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IN THE SUPREME COURT OF THE STATE OF WASHINGTON 

DOT FOODS, INC., 

Respondent/Cross Appellant, 

v. 

STATE OF WASHINGTON, 

DEPARTMENT OF REVENUE, 

Appellant/Cross Respondent. 

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________________________ ) 

No. 92398-1 

EnBanc 

Filed MAR 11 2016 ----------------

YU, J.-We are asked to decide whether retroactive application of the 

legislature's amendment to a business and occupation (B&O) tax exemption 

violates a taxpayer's rights under the due process clause of the Fourteenth 

Amendment, U.S. CoNST. amend. XIV,§ 1, collateral estoppel, or separation of 

powers principles. Taxpayer Dot Foods contends that it should remain eligible for 

a B&O tax exemption pursuant to our decision in Dot Foods, Inc. v. Department of 

Revenue, 166 Wn.2d 912, 215 P.3d 185 (2009) (Dot Foods I), despite an 

intervening, contrary amendment to the applicable law. Because Dot Foods I does 

not encompass the tax periods before us now, we hold that retroactive application 
Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

of the legislative amendment to Dot Foods does not violate due process, collateral 

estoppel, or separation of powers principles. We affirm in part and reverse in part. 

FACTUAL & PROCEDURAL HISTORY 

The B&O tax is imposed for "the act or privilege of engaging in business 

activities" within the state. RCW 82.04.220(1). The tax applies unless a specific 

exemption exists. See RCW 82.04.31 0-.427; see also TracFone Wireless, Inc. v. 

Dep 't of Revenue, 170 Wn.2d 273, 296-97, 242 P.3d 810 (2010). Former 

RCW 82.04.423(1)(d) (1983) exempted certain out-of-state sellers from the B&O 

tax if they made "sales in this state exclusively to or through a direct seller's 

representative," as defined in former RCW 82.04.423(2). 

Dot Foods is an Illinois-based food reseller that sells products to service 

companies in Washington through its wholly owned subsidiary DTI. Dot Foods 

qualified for the direct seller's exemption under former RCW 82.04.423 from 1997 

unti12000, when the Department of Revenue (Department) narrowed its 

interpretation of the statute. This new interpretation gave rise to Dot Foods I, the 

previous tax appeal implicated in the current dispute. 

In 2009, we decided Dot Foods I, which held that the Department's revised 

interpretation ofRCW 82.04.423 was contrary to the statute's plain and 

unambiguous language. Dot Foods I, 166 Wn.2d at 920-21. We concluded that 

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Dot Foods, Inc. v. Dep't of Revenue, No. 92398-1 

"Dot [Foods] remains qualified for the B&O tax exemption to the extent its sales 

continue to qualify for the exemption." Id. at 926. 

Dot Foods continued to pay the full B&O tax during the pendency of its 

prior tax appeal to avoid penalties and interest. Clerk's Papers (CP) at 360. In 

December 2009, pursuant to the judgment in Dot Foods I, Dot Foods requested a 

refund for B&O taxes paid from January 2005 through August 2009, id. at 83-84, a 

time period that extends beyond the tax periods directly at issue in Dot Foods I. 

In April2010, the legislature amended former RCW 82.04.423 in direct 

response to our decision in Dot Foods I. LAWS OF 2010, 1st Spec. Sess., ch. 23, 

§§ 401, 402. The amendment retroactively narrowed the scope of 

RCW 82.04.423(2) and prospectively repealed the direct seller's exemption. Id. at 

§ 401 ( 4 ). It is undisputed that Dot Foods qualified for the exemption under former 

RCW 82.04.423 but is ineligible for the exemption under the 2010 amendment. 

In July 2010, based on the retroactive application of the 2010 amendment, 

the Department denied Dot Foods' refund request for the periods outside the 

litigation in Dot'Foods I, "[s]pecifically, the refund request for Wholesaling B&O 

tax for the periods from May 2006 through August 2009." CP at 309. However, 

the Department explained that "retroactive application of the bill does not affect 

the periods included in the Dot Foods Supreme Court decision. Specifically, it will 

not apply to the periods from January 2000 through April2006." Id. at 308. Later 

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Dot Foods, Inc. v. Dep'tofRevenue, No. 92398-1 

that year, Dot Foods negotiated a settlement with the Department for over 97 

percent ofthe B&O taxes paid from January 2000 through April2006, the refund 

period directly at issue in Dot Foods I. Dot Foods' Resp. Br. & Br. on CrossAppeal (Dot Foods' Resp. Br.) at 7. 

Dot Foods now seeks a refund for the B&O taxes it paid from May 2006 

through December 2007, the interim period beginning immediately after the tax 

periods at issue in Dot Foods I and ending when Dot Foods' business practices 

changed in 2008. After the Department denied its refund request, Dot Foods 

brought a refund action against the Department in Thurston County Superior 

Court, challenging retroactive application of the amendment under theories of 

collateral estoppel, separation of powers, and due process. 

In a letter opinion, the trial court granted summary judgment to the 

Department on the collateral estoppel and separation of powers issues but found in 

favor of Dot Foods on the due process claim. CP at 468-74. The Department 

appealed, and Dot Foods cross appealed on the separation of powers and collateral 

estoppel issues. The Court of Appeals certified the case to this court pursuant to 

RAP 4.4. 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

ANALYSIS 

The history of litigation around Washington's B&O tax and its subsequent 

amendments has been a long and winding road. 1 While the constitutional validity 

of the ability to impose a B&O tax is not at issue, this case requires us to examine 

whether due process and collateral estoppel should disallow retroactive application 

of an amended statute to a particular period of time. The dispute before us is 

resolved by our own precedent, traditional legal principles, and cases from the 

United States Supreme Court and federal district courts. 

A. DUE PROCESS CLAIM 

The Supreme Court set forth the due process standard for retroactive tax 

legislation in United States v. Carlton, 512 U.S. 26, 114 S. Ct. 2018, 129 L. Ed. 2d 

22 (1994). Carlton established that "[t]he due process standard to be applied to tax 

statutes with retroactive effect ... is the same as that generally applicable to 

retroactive economic legislation," id. at 30; that is, the statute must be '"supported 

1 See Tyler Pipe Indus., Inc. v. Dep'tofRevenue, 105 Wn.2d 318,715 P.2d 123 (1986), 

vacated, 483 U.S. 232, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987) (invalidating Washington's 

B&O tax scheme); Nat'! Can Corp. v. Dep 't of Revenue, 109 Wn.2d 878, 749 P.2d 1286 (1988) 

(Nat'! Can II) (Tyler Pipe applies prospectively only), overruled by Digital Equip. Corp. v. Dep't 

a/Revenue, 129 Wn.2d 177, 196P.2d 933 (1996);Am. Nat'! Can Corp. v. Dep'tofRevenue, 114 

Wn.2d 236, 787 P.2d 545 (1990) (applying the remedial amendment that cured the constitutional 

defects of the B&O scheme to the interim period between Tyler Pipe and the effective date of the 

amendment), overruled by Digital Equip., 129 Wn.2d 177; Digital Equip. Corp., 129 Wn.2d 177 

(Tyler Pipe applies retroactively, overruling National Can II; limiting relief to retroactive credit 

not a violation of due process); WR. Grace & Co. v. Dep't of Revenue, 137 Wn.2d 580, 973 P.2d 

1011 (1999) (affirming retroactive application of Tyler Pipe and upholding the exclusive remedy 

feature of the remedial legislation that cured the B&O tax). 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

by a legitimate legislative purpose furthered by rational means."' I d. at 30-31 

(quoting Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 729, 104 

S. Ct. 2709, 81 L. Ed. 2d 601 (1984)). Retroactive legislation must meet an 

additional burden not faced by statutes with only prospective effect, but '"that 

burden is met simply by showing that the retroactive application of the legislation 

is itself justified by a rational legislative purpose."' I d. at 31 (quoting Pension 

Benefit, 467 U.S. at 730). 

We affirmed a retroactive tax amendment under the Carlton rational basis 

standard most recently in In re Estate of Hambleton, 181 Wn.2d 802, 335 P.3d 398 

(2014), cert. denied, 136 S. Ct. 318 (2015). The legislature retroactively amended 

the Estate and Transfer Tax Act, chapter 83.100 RCW, in direct response to our 

decision in In re Estate of Bracken, 175 Wn.2d 549, 290 P.3d 99 (2012). In 

Hambleton, we upheld the retroactive application of the amendment against a due 

process challenge under the Carlton rational basis standard. 

Although the present case involves a different tax scheme, the underlying 

facts are analogous to those in Hambleton, which is controlling precedent here.2 

Under the rational basis standard set forth in Carlton, as applied in Hambleton, 

2 The trial court did not have the benefit of our decision in Hambleton when it issued its 

letter opinion. 

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Dot Foods, Inc. v. Dep'tofRevenue, No. 92398-1 

retroactive application ofthe 2010 amendment at issue here does not violate due 

process protections. 

i. The 2010 amendment serves a legitimate legislative purpose 

As with other economic legislation, a tax statute must serve a legitimate 

legislative purpose. Carlton, 512 U.S. at 30. The legislature identified the 

prevention of "large and devastating revenue losses" as the primary purpose for 

narrowing the scope ofRCW 82.04.423. LAWS OF 2010, 1st Spec. Sess., ch. 23, 

§ 401(3). This is the same legislative intent that the Supreme Court recognized as 

a legitimate purpose in Carlton, 512 U.S. at 32, and that we upheld in Hambleton, 

181 Wn.2d at 827. Additionally, the legislature concluded that former 

RCW 82.04.423 provided "preferential tax treatment for out-of-state businesses 

over their in-state competitors and now creates a strong incentive for in-state 

businesses to move their operations outside Washington." LAws OF 2010, 1st 

Spec. Sess., ch. 23, § 401(3). This is analogous to the legislature's goal of 

restoring parity between different classes of taxpayers, which we also accepted as a 

legitimate legislative purpose in Hambleton, 181 Wn.2d at 826. See also Am. Nat 'l 

Can Corp. v. Dep 't of Revenue, 114 Wn.2d 236, 247-48, 787 P.2d 545 (1990). It is 

clear that the amendment to RCW 82.04.423 serves a legitimate legislative purpose 

under our case law. 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

Dot Foods alleges that the 2010 amendment is not supported by a legitimate 

legislative purpose because the legislature was attempting to reinstate the 

"'original intent'" of the direct seller's exemption. Dot Foods' Resp. Br. at 19. 

Dot Foods contends, and the trial court agreed, that because "the [l]egislature 

cannot know the intentions of a prior, distant legislature," the asserted purpose of 

the amendment is both arbitrary and unreasonable. Id.; see also CP at 473. 

However, our duty is to review the statute for its rational basis, not to 

analyze the strength of its epistemological underpinnings. The rational basis test is 

the "most relaxed form of judicial scrutiny." Amunrud v. Ed. of Appeals, 15 8 

Wn.2d 208, 223, 143 P.3d 571 (2006). Our review is highly deferential, especially 

in light of the fact that the legislature '"possesses a plenary power in matters of 

taxation except as limited by the [c]onstitution,"' State ex rel. Heavy v. Murphy, 

138 Wn.2d 800, 809, 982 P.2d 611 (1999) (quoting Belas v. Kiga, 135 Wn.2d 913, 

919, 959 P.2d 1037 (1998)), and "'a particularly heavy presumption of 

constitutionality applies when the statute concerns economic matters,"' Ford 

Motor Co. v. Barrett, 115 Wn.2d 556, 563, 800 P.2d 367 (1990) (quoting 

Am. Network, Inc. v. Utils. & Transp. Comm 'n, 113 Wn.2d 59, 79, 776 P.2d 950 

(1989)). We have previously observed that where the legislature holds plenary 

power, "'the courts will not question the wisdom or desirability of such legislative 

requirements, so long as there is any reasonable basis upon which the legislative 

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Dot Foods, Inc. v. Dep'tofRevenue, No. 92398-1 

determination can rest.'" Bang D. Nguyen v. Dep 't of Health, Med. Quality As sur. 

Comm 'n, 144 Wn.2d 516, 549,29 P.3d 689 (2001) (emphasis added) (quoting 

Ellestadv. Swayze, 15 Wn.2d 281,291, 130 P.2d 349 (1942)). 

Dot Foods further claims that Carlton requires revenue losses be 

"'unanticipated"' to meet the rational basis standard. Dot Foods' Resp. Br. at 28 

(quoting Hambleton, 181 Wn.2d at 825 (citing Carlton, 512 U.S. at 32)). There is 

no holding in Carlton to that effect, and Dot Foods provides no case law 

supporting this contention. The fact that the revenue losses in Carlton were, in 

fact, "unanticipated" is dictum. Carlton, 512 U.S. at 32. Carlton should not beand has not been-interpreted as requiring that revenue losses be "unanticipated" 

in order to satisfy the rational basis standard. 

Similarly, the allegation that the amendment fails to serve a legitimate 

purpose because the legislature had an "improper motive" of targeting Dot Foods 

is unsubstantiated. The fact that the legislature was acting in direct response to our 

decision in Dot Foods I does not constitute targeting a specific taxpayer, and the 

statement of intent does not single out Dot Foods beyond pointing to the negative 

impact that the decision would have on revenue generally. 3 The "improper 

3 The Department estimated a projected revenue loss of more than $150 million over the 

2010-2011 biennium as a result of Dot Foods I. CP at 80. Dot Foods' refund request was for 

just over $500,000, Dot Foods' Resp. Br. at 9, indicating that other taxpayers would be affected 

by the 2010 amendment-not just Dot Foods. At oral argument, the Department specifically 

identified Stroh Brewery Company as another taxpayer that, like Dot Foods, qualified for the 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

motive" that the Court refers to in Carlton was targeting taxpayers after 

deliberately inducing them to engage in certain transactions. Carlton, 512 U.S. at 

32. We see no evidence of any improper motive here, only the normal interplay 

between the legislature and the judiciary. Furthermore, as long as it is acting 

within its lawful power, "the motives of the [l]egislature are irrelevant to questions 

of state taxation under the due process clause." Am. Nat 'l Can Corp., 114 Wn.2d 

at 247 (citing A. Magnano Co. v. Hamilton, 292 U.S. 40, 44, 54 S. Ct. 599, 78 L. 

Ed. 1109 (1934)). 

We do not find support for Dot Foods' assertions and hold that the 2010 

amendment serves a legitimate legislative purpose. 

ii. The 2010 amendment is rationally related to the legitimate legislative 

purpose 

A retroactivity period meets the Carlton standard if it is rationally related to 

the amendment's legitimate purpose. Hambleton, 181 Wn.2d at 823. Relying on 

Tesoro Refining & Marketing Co. v. Department of Revenue, 159 Wn. App. 104, 

246 P.3d 211 (2010), rev'd on other grounds, 173 Wn.2d 551,269 P.3d 1013 

direct seller's exemption under former RCW 82.04.423 but would not be eligible for the 

exemption under the 2010 amendment. Wash. Supreme Court oral argument, Dot Foods, Inc. v. 

Dep'tofRevenue, No. 92398-1 (Jan. 28, 2016), at 40 min., 12 sec., audio recording by TVW, 

Washington State's Public Affairs Network, http://www.tvw.org; see also Stroh Brewery Co. v. 

Dep 't of Revenue, 104 Wn. App. 235, 243-44, 15 P.3d 692 (2001). This supports the conclusion 

that the legislature was not improperly targeting Dot Foods but was enacting a statute of general 

application. 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

(2012) (Tesoro I), Dot Foods asserts that the purported 27-year retroactivity period 

is "irrational on its face." Dot Foods' Resp. Br. at 24. 

Tesoro I is not controlling authority on this court, and to the extent that the 

trial court relied on this case, it was operating in the absence of our decision in 

Hambleton. Further, Dot Foods' contention that a 27-year retroactivity period is 

per se unconstitutional is belied by the fact that we upheld a retroactive amendment 

that occurred 37 years after the statute was originally enacted in W.R. Grace & 

Co. v. DepartmentofRevenue, 137 Wn.2d 580,973 P.2d 1011 (1999). Thus, the 

length of time that has elapsed since a statute's original enactment is not 

dispositive. 

While it is true that the 2010 amendment theoretically dates back to 

enactment under the plain language of section 402 and section 1704, LAws OF 

2010, 1st Spec. Sess., ch. 23, §§ 402, 1704, the actual retroactive application ofthe 

amendment is necessarily limited by the particularities of this case as well as the 

applicable statute of limitations. At issue here is whether the amendment, which 

went into effect on May 1, 2010, applies retroactively to the May 2006 through 

December 2007 interim tax periods. Thus, the retroactivity period as applied to 

Dot Foods is only four years. 

In practical terms, the 2010 amendment cannot reach back 27 years, as 

Dot Foods alleges. The statute of limitations prescribed by RCW 82.32.060(1) 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

functionally limits retroactive application of the amendment to four years. A fouryear retroactivity period, both as applied to Dot Foods in this particular case or as 

generally applicable to any other taxpayer under the statute of limitations, is well 

within the range of retroactivity periods that we have previously upheld. See 

Hambleton, 181 Wn.2d at 827 (eight-year retroactivity period); Digital Equip. 

Corp. v. Dep 't of Revenue, 129 Wn.2d 177, 194-95, 916 P.2d 933 (1996) (fouryear retroactivity period); W.R. Grace, 137 Wn.2d at 586-87 (eight-year 

retroactivity period). 

Furthermore, there is no "absolute temporal limitation on retroactivity." 

W.R. Grace, 137 Wn.2d at 602. The standard set forth in Carlton, which has been 

followed by this court, states only that the retroactive period must be "rationally 

related" to a legitimate legislative purpose. Hambleton, 181 Wn.2d at 823 (citing 

Carlton, 512 U.S. at 30-31 ). While there are certainly constitutional limits on how 

far back laws may reach, see State v. Pac. Tel. & Tel. Co., 9 Wn.2d 11, 117 P .2d 

542 (1941 ),4 whether the length of a retroactivity period breaches that limit should 

be determined by a qualitative analysis of the law, not solely by a quantitative 

measurement oftime, see Welch v. flenry, 305 U.S. 134, 147, 59 S. Ct. 121, 

4 We invalidated a four-year retroactivity period in Pac{fic Telephone based solely on a 

reference to '"prior but recent transactions.'" Pac. Tel. & Tel. Co., 9 Wn.2d at 17 (quoting 

Welch v. Henry, 223 Wis. 319,271 N.W. 68,72 (1937)). Pacific Telephone did not specify or 

cite to an absolute constitutional limit on retroactivity and provides no insight into why a hardline rule should apply. 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

83 L. Ed. 87 (1938) ("In each case it is necessary to consider the nature of the tax 

and the circumstances in which it is laid before it can be said that its retroactive 

application is so harsh and oppressive as to transgress the constitutional 

limitation."). 

In Hambleton, for example, we found that the retroactivity period was 

"rationally related to preventing the fiscal shortfall." Hambleton, 181 Wn.2d at 

827. Noting that the eight-year retroactivity period at issue was "not far outside 

other retroactive periods that courts have accepted," we upheld the retroactive 

application of the amendment against a due process challenge because it was 

"directly linked with the purpose of the amendment, which [was] to remedy the 

effects of Bracken." !d. Furthermore, we observed that any shorter retroactivity 

period would have been arbitrary because "[i]t would allow some estates to escape 

the tax while similarly situated estates would be subject to it." !d. This illustrates 

that it is the function-rather than the length-of a retroactivity period that should 

determine whether it comports with due process protections. 

In this case, the actual retroactive effect of the amendment as applied to 

Dot Foods is rationally related to the legislature's legitimate, stated purpose of 

"prevent[ing] the loss of revenues resulting from the expanded interpretation ofthe 

exemption." LAWS OF 2010, 1st Spec. Sess., ch. 23, § 401(4). Consequently, there 

is no due process violation. 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

B. COLLATERAL ESTOPPEL CLAIM 

Dot Foods asserts that the May 2006 through December 2007 interim tax 

periods are encompassed by the judgment in Dot Foods I, which prevents the 

Department from assessing B&O taxes against it under the 2010 amendment 

pursuant to collateral estoppel. Dot Foods also asserts that there is statutory 

support for its collateral estoppel claim in section 1706 of the amending statute, 

which explicitly preserves final judgments, LAWS OF 2010, 1st Spec. Sess., ch 23, 

§ 1706. We do not find support for these arguments in our case law and hold that 

collateral estoppel does not apply in this case. 

i. Dot Foods fails to meet the requirements for collateral estoppel 

The collateral estoppel doctrine "may be applied to preclude only those 

issues that have actually been litigated and necessarily and finally determined in 

the earlier proceeding." Christensen v. Grant County Hasp. Dist. No. 1, 152 

Wn.2d 299, 307, 96 P.3d 957 (2004). To invoke collateral estoppel, Dot Foods 

must establish that (1) the issue decided in Dot Foods I was identical to the issue 

that is presented to us now, (2) the prior action ended in a final judgment on the 

merits, (3) the Department was a party or in privity with a party in the prior action, 

and (4) application of the doctrine would not work an injustice. ld. "Failure to 

establish any one element is fatal" to a collateral estoppel claim. Lopez-Vasquez v. 

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Dot FoodsJ Inc. v. Dep Jt ofRevenue, No. 92398-1 

DepJt of Labor & Indus., 168 Wn. App. 341,345,276 P.3d 354 (2012). Because 

Dot Foods cannot satisfy the first requirement, collateral estoppel does not apply. 

Both the facts and the applicable law in this case are distinguishable from 

Dot Foods I. The dispute in Dot Foods I arose out of Dot Foods' refund request 

for the tax periods from January 2000 through April 2006, and the legal issue was 

whether Dot Foods qualified for the direct seller's exemption under former 

RCW 82.04.423. Dot Foods I, 166 Wn.2d at 919. Dot Foods neither alleges nor 

establishes that the subsequent interim tax periods from May 2006 through 

December 2007 were directly at issue or actually litigated in Dot Foods I. In fact, 

Dot Foods itself acknowledges that "the periods directly at issue in the prior 

appeal" were January 2000 through April2006, CP at 359, and that the interim tax 

periods fall outside the scope of Dot Foods I, Dot Foods' Reply Br. at 8. 

Dot Foods asserts that under collateral estoppel principles, the decision in 

Dot Foods I should extend to the interim tax periods because the prior tax appeal 

adjudicated Dot Foods' exempt status under former RCW 82.04.423. Dot Foods' 

Resp. Br. at 44. Nothing in the statute or our case law supports this assertion. To 

the contrary, tax appeals are very limited causes of action. Under RCW 82.32.180, 

tax appeals are confined to the specific taxes and associated time periods identified 

by the aggrieved taxpayer. Thus, although Dot Foods I and the present case 

concern the same taxable activity, different tax periods are involved. 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

The United States Supreme Court and federal circuit courts have declined to 

apply collateral estoppel in federal tax cases involving identical taxable 

transactions that occur in subsequent taxing periods. See Harvie Branscomb, Jr., 

Collateral Estoppel in Tax Cases: Static and Separable Facts, 37 TEX. L. REv. 

584,587 (1959). In Commissioner v. Sunnen, 333 U.S. 591, 598, 68 S. Ct. 715, 

92 L. Ed. 898 (1948), the Court determined that separate tax periods give rise to 

separate causes of action for collateral estoppel purposes. The Court held that the 

United States Tax Court was not bound by a prior decision of the Unites States 

Board of Tax Appeals, reasoning that where a subsequent proceeding relates to a 

different taxing period, "the prior judgment acts as a collateral estoppel only as to 

those matters in the second proceeding which were actually presented and 

determined in the first suit." Id. 

Dot Foods contends that Sunnen is inapplicable because it deals with the 

federal income tax, which is assessed annually, as opposed to continuously on a 

monthly basis like Washington's B&O tax. Dot Foods' Resp. Br. at 42. However, 

the federal courts have extended Sunnen specifically to cases involving excise tax 

liability. In Smith v. United States, 242 F.2d 486, 488 (5th Cir. 1957), the Fifth 

Circuit Court of Appeals concluded that "[e]ach month, then, is the origin of a new 

liability and of a separate cause of action." Applying Sunnen, the court stated that 

"it is clear that the doctrine of res judicata does not apply since the instant suit does 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

not involve the same claim and the same taxable periods as were involved in the 

prior action." Id. 

Regardless of the different taxes involved, the broader rationale of Sunnen is 

compelling: 

A taxpayer may secure a judicial determination of a particular tax 

matter, a matter which may recur without substantial variation for 

some years thereafter. But a subsequent modification of the 

significant facts or a change or development in the controlling legal 

principles may make that determination obsolete or erroneous, at least 

for future purposes. If such a determination is then perpetuated each 

succeeding year as to the taxpayer involved in the original litigation, 

he is accorded a tax treatment different from that given to other 

taxpayers of the same class. As a result, there are inequalities in the 

administration of the revenue laws, discriminatory distinctions in tax 

liability, and a fertile basis for litigious confusion. 

Sunnen, 333 U.S. at 599. The Court further observed that collateral estoppel is 

only meant to apply in situations that "have remained substantially static, factually 

and legally." ld. This reflects the well-established principle that an '"intervening 

change in the applicable legal context"'-such as the retroactive amendment in this 

case-prohibits the application of collateral estoppel. Hambleton, 181 Wn.2d at 

835 (quoting RESTATEMENT (SECOND) OF JUDGMENTS§ 28(2)(b) (AM. LAWINST. 

1982)). The facts following Dot Foods I were not static, factually or legally. 

Factually a different tax period was at issue, and legally there was an intervening 

change in the law that narrowed the scope of the exemption in such a way that 

excluded Dot Foods. In fact, Dot Foods concedes that if the amendment applies 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

retroactively, it would not be able to satisfy the requirements for invoking 

collateral estoppel. Dot Foods' Resp. Br. at 37 ("Had the [l]egislature not changed 

the law retroactively, Dot Foods would have met the 4-part test for collateral 

estoppel."). 

Sunnen and earlier federal cases5 established that determinations about tax 

liability for one taxing period under then-applicable statutes do not control 

decisions regarding subsequent taxing periods under amended statutes. We find 

the reasoning of these cases persuasive and hold that collateral estoppel does not 

apply to subsequent taxing periods that were not previously adjudicated. 

ii. Section 1706 does not extend the judgment in Dot Foods I to the 

subsequent interim tax periods. 

The traditional application of issue preclusion principles adequately 

addresses the collateral estoppel claim, but Dot Foods also asserts a statutory basis 

for the preclusive effect of the judgment in Dot Foods I. The amending statute 

explicitly provides that the substantive amendment to RCW 82.04.423 "does not 

affect any final judgments, not subject to appeal, entered by a court of competent 

jurisdiction before the effective date of this section." LAWS OF 2010, 1st Spec. 

5 See Monteith Bros. Co. v. United States, 142 F.2d 139, 140 (7th Cir. 1944) ("[A]lthough 

the transactions involved in different years were similar, they were not identical, and must 

therefore be studied in the light of the law and facts of the year involved."); Henricksen v. 

Seward, 135 F.2d 986, 987 (9th Cir. 1943) ("While the mechanical processes and the business 

practices of the taxpayer were found to be substantially identical in the several periods, 

nevertheless the transactions held not subject to tax in the earlier suit were not the transactions 

subjected to tax in this, nor were the periods involved the same."). 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

Sess., ch. 23, § 1706. This section has the effect of preserving the judgment in Dot 

Foods I only as to the tax periods actually litigated in that case. Perhaps 

anticipating that it could not satisfy the requirements for collateral estoppel, 

Dot Foods asserts that collateral estoppel is "built into the 20 1 0 legislative 

amendment" under section 1706. CP at 469. 

The trial court properly rejected this argument, observing that "the 2006 to 

2007 refund request was not a 'final judgment' when the amendment went into 

effect. Indeed, that matter is currently 'subject to appeal' in this very case." !d. at 

470. As discussed above, Dot Foods cannot show-and in fact admits-that the 

interim period was not directly at issue or actually litigated in Dot Foods I. 

Because a refund for the interim period was not reduced to a final judgment prior 

to the date that the 2010 amendment went into effect, section 1706 is not 

implicated. 

C. SEPARATION OF POWERS CLAIM 

"The legislature violates separation of powers principles when it infringes on 

a judicial function." Hambleton, 181 Wn.2d at 817-18 (citing Haberman v. Wash. 

Pub. Power Supply Sys., 109 Wn.2d 107, 143, 744 P.2d 1032, 750 P.2d 254 

(1987)). We have recognized "that a retroactive legislative amendment that rejects 

a judicial interpretation would give rise to separation of powers concerns" but have 

been willing to uphold such amendments where "the legislature was careful not to 

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Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

reverse our decision." Hale v. Wellpinit Sch. Dist. No. 49, 165 Wn.2d 494, 508, 

510, 198 P.3d 1021 (2009). 

Dot Foods cannot point to any evidence that the legislature intended to affect 

or curtail the judgment in Dot Foods I. In fact, as discussed above, the legislature 

explicitly preserved prior judgments in section 1706 and we upheld a retroactive 

amendment with language identical to section 1706 against a separation of powers 

challenge in Hambleton, 181 Wn.2d at 817. Furthermore, as also discussed above, 

the judgment in Dot Foods I does not encompass the interim period at issue now; 

therefore, retroactive application of the amendment to this period does not run 

afoul of the separation of powers doctrine. 

CONCLUSION 

We have previously observed that "[o]ccasionally, try as the court may, the 

legislature is disappointed with the court's interpretation." Hale, 165 Wn.2d at 

509. It is entirely within the proper function of the legislature to amend laws in 

response to our decisions. This is how the lawmaking process is meant to work. 

In amending RCW 82.04.423(2), the legislature was careful to avoid 

trespassing on the judicial function by explicitly preserving any final judgments 

prior to the effective date of the amendment. Our jurisprudence requires us to 

show the legislature equal respect in this case by upholding the retroactive 

20 
Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

application of this amendment as to Dot Foods for the tax periods not encompassed 

by our prior decision in Dot Foods I. 

We affirm the trial court's decision to grant the Department's motion for 

summary judgment on the collateral estoppel and separation of powers arguments, 

but we reverse the trial court's decision to grant Dot Foods' motion for summary 

judgment on the due process claim. In doing so, we hold that the retroactive 

application of the amendment to RCW 82.04.423 applies to the May 2006 through 

December 2007 interim tax periods, and that Dot Foods is liable for the B&O tax 

for this time period. 

21 
Dot Foods, Inc. v. Dep 't of Revenue, No. 92398-1 

WE CONCUR: 

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