tax on direct mail order sales-delivered to 

Alaska-that did not utilize the local Sears retail outlets. 660 P .2d 1188, 1189 (Alaska 

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No. 92080-0 

1983 ). The Alaska Supreme Court held that Norton and the dormant commerce clause 

did not bar the imposition of the tax, even if the direct mail orders in no way involved a 

local outlet, because the local outlets "provided Alaska patrons with customer service on 

catalog items, such as returns for repair, credit, or exchange. In addition, they supplied 

application forms and accepted direct applications for Sears credit card accounts." !d. at 

1191. The court held that under those facts, Sears had a "substantial commercial 

presence" that had "a significant nexus to Sears' direct mail order business." !d. In J.C. 

Penney Co. v. Hardesty, the Supreme Court of West Virginia held a B&O tax on J.C. 

Penney's out-of-state catalog sales valid, even though the sales were neither made nor 

shipped through its local retail outlets. 264 S.E.2d 604, 610 (W.Va. 1979). In a 

concurring opinion, Justice Miller stated that "to contend that out-of-State catalog sales 

have no local connection is to ignore business reality." !d. at 617. 

The parties spend a portion of their briefing arguing over whether General Motors, 

Standard Pressed Steel, and Tyler Pipe overruled Norton. However, resolution of that 

question is not dispositive of the issue. While the United States Supreme Court "does not 

normally overturn, or so dramatically limit, earlier authority sub silentio," we need not 

resolve this question today. Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 

18, 120 S. Ct. 1084, 146 L. Ed. 2d 1 (2000). Norton unquestionably remains good law as 

pertains to the principle that the taxpayer has the burden to show that the bundle of its instate corporate activities are "dissociated from the local business and interstate in nature. 

The general rule, applicable here, is that a taxpayer claiming immunity from a tax has the 

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burden of establishing [its] exemption." Norton, 340 U.S. at 537. What has changed in 

the 60 years since Norton is the Supreme Court's interpretation of how a company must 

demonstrate dissociation. In that, General Motors, Standard Pressed Steel, and Tyler 

Pipe control. 

Here, Avnet admits that its "Redmond office performs a variety of functions for 

Avnet's Washington customers, including soliciting orders, responding to requests for 

quotes, receiving orders, responding to questions and otherwise meeting the needs of 

Avnet's Washington customers." Avnet, Inc.'s Suppl. Br. at 2. Although Avnet 

contends that its Redmond office did not provide any postshipment services related to the 

drop-shipped or national sales, it does not indicate that it would not do so if requested. In 

Chicago Bridge, we indicated that it was enough that the local office was involved in the 

"passive sense of being present, aware of the transaction, and available to assist if 

necessary." 98 Wn.2d at 828-29. In addition, Avnet's employees in the Redmond office 

also provided its corporate office with "market intelligence" regarding Washington 

markets, met with Avnet's sales teams and suppliers to strategize on how to create a 

greater demand for Avnet's products and services, and worked with customers in 

improving existing products and designing new prototypes. CP at 353-55. Avnet has 

failed to offer any evidence that those local activities in Washington are not significantly 

associated with its ability to establish and maintain a Washington market even when its 

local office or employees are not directly involved with the inbound sales. Avnet's instate activities therefore were at least minimally associated with its ability to establish 

18 
No. 92080-0 

and maintain a market in Washington for the sale of its products. Avnet's presence 

creates a climate for Washington residents to want to order from the company. We hold 

that under Tyler Pipe and Chicago Bridge, there is a sufficient nexus between Avnet's 

in-state activities and the State to support Washington's imposition of its B&O tax on the 

gross receipts derived from all of Avnet' s inbound sales. 

Rule 193 

We now turn to A vnet' s argument that Rule 193 bars the imposition of a B&O tax 

on both categories of sales. Avnet first argues that Rule 193(7), which states that 

"Washington does not assert B&O tax on sales of goods which originate outside this state 

unless the goods are received by the purchaser in this state and the seller has nexus," 

exempts its drop-shipped sales. A vnet contends that even if there is a nexus, its buyer 

never received possession or exercised control or dominion over the goods. Avnet 

further argues that a B&O tax on its national and drop-shipped sales are barred by Rule 

193(7)(c), claiming that none of the nonexclusive examples of nexus set forth in Rule 

193(7)(c)(i)-(vi) are applicable. Avnet next asserts that the Department has disavowed its 

own interpretive rule and should be estopped from so doing. The Department argues that 

it has not disavowed anything, but that Avnet misconstrues Rule 193. We agree with the 

Department. 

The plain language of Rule 193(7) does not provide Avnet with an exemption. 

First, the rule defines "received" as the "purchaser or its agent ... taking physical 

possession of the goods or having dominion and control over them." Rule 193(2)(d) 

19 
No. 92080-0 

(emphasis added). "Agent" is then defined as "a person authorized to receive goods with 

the power to inspect and accept or reject them." Rule 193(2)(e). As the Department 

argues, the only person "authorized to receive [the] goods with the power to inspect and 

accept or reject them" would be the person Avnet's buyer designates-Avnet's buyer's 

customer-bringing them squarely within the rule's definition of"agent." Rule 

193(2)(e). For each sale at issue, Avnet's customer contracted to pay for the goods and 

provided A vnet with the name and address of the person or company authorized to 

receive the goods. Furthermore, as the Court of Appeals below correctly pointed out, 

"the only transfer of possession of property to any buyer occurred within the state of 

Washington." Avnet, 187 Wn. App. at 436. The person designated by Avnet's customer 

to receive the goods was the customer's "agent" as defined in Rule 193. 

However, even if the company that places the order and requests it be dropshipped to Washington is not the purchaser-that would make the ultimate recipient the 

purchaser and Avnet's customer the purchaser's agent. A commonsense breakdown of a 

drop-shipped sale demonstrates that the "purchaser" is the ultimate recipient in 

Washington. Avnet and the Department treat the sale as beginning with the out-of-state 

company placing an order with A vnet. However, the out-of-state company is presumably 

placing the order with Avnet only because it first received an order from its customer in 

Washington. For example, a Washington customer orders a piece of electronic 

equipment from a company located in Colorado. The Colorado company then places an 

order with A vnet and requests it be delivered to its customer in Washington. The 

20 
No. 92080-0 

payment for Avnet's product originates in Washington, and the product is delivered in 

Washington. If the Colorado company is not the purchaser, then it must be acting as an 

agent of the Washington customer. The result is that the ultimate recipient in 

Washington is, for all intents and purposes, the purchaser of Avnet's goods. Depending 

where we place the focus, the Washington customer is either the commonsense purchaser 

or the agent of the purchaser. Regardless, Rule 193 is satisfied. 

The common law also supports our interpretation that the Washington customer is 

Avnet's de facto purchaser. "[I]t is a well-established rule that delivery to a person 

appointed by the buyer to receive the goods or to any third person at the buyer's request 

or with his consent is sufficient delivery to the buyer." Middleton v. Evans, 86 Utah 396, 

403, 45 P.2d 570 (1935); Weiner v. Am. Credit-Indem. Co. ofN Y, 222 N.W. 699, 701 

(Mich. 1929) ("It is not unusual in business for orders to direct delivery to be made to a 

party other than the one giving the order, and a delivery so made is in legal effect a 

delivery to the party ordering the shipment. "i 

5 See also Williams burgh Stopper Co. v. Bickart, I 04 Conn. 674, 134 A. 233 (1926) (delivery to 

the buyer's customers in accordance with his instructions is delivery to the buyer); Francis v. 

Merkley, 59 Cal. App. 196, 198,210 P. 437,438 (1922) (delivery to purchaser's designee 

deemed delivery to purchaser for purpose of consummating contract of sale); Fergus Cnty. 

Hardware Co. v. Crowley, 57 Mont. 340,343, 188 P. 374 (1920) ("[I]t is too well-settled to be 

open to question that delivery of goods to one designated by the buyer to receive them is delivery 

to the buyer himself."); Roy v. Griffin, 26 Wash. 106, 66 P. 120 (1901) (delivery to shipper 

designated by purchaser constituted delivery to purchaser for purposes of consummating a sale 

oflurnber); Wing v. Clark, 24 Me. 366, 373 (1844) ("The cases are numerous, which show that, a 

delivery of an article sold, to a person appointed by the vendee to receive it, is a delivery to the 

vendee."). 

21 
No. 92080-0 

Finally, it is worth noting that Avnet's interpretation of Rule 193 creates a class of 

"nowhere sales" that because the goods are not physically received by the purchaser 

cannot be classified as inbound or outbound sales. Avnet's interpretation results in no 

sale occurring, and is inconsistent with the language of the B&O statutes and the 

legislature's intent that the B&O tax apply to virtually every business activity and to the 

extent permitted by the constitution.6 The legislature did not intend the applicability of 

the B&O tax to turn on whether the purchaser designates a third party to take possession 

of the goods at the shipping destination. This is especially true when that designation is 

completely within the control of the parties and could lead to substantial tax avoidance. 

Cf Wash. Imaging Servs., LLC v. Dep't of Revenue, 171 Wn.2d 548, 556, 252 P.3d 885 

(2011) (independent contractor could not avoid its B&O tax obligation by purporting to 

disclaim an ownership interest in the amounts owed for services rendered); Ford Motor, 

160 Wn.2d at 43-44 (out-of-state seller could not avoid B&O tax by contractually 

transferring title at the point of shipment); Chi. Bridge, 98 Wn.2d at 824 (construction 

contractor could not avoid B&O tax by bifurcating the design and manufacturing 

components of contracts for construction services from the installation of products in 

Washington); Wasem's, Inc. v. State, 63 Wn.2d 67, 69-70, 385 P.2d 530 (1963) (retailer 

could not avoid state excise taxes by having a nonresident purchaser sign a bill of lading 

agreeing to deliver goods to himself at a point outside the state). Properly interpreted, 

6 A vnet' s interpretation would even bar the imposition of a B&O tax on orders placed by a 

Washington company through the Redmond office and sent to Arizona for fulfillment, so long as 

the Washington company directed that the goods be delivered to someone else in Washington. 

22 
No. 92080-0 

Rule 193 ensures that the B&O tax avoids both multiple taxation and no taxation 

anywhere. 

Avnet and the dissent rely on one of the specific examples given in Rule 

193(11 )(h) to assert that Avnet's buyer does not receive the goods under the meaning of 

the rule. Rule 193(11)(h) provides: 

Company X is located in Ohio and has no office, employees, or other 

agents located in Washington or any other contact which would create 

nexus. Company X receives by mail an order from Company Y for parts 

which are to be shipped to a Washington location. Company X purchases 

the parts from Company Z who is located in Washington and requests that 

the parts be drop shipped to Company Y. Since Company X has no nexus 

in Washington, Company X is not subject to B&O tax or required to collect 

retail sales tax. Company X has not taken possession or dominion or 

control over the parts in Washington. Company Z may accept a resale 

certificate from Company X which will bear the registration number issued 

by the state of Ohio. Company Y is required to pay use tax on the value of 

the parts. 

Avnet maintains that it is "Company Z," its buyer is "Company X," and its buyer's 

customer is "Company Y." This example is not on point. First, it addresses the tax 

liability not of Avnet (Company Z), but of Avnet's buyer (Company X), which is not at 

issue. Second, the fact that Avnet's immediate customer (Company X) did not take 

possession of the products in Washington is not determinative. Again, "the only buyer 

who took possession or delivery did so from Avnet and in Washington." Avnet, 187 Wn. 

App. at 438. Rule 193(11)(h) is therefore not helpful. 

We hold that Rule 193(7) does not exempt Avnet's drop-shipped sales. Likewise, 

Avnet will find no exemption in the examples listed in Rule 193(7)(c)(i)-(vi). First, 

regardless of the examples, subsection (7)( c) deals with nexus, and "nexus" is defined as 

23 
No. 92080-0 

"the activity carried on by the seller in Washington which is significantly associated with 

the seller's ability to establish or maintain a market for its products in Washington." Rule 

193(2)(f). As previously discussed, Avnet's in-state activities meet this standard. Avnet 

attempts to evade this conclusion by arguing that subsection (2)(f) pertains to "taxpayer 

nexus," whereas subsection (7)(c) relates to "transactional nexus." Avnet, Inc.'s Suppl. 

Br. at 17 n.9. Under Avnet's interpretation, subsection (7)(c) would be sale specific. 

However, Avnet's distinction between subsections (2)(f) and (7)(c) ignores language 

from (7)( c) that provides that the nexus will be deemed to exist for taxing purposes for up 

to five years even when the in-state activity has ceased. This undermines the 

interpretation that A vnet advances, which would require a transaction-by-transaction 

nexus determination. Second, one of the examples listed states that there is a sufficient 

nexus if 

"[t]he out-of-state seller, either directly or by an agent or other 

representative, performs significant services in relation to establishment or 

maintenance of sales into the state, even though the seller may not have 

formal sales offices in Washington or the agent or representative may not 

be formally characterized as a 'salesperson'." 

Rule 193(7)(c)(v) (emphasis added). This example is an iteration ofthe Tyler Pipe 

standard, and Avnet's activities fall squarely within it. We hold that Rule 193, which 

interprets Washington's B&O tax statutes, does not bar the imposition of a gross receipts 

tax on Avnet's national and drop-shipped sales. 7 

7 The Department's reading of Rule 193, which interprets the B&O taxing statutes, is correct. 

Therefore, it is unnecessary to determine whether the Department disavowed an interpretive rule 

and whether it should be estopped from doing so if a taxpayer relies on it. 

24 
No. 92080-0 

CONCLUSION 

Washington's B&O tax is intended to extend as far as permitted by the dormant 

commerce clause and to reach "virtually all business activities carried on within the 

state." Time Oil, 79 Wn.2d at 146. The dormant commerce clause would permit Avnet 

to dissociate its national and drop-shipped sales if it could show that the bundle of its 

corporate in-state activities were not "'significantly associated with the taxpayer's ability 

to establish and maintain a market in this state for the sales."' Tyler Pipe, 483 U.S. at 

250 (quoting Tyler Pipe, 105 Wn.2d at 323). During the time in question, Avnet had an 

office in Redmond, Washington, with over 40 employees consisting of account managers, 

sales and marketing representatives, engineers, and technology consultants. The 

Redmond office was significantly associated with establishing and holding the market for 

its products in Washington, and therefore we hold that the dormant commerce clause 

does not prevent the imposition of a B&O tax. Furthermore, we hold that the plain 

language of Rule 193 does not bar the B&O tax. The Court of Appeals is affirmed. 

25 
No. 92080-0 

WE CONCUR: 

# { 

~huts+. 

26 
Avnet v. Dep 't of Revenue, No. 92080-0 (Gonz:Uez, J., concurring) 

GONZALEZ, J. (concurring)-! concur with the lead opinion in result. 

Neither the dormant commerce clause nor the Department of Revenue's former 

"Rule 193" (former WAC 458-20-193 (1992)) preclude imposition of business and 

occupation (B&O) tax on Avnet's national and drop-shipped sales. U.S. CoNST. 

art. I,§ 8, cl. 3. I write separately to stress that for B&O taxation purposes, the 

"purchaser" in Rule 193 is the entity that ultimately takes possession of goods in 

Washington, regardless ofthe fact that there was a broker in the middle who placed 

the order on behalf of the ultimate purchaser. 

The Washington Legislature manifested a clear intent to impose the B&O 

tax on virtually all business activities carried on in the State. Time Oil Co. v. State, 

79 Wn.2d 143, 483 P.2d 628 (1971). Washington courts have repeatedly ruled that 

the B&O tax applies to all business activities not expressly excluded. Id. 

Construing "purchaser" as narrowly as the dissent advocates would be inconsistent 

with the relevant regulations, the legislature's expressed intent, and our precedent 

finding B&O taxation covers virtually every business activity in Washington. Rule 

I 
Avnet v. Dep 't ofRevenue, No. 92080-0 (Gonzalez, J., concurring) 

193(7); RCW 82.04.220; Steven Klein, Inc. v. Dep 't of Revenue, 183 Wn.2d 889, 

896, 357 P.3d 59 (2015) ("Washington's B&O tax system is extremely broad."); 

Simpson Inv. Co. v. Dep 't of Revenue, 141 Wn.2d 139, 149-50, 3 P.3d 741 (2000); 

Budget Rent-A-Car ofWash.-Or., Inc. v. Dep 't of Revenue, 81 Wn.2d 171, 500 

P.2d 764 (1972); Time Oil Co., 79 Wn.2d 143. 

Washington does not assert B&O tax on sales of goods originating outside the 

state unless the goods are received by the purchaser in our state and the seller has a 

sufficient nexus to our state. Rule 193(7). Avnet has a nexus with the state because 

its in-state activities were not separate and independent from its sales to 

Washington customers. See Norton Co. v. Dep 't of Revenue, 340 U.S. 534, 71 S. 

Ct. 377,95 L. Ed. 517 (1951); Gen. Motors Corp. v. Washington, 377 U.S. 436,84 

S. Ct. 1564, 12 L. Ed. 2d 430 (1964), overruled on other grounds by Tyler Pipe 

Indus., Inc., v. Wash. State Dep 't of Revenue, 483 U.S. 232, 107 S. Ct. 2810, 97 L. 

Ed. 2d 199 (1987); Standard Pressed Steel v. Dep't of Revenue, 419 U.S. 560, 95 

S. Ct. 706,42 L. Ed. 2d 719 (1975); Tyler Pipe, 483 U.S. 232; Chi. Bridge &Iron 

Co. v. Dep 't of Revenue, 98 Wn.2d 814, 816-17, 659 P.2d 463 (1983). The goods 

at issue in Avnet's drop-shipped sales were received by the purchaser in our state 

because the entity ultimately taking possession of those goods was a Washington 

purchaser, regardless of the fact that there was a facilitator elsewhere. Construing 

"purchaser" to encompass the ultimate Washington purchaser follows our 

2 
Avnet v. Dep 't of Revenue, No. 92080-0 (Gonzalez, J., concurring) 

precedent and follows the legislature's clear intent to impose B&O tax on virtually 

all business in our state. 

With these observations, I join the lead opinion in result. 

3 
Avnet v. Dep 't of Revenue, No. 92080-0 (Gonzalez, J.1

concurring) 

4 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

No. 92080-0 

GORDON McCLOUD, J. (clissenting)-Washington's business and 

occupation (B&O) tax falls on wholesalers "for the act or privilege of engaging in 

business activities" inside our state. RCW 82.04.220(1). The lead opinion upholds 

the imposition of this tax on two categories of sales that, in this case, were 

indisputably made by Avnet outside our state: national sales and third party dropshipped sales. It rejects Avnet's arguments that the tax on those interstate sales fell 

outside the reach of RCW 82.04.220, was impermissible under former WAC 458-

20-193 (1992) (Rule 193), and violated the dormant commerce clause, U.S. CONST. 

art. I, § 8, cl. 3. 

I disagree with the lead opinion's conclusion on each of those points. There 

is no statute or regulation that "state[ s] distinctly" that these two categories of 

interstate sales are "the object of th[at] [B&O tax law] to which only it shall be 

applied" as required by article VII, section 5 of our state constitution. In fact, 

imposing that tax on A vnet' s third party drop-shipped sales violates Rule 193, which 

bars taxation of such out-of-state sales unless the product is received by the 

1 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

purchaser in Washington. Such receipt by the purchaser in Washington did not 

occur here; in third party drop-shipped sales, it is not the purchaser but the 

purchaser's customer, an independent entity, who receives the product in 

Washington. Finally, in Norton, 1 the United States Supreme Court rejected state 

efforts to impose a similar B&O tax on analogous interstate sales; it held that those 

sales were sufficiently "dissociated" from the company's in-state activities to bar 

local state taxation of those sales under the dormant commerce clause. Norton 

remains binding precedent. I therefore respectfully dissent. 

PROCEDURAL HISTORY 

The question presented in this case is a difficult one. The courts below 

reached different conclusions, as summarized below. That's certainly a red flag, 

given (1) our interpretive rule that ambiguous tax statutes or regulations are 

construed in the taxpayer's favor and (2) the state constitutional requirement that 

"every law imposing a tax shall state distinctly the object of the same to which only 

it shall be applied." WASH. CaNST. art. VII, § 5. I therefore summarize the 

background of this case in detail. 

1 Norton Co. v. Dep 't ofRevenue, 340 U.S. 534, 537, 539, 71 S. Ct. 377, 95 L. Ed. 

517 (1951). 

2 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

A. The Department of Revenue Determined That Avnet Was Liable for B&O 

Taxes on Both National and Drop-Shipped Sales 

The Department of Revenue (Department) audited Avnet's taxes and 

concluded that from January 1, 2003, to December 31, 2005, Avnet underreported 

its B&O tax liabilities. In particular, the Department found that Avnet failed to 

include national and drop-shipped sales in its tax filings. A vnet agrees that it did not 

report these as taxable events, but it argues that it had no duty to report them. Avnet 

explained that they were considered nontaxable incidents under the Department's 

Rule 193 and the dormant commerce clause. According to A vnet, national and dropshipped sales are excluded from state B&O tax liability because they were 

"dissociated" (i.e., lacked transactional nexus) from its Redmond office. Clerk's 

Papers (CP) at 6. Avnet claims it engaged in no activity in Washington associated 

with these sales-no soliciting, no taking or receiving of orders, no warehousing, no 

shipping, no billing, no customer service, and no technical calls. 

The Department auditor accepted A vnet' s factual assertions but disagreed 

with its legal conclusion. It assessed Avnet $556,037 in taxes and interest ($509,256 

in back taxes plus $46,781 in interest). 

3 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

B. The Administrative Appeals Division of the Department Affirmed the 

Department's Tax Assessment 

A vnet raised the same arguments m its administrative appeal. The 

administrative law judge rejected them. The administrative law judge denied 

Avnet's claims under Rule 193(7) and its claims of dissociation under the dormant 

commerce clause because A vnet had failed to show that its national and dropshipped sales were not attributable to its in-state activities in any way. According to 

the judge, "[i]t is not just a question of segregating the activities of specific sales 

offices, but rather establishing that a sale attributed to out-of-state location is not in 

any way associated with the taxpayer's collective in-state activities that maintain a 

market for that product." CP at 100 (emphasis added). The judge upheld the 

Department's tax assessment. 

That judge then granted Avnet's motion for reconsideration. During the 

rehearing, A vnet produced additional evidence detailing the amount of each disputed 

sale, the branch that wrote the sale, the buyer and state of location, and the receiver. 

After reviewing this evidence, the judge once again affirmed the Department's tax 

assessment. 

Avnet paid the accrued tax assessment of $660,999.54 ($556,037.00 plus 

$104,962.54 in additional interest) under protest and filed a refund action in 

Thurston County Superior Court based on the same challenges. 

4 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

C. The Thurston County Superior Court Granted Avnet a Tax Refund on DropShipped Sales, but Not National Sales 

The superior court agreed with Avnet that drop-shipped sales were not subject 

to Washington's B&O tax under Rule 193(7) and ordered the Department to refund 

Avnet $371,042 plus any interest Avnet paid on it. But it disagreed with Avnet's 

contention that Rule 193(7)(c) or the dormant commerce clause barred taxes on the 

national sales. As to those sales, the court ruled that there was a sufficient local 

nexus to impose tax liability. 

D. The Court of Appeals Held That Both National Sales and Drop-Shipped Sales 

Were Subject to B&O Taxation 

A vnet appealed its continued tax liability for national sales, and the 

Department cross appealed the dismissal of its tax assessments on the drop-shipped 

sales. Division Two of the Court of Appeals held that A vnet' s B&O tax liability 

included national and drop-shipped sales. Avnet, Inc. v. Dep 't of Revenue, 187 Wn. 

App. 427,448-49, 348 P.3d 1273 (2015), review granted, 184 Wn.2d 1026, 364 P.3d 

120 (2016). 

Regarding Avnet's tax liability for national and drop-shipped sales, the 

appellate court acknowledged that older decisions from this court and the United 

States Supreme Court had held that similar sales were sufficiently dissociated from 

a defendant's in-state activities to avoid state B&O tax liability. Id. at 444-45 

5 
Avnet v. Dep "t of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

(discussing Norton, 340 U.S. at 539; B.F. Goodrich Co. v. State, 38 Wn.2d 663,673-

76, 231 P.2d 325 (1951)). But it concluded that those cases' precedential authority 

had been eroded by subsequent Supreme Court decisions directing courts to consider 

more than just the involvement of the local office in procuring the sale, but also the 

taxpayer's other in-state activities that supported an in-state market for its out-ofstate sales. Id. at 445-47 (discussing Tyler Pipe Indus., Inc. v. Wash. State Dep 't of 

Revenue, 483 U.S. 232, 250-51, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987); Standard 

Pressed Steel Co. v. Dep 't of Revenue, 419 U.S. 560, 95 S. Ct. 706,42 L. Ed. 2d 719 

(1975); Gen. Motors Corp. v. Washington, 377 U.S. 436,447-48, 84 S. Ct. 1564, 12 

L. Ed. 2d 430 (1964), overruled on different grounds by Tyler Pipe, 483 U.S. at 242-

48)). 

The appellate court also rejected Avnet's contention that Rule 193 barred 

B&O taxation of its drop-shipped and national sales. It concluded that Rule 193 was 

not binding on the court. Id. at 439 (discussing Ass 'n of Wash. Bus. v. Dep 't of 

Revenue, 155 Wn.2d 430, 446-47, 120 P.3d 46 (2005)). 

Avnet petitioned this court for review, which we granted. 184 Wn.2d 1026. 

ANALYSIS 

Washington imposes a tax on businesses, called a B&O tax, "for the act or 

privilege of engaging in business activities" in Washington. RCW 82.04.220(1). It 

6 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

is measured by the business' gross receipts. Former RCW 82.04.220 (1961). That 

tax is distinct from, and in addition to, any retail sales tax or use tax. The B&O tax 

applies to sales that originate within the state and some sales that originate outsidedepending on where the goods are received by the purchaser. Rule 193(7) (tax 

applies to inbound sales), (3) (tax does not apply to outbound sales even though they 

originate in state). This case involves two categories of inbound sales: sales where 

the recipient is a business entity linked to the customer (national sales) and sales 

where the recipient is a completely separate third party, such as the beneficiary of a 

gift or the purchaser's customer (third party drop-shipped sales). 

Controlling Supreme Court precedent compels the conclusion that the 

dormant commerce clause bars states from taxing both out-of-state sales. 

A. Norton Remains Controlling Authority and Requires That We Reach the 

Same Result Based on the Same Facts 

The United States Constitution prohibits states from taxing interstate 

commerce if the tax infringes on Congress' express authority "[t]o regulate 

commerce ... among the several states." U.S. CaNST., art. I, § 8, cl. 3. This 

"commerce clause" has historically been viewed as both an express grant of 

congressional authority to regulate and an implicit restriction on a state's authority 

to enact legislation that discriminates against or excessively burdens interstate 

commerce. Lamtec Corp. v. Dep 't of Revenue, 170 Wn.2d 838, 844, 246 PJd 788 

7 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

(20 11 ). This case implicates the commerce clause's implied restriction, the dormant 

commerce clause. 

A tax on interstate commerce does not violate the dormant commerce clause 

if '"[(1)] the tax is applied to an activity with a substantial nexus with the taxing 

State, [(2)] is fairly apportioned, [(3)] does not discriminate against interstate 

commerce, and [(4)] is fairly related to the services provided by the State."' Ford 

Motor Co. v. City of Seattle, Exec. Serv. Dep 't, 160 Wn.2d 32, 48, 156 P.3d 185 

(2007) (quoting Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279, 97 S. Ct. 

1076, 51 L. Ed. 2d 326 (1977)). "If a local taxing scheme fails any one of these four 

requirements, it is invalid." !d. 

The parties disagree whether the first requirement, of a "substantial nexus 

with the taxing state," is satisfied. That "substantial nexus" requirement actually 

involves two separate, though related, nexus requirements: the first concerns the 

"taxpayer's [general] business activities within the State," or general business nexus, 

and the second concerns the specific transaction at issue, or specific transactional 

nexus. Gen. Motors, 377 U.S. at 441 (recognizing the test for business nexus is 

distinct from transactional nexus and its test for dissociation); Norton, 340 U.S. at 

537 (where corporation has general presence in state, it "can avoid taxation on [in8 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

state] sales only by showing that particular transactions are dissociated from the 

local business and interstate in nature" (emphasis added)). 

To establish business nexus, the tax must be based on "'the activities 

performed in [the taxing] state on behalf of the taxpayer [that] are significantly 

associated with the taxpayer's ability to establish and maintain a market in [that] 

state for the sales."' Tyler Pipe, 483 U.S at 250-51 (quoting Tyler Pipe v. Dep 't of 

Revenue, 105 Wn.2d 318, 323, 715 P.2d 123 (1986)). Once sufficient business 

nexus is shown, '"a taxpayer claiming immunity from a tax has the burden of 

establishing [an] exemption."' Gen. Motors, 377 U.S. at 441 (quoting Norton, 340 

U.S. at 537). A particular transaction can be exempt from B&O taxation even though 

the business has nexus in Washington if that transaction is "dissociated from the 

local business and interstate in nature." Norton, 340 U.S. at 537.2 

Avnet concedes that it has a business nexus with Washington based on the 

presence of its Redmond office. Hence, Avnet does not challenge the Department's 

authority to tax transactions facilitated by that office. Indeed, Avnet has paid B&O 

2 Rule 193 incorporates the same constitutional requirements of business and 

transactional nexus into its prerequisites to the occurrence of a taxable event. Rule 

193(7)( c) ("Washington does not assert B&O tax on sales of goods which originate outside 

this state unless ... the seller has nexus"; "[i]f a seller carries on significant activity in this 

state and conducts no other business in the state except the business of making sales, this 

person has the distinct burden of establishing that the in[-]state activities are not 

significantly associated in any way with the sales into this state"). 

9 
Avnet v. Dep 't ofRevenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

taxes on all those transactions. 

Instead, A vnet argues that two categories of interstate sales--its national and 

third party drop-shipped sales-are so dissociated from the activities of its Redmond 

office that they lack transactional nexus and are exempt from B&O taxation for that 

reason.3 Avnet relies on the United States Supreme Court's decision in Norton for 

that argument. 

Norton, like Avnet, was an out-of-state corporation that operated a local retail 

office and warehouse in state, where it sold and distributed goods directly to local 

customers. Norton, 340 U.S. at 535. Norton, like Avnet, also hired local engineers 

to consult with its in-state customers. Norton Co. v. Dep 't of Revenue, 405 Ill. 314, 

315, 90 N.E.2d 737 (1950). And Norton, like Avnet, challenged the State's ability 

to impose a B&O tax on the portion of its Washington sales derived from orders 

received directly and fulfilled directly by its out-of-state warehouses and without the 

assistance of its local employees or facilities in any way. Norton, 340 U.S. at 535-

36. Based on these facts, the Court held that those interstate sales were sufficiently 

"dissociated" from Norton's in-state activities to be constitutionally exempt from 

3 The lead opinion claims that General Motors and its progeny drew no distinction 

between these two inquiries. Lead opinion at 8 n.2. This is incorrect. In General Motors 

itself, General Motors "admitted" that its activities satisfied the first inquiry. Gen. Motors, 

377 U.S. at 441. The only disputed question was whether certain specific transactions by 

four of its divisions could be taxed--i.e., whether the transactions by those divisions 

showed sufficient nexus. 

10 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

B&O taxation under the dormant commerce clause. I d. at 536. 

This case involves the exact same facts. Everyone agrees-A vnet, the 

Department, and even the lead opinion-that Norton is factually indistinguishable. 

Avnet, Inc.'s Suppl. Br. at 6-11; Resp't Dep't of Revenue's Suppl. Br. at 11, 13; lead 

opinion at 17. Yet the lead opinion concludes that unlike Norton, Avnet is subject 

to B&O taxation for those same sort of out-of-state sales. Lead opinion at 18. The 

lead opinion reaches this contrary conclusion by interpreting several subsequent 

United States Supreme Court decisions as raising Norton's standard for proving 

dissociation. Id. at 17-18. Specifically, it relies on General Motors, Standard 

Pressed Steel, and Tyler Pipe. 

None ofthose cases support the lead opinion's conclusion. 

First, Tyler Pipe is a case about business nexus, not transactional nexus. 483 

U.S. at 249 ("Tyler argues that its business does not have a sufficient nexus with the 

State of Washington to justify the collection of a gross receipts tax" (emphasis 

added)).4 Nowhere in Tyler Pipe did the Court discuss the concept of dissociation 

4 The lead opinion argues that Tyler Pipe drew no distinction between general 

business nexus and specific transaction nexus. That's because it didn't have to; the only 

disputed issue there, unlike the issue in General Motors, Norton, and the instant case, was 

whether Tyler Pipe had enough general business connections with the State. 

11 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

or Norton. So that case is inapplicable here. 5 

Second, contrary to the lead opinion's opinion, both General Motors and 

Standard Pressed Steel support applying the "dissociation" test as it was articulated 

in Norton, and not some modified standard of proof. Indeed, both cases repeatedly 

cited to Norton as the standard for evaluating whether a disputed transaction is 

sufficiently dissociated. Gen. Motors, 377 U.S. at 441, 447-48; Standard Pressed 

Steel, 419 U.S. at 562-63. 

In General Motors, the Court reached a different result from Norton because 

the facts were different: it found there was a significant relationship between General 

Motors' (GM) in-state sales activities and the disputed transactions. In General 

Motors, GM sought to exempt all sales where the orders were placed by Washington 

dealers directly with its Portland office and fulfilled by an out-of-state facility 

despite the significant contacts between GM's in-state employees and those dealers. 

377 U.S. at 443, 446. GM argued that Norton controlled because in its case, as in 

Norton, customers ordered directly from out-of-state offices and their orders were 

5 The lead opinion's reliance on Lamtec is misplaced for this same reason. Like 

Tyler Pipe, Lamtec is a case about business nexus, not transactional nexus. Specifically, 

"Lamtec argue[d] that an entity has sufficient nexus with Washington for purposes of the 

B&O tax only if it has a 'physical presence' here and contends that it does not have such a 

presence." 170 Wn.2d at 844. Thus, contrary to the lead opinion's assertion, Lamtec did 

not address Norton and did not endorse some modified standard for what constitutes 

sufficient dissociation. Lead opinion at 16. 

12 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

fulfilled by out-of-state facilities. The Court rejected GM's analogy, explaining that 

Norton was about more than just where the order was placed and where the product 

was fulfilled; it was about the absence of any contact between the taxpayer's in-state 

employees and the particular transaction. !d. at 44 7. The Court concluded that GM 

had failed to prove those orders were dissociated from its in-state activities. On the 

contrary, the facts showed that GM hired a significant number of Washington 

employees whose only jobs were to facilitate and assist those Washington dealers 

with determining what products to order and training those dealers' employees on 

how to use those products. !d. at 443-46. On those facts, the Court could not say 

the sales were unrelated to GM's in-state activities. So the difference between 

Norton and GM was the facts, not the legal rule. 

The Court reached a different result from Norton again in Standard Pressed 

Steel. But that different result was also based on different facts: the significant 

relationship between the taxpayer's in-state activities and the customer who placed 

the order. Standard Pressed Steel challenged Washington's authority to impose a 

B&O tax on sales orders placed by a Washington customer directly with an out-ofstate office and then fulfilled by an out-of-state facility. 419 U.S. at 561. But unlike 

Norton, Standard Pressed Steel hired an employee whose sole job was to consult 

with that customer regarding its needs and product requirements. !d. The Court 

13 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

found these facts to be more analogous to the facts of General Motors than to the 

facts of Norton. Once again, the difference between Norton and this later case was 

the facts, not the legal rule. 

We have also recognized that Norton stands as controlling authority but 

reached a different result based on the facts of the particular transaction. Chi. Bridge 

& Iron Co. v. Dep't of Revenue, 98 Wn.2d 814, 659 P.2d 814 (1983). Chicago 

Bridge manufactured and installed large, custom-built, steel storage containers. Id. 

at 816. Like Norton, GM, and Standard Pressed Steel, Chicago Bridge challenged 

Washington's imposition of a B&O tax on orders placed by customers directly with 

an out-of-state sales office. Id. at 816-17. But unlike in General Motors and 

Standard Pressed Steel, where the employees had a significant relationship with the 

in-state customer, none of Chicago Bridge's local employees were involved in 

commencing or facilitating the in-state sales. I d. As a result, the facts seemed more 

similar to the facts in Norton than the facts in General Motors and Standard Pressed 

Steel. We nevertheless upheld Washington's authority to tax these sales, 

distinguishing these sales from the sale of fungible goods that were at issue in 

Norton. We explained that unlike the sale of ordinary goods, these sales involved 

custom-made structures specifically designed for installation in Washington, the 

future installation of which would require significant involvement from Chicago 

14 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

Bridge's many in-state employees to complete by way of site surveys, site 

preparations, and assemblage. Jd. at 818-19,821-22. 

Unlike in General Motors, Standard Pressed Steel, and Chicago Bridge, there 

is no way to distinguish the facts in this case from the facts in Norton. The parties 

agree that the cases are factually indistinguishable. There is no significant 

relationship between Avnet's Redmond employees and the out-of-state customers or 

in-state recipients. Further, Avnet sold fungible goods, not long-term construction 

or service projects. In light of the Supreme Court's repeated application of Norton 

as controlling authority, I conclude that its legal rule remains controlling where 

similar facts are presented. Following Norton, the disputed national sales and third 

party dropped-shipped sales are dissociated from Avnet's in-state activities. They 

are therefore exempt from B&O tax liability under the dormant commerce clause. 

B. Rule 193 Also Requires That the Goods Be Received by the Purchaser in 

Washington for the Sale To Be Taxable 

Rule 193 compels the same conclusion for a different reason. It requires more 

than just constitutional nexus for a taxable event. It states that "Washington does 

not assert B&O tax on sales of goods which originate outside this state unless the 

goods are received by the purchaser in this state and the seller has nexus." Rule 

193(7). In other words, "[t]here must be both the receipt of the goods in Washington 

by the purchaser and the seller must have nexus for the B&O· tax to apply to a 

15 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

particular sale. The B&O tax will not apply if one of these elements is missing." I d. 

Thus, even ifthere is constitutional nexus, the State cannot tax the transaction unless 

"the purchaser" also took "receipt" ofthe goods in Washington. 

It is undisputed that Avnet's national sales were received by an entity of the 

purchaser in this state. So Rule 193 would permit the State to tax those sales if the 

constitution permitted it. 

But it is also undisputed that Avnet's third party drop-shipped sales were not 

received by the purchaser in this state. They were received instead by an independent 

entity in this state: the purchaser's customer or some other third party recipient.6 The 

question is whether the delivery of goods to such a third party recipient in 

Washington qualifies as "the receipt of the goods in Washington by the purchaser." 

Rule 193(7) (emphasis added). 

The lead opinion concludes that the answer must be yes-there must be some 

interpretation of "purchaser" that includes the nonpurchasing third party recipientbecause the legislature intended to tax all constitutionally taxable events even if it 

6 The lead opinion misapprehends Avnet's argument, characterizing it as a claim 

that "the company that places the order and requests it be drop-shipped to Washington is 

not the purchaser." Lead opinion at 20. But Avnet is arguing the exact opposite position. 

A vnet is claiming that the company that places the order is the purchaser and that as a 

result, the goods are not received by the purchaser in Washington as required under Rule 

193. Avnet, Inc.'s Suppl. Br. at 19. 

16 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

didn't clearly say so in its statutes or regulations. The lead opinion therefore 

construes the rule liberally to find a taxable event. But that is inconsistent with our 

well-established rule that ambiguous tax statutes and regulations must be construed 

in the taxpayer's favor. Seattle Film Works, Inc. v. Dep 't of Revenue, l 06 Wn. App. 

448,453, 24 P.3d 460 (2001); see also Estate of Bracken, 175 Wn.2d 549, 563, 290 

P.3d 99 (2012) (quoting Lamtec, 170 Wn.2d at 842-43). 

In fact, that interpretive rule is constitutionally compelled. See Bracken, 175 

Wn.2d at 563 (quoting Washington Constitution article I, section 5 in support of 

narrow construction). 

It is only where the statute or regulation grants a tax exemption or deduction 

that we construe the language strictly, though fairly, in keeping with the ordinary 

meaning of its language, against the taxpayer. !d. 7 A vnet is not claiming a deduction 

or an exemption from an otherwise taxable event; it is claiming that the tax is 

inapplicable in the first place, per Rule 193. Thus, as the taxpayer burdened by the 

tax, A vnet should receive the benefit from any ambiguity. 

But Rule 193 is not ambiguous. It defines "received" as meanmg "the 

7 Although this case involves agency interpretations of statutes and regulations, the 

parties do not discuss what deference, if any, should be afforded to the Department's 

interpretation of tax statutes and its regulations. See Chevron, USA, Inc. v. Nat'! Res. Def 

Council, Inc., 467 U.S 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984); United States v. 

Mead Corp., 533 U.S. 218, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001). 

17 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

purchaser or its agent first either taking physical possession of the goods or having 

dominion and control over them." Rule 193(2)(d). This means the "receipt" 

requirement can be satisfied in one of two limited ways: the purchaser or its agent 

must have either possession over the goods in Washington or dominion and control 

over the goods in Washington. The example in subsection (ll)(h) under Rule 193 

explains that a drop-shipment purchaser (Company X) does not take possession in 

Washington or have dominion or control over the goods in Washington when it 

requests the goods purchased be delivered to a third party recipient (Company Y) in 

Washington. That example states: 

Company X is located in Ohio and has no office employees, or other agents 

located in Washington or any other contact which would create nexus. 

Company X receives by mail an order from Company Y for parts which are 

to be shipped to a Washington location. Company X purchases the parts 

from Company Z who is located in Washington and requests that the parts 

be drop shipped to Company Y. Since Company X has no nexus in 

Washington, Company X is not subject to B&O tax or required to collect 

retail sales tax. Company X has not taken possession or dominion or control 

over the parts in Washington. Company Z may accept a resale certificate 

from Company X which will bear the registration number issued by the state 

of Ohio. Company Y is required to pay use tax on the value of the parts. 

Rule 193(11)(h) (emphasis added). If the purchaser (Company X) does riot take 

possession of the goods in Washington when the goods were delivered to a third 

party designee (Company Y), it necessarily follows that the third party recipient is 

not an "agent" of the purchaser either because a company can take possession or 

18 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

have dominion or control over the goods through either its employees or its agents. 

Rule 193(2)(d). 

This conclusion is also consistent with the definition of "agent" under Rule 

193, which requires, contrary to the lead opinion's opinion, more than just the 

authority to receive goods; an "agent" is "a person authorized to receive goods with 

the power to inspect and accept or reject them." Rule 193(2)(e) (emphasis added). 

In addition, this conclusion is in accord with internal e-mails from department 

employees acknowledging that they were advised to inform taxpayers that dropshipped sales were not subject to Washington's B&O tax. It is certainly not fair to 

characterize A vnet' s challenge as an attempt to circumvent taxation or exploit some 

tax loophole when the Department is the one who defined the taxable event to 

exclude sales where the goods are not received by the purchaser in Washington. See 

lead opinion at 21-22. 

While it may have been "the legislature's intent that the B&O tax apply to 

virtually every business activity and to the extent permitted by the constitution," id. 

at 21-22, we cannot ignore the express language of Rule 193-a rule expressly 

promulgated by the Department and relied on by Washington businesses in making 

their business choices. Taxpayers "must be able to rely on the plain meaning of 

regulations and Department interpretations, without fear that a state agency will later 

19 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

penalize them by adopting a different interpretation." Silverstreak, Inc. v. Dep 't of 

Labor & Indus., 159 Wn.2d 868, 889-90, 154 P.3d 891 (2007). Not only would it 

be unfair to ignore the Department's own rules, the legislature requires that the 

Department follow its own promulgated rules. RCW 34.05.570(3)(h) (authorizing 

courts to grant relief where an agency order "is inconsistent with a rule of the agency 

unless the agency explains the inconsistency by stating facts and reasons to 

demonstrate a rational basis for inconsistency"). Thus, even if the legislature silently 

intended to exempt third party drop-shipped sales from B&O taxation (the issue the 

lead opinion addresses), the Department was still required to exempt those sales 

from taxation under its then-effective Rule 193.8 

Finally, to the extent the lead opinion is concerned that application of Rule 

193 would result in the exclusion of significant tax revenue, that concern has been 

addressed by the current version of Rule 193, WAC 458-20-193(301 ). That current 

version addresses in specific detail the application of the B&O tax to third party 

drop-shipped sales. Id. The application of this decision is therefore limited to a 

8 The question of whether this court is bound by Department rules is a different 

question from whether the Department must follow its own rules. The State's citation to 

Coast Pacific Trading, Inc. v. Dep 't of Revenue, 105 Wn.2d 912, 916-17, 719 P.2d 541 

(1986), is therefore unavailing. It relates to the fanner question; this case relates to the 

latter. 

20 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

business's liability for past taxes based on a certain category of past sales involving 

third party drop shipments made during the period when Rule 193 applied. 

CONCLUSION 

The United States Supreme Court's decision in Norton barred Washington 

from imposing its B&O tax on the portion of an out-of-state corporation's sales 

derived from orders placed with the out-of-state business and fulfilled by out-ofstate warehouses without the assistance of the business's in-state employees. It held 

that the dormant commerce clause prohibited the state from taxing such interstate 

transactions because they were too "dissociated" from the taxpayer's in-state 

activities to justifY the burden on interstate commerce. Norton, 340 U.S. at 537. 

Everyone agrees that the national sales and drop-shipped sales at issue in this case 

are factually indistinguishable from the interstate sales at issue in Norton. Norton 

therefore controls and bars application of Washington's B&O tax to the disputed 

transactions. Even if the tax were constitutionally permissible, it also violated Rule 

193 to the extent it was applied to Avnet's third party dropped-shipped sales. Rule 

193 requires that the goods purchased be received by the purchaser in Washington 

to constitute a taxable event in our state. By definition, third party drop-shipped 

sales are not received by the purchaser, but rather the purchaser's customer or some 

other third party recipient, in Washington. Finally, any ambiguity about whether 

21 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

RCW 82.04.220 and Rule 193 extend Washington's B&O tax to the national and 

drop-shipped sales in this case must be resolved in favor of the taxpayer, not against 

it. WASH. CONST. art. VII,§ 5; Bracken, 175 Wn.2d at 563. 

I therefore respectfully dissent. 

22 
Avnet v. Dep 't of Revenue, No. 92080-0 

(Gordon McCloud, J., dissenting) 

23