Court Opinion

ID: 9793997
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:56:28.247809+00
Date Added: 2024-06-11T08:09:35.693394
License: Public Domain

Hale, J.
Budget Rent-A-Car is in the business of renting automobiles. In the course of business, it rents late-model automobiles which it keeps in operation for about 9 months, or until they have been run for about 10,000 miles. Then, with a few exceptions, it sells them back to the dealer from which it purchased them. The state sought to impose a business and occupation tax upon the gross proceeds of such sales. From a judgment of the superior court declaring the proceeds of these sales not taxable under the business and occupation tax statutes, the Washington State Department of Revenue appeals. We hold the transactions taxable.
The record here shows a systematic and regular marketing of all automobiles used as rentals. Between the years 1962 and 1966, Budget realized a gross revenue of $899,199 from selling back to the dealers 458 9-month-old automobiles having an average mileage of 10,000 to 12,000 miles at an average price of $399.81 less than Budget had paid for them. It was a routine and continuous business operation and in our judgment represents more than the casual sales of capital assets, into which category Budget would put them. The business and occupation tax imposed on the gross revenue from these sales comes to $4,610.38. .
Budget Rent-A-Car is but one of many car rental operations doing business in this state which operate on much the same buy-back agreements with the automobile dealerships from which they buy their automobiles. Every busi*173ness in this state must pay a business and occupation tax on its gross revenue. RCW 82.04.220. Business, as the statute defines it for tax purposes, is a broad and virtually all-encompassing commercial activity. It “includes all activities engaged in with the object of gain, benefit, or advantage to the taxpayer or to another person or class, directly or indirectly.” (Italics ours.) RCW 82.04.140. It thus includes the business of selling and renting. Sale is defined as follows:
“Sale” means any transfer of the ownership of, title to, or possession of property for a valuable consideration and includes any activity classified as a “sale at retail” or “retail sale” under RCW 82.04.050. It includes renting or leasing, conditional sale contracts, leases with option to purchase, and any contract under which possession of the property is given to the purchaser but title is retained by the vendor as security for the payment of the purchase price. It also includes the furnishing of food, drink, or meals for compensation whether consumed upon the premises or not.
“Casual or isolated sale” means a sale made by a person who is not engaged in the business of selling the type of property involved.
(Italics ours.) RCW 82.04.040. We would be hard put to come up with a broader or more sweeping definition.
The business and occupation tax is not a tax on either profit or net gain or capital gain or sales, but a tax on the total money or money’s worth received in the course of doing business. Young Men’s Christian Ass’n v. State, 62 Wn.2d 504, 383 P.2d 497 (1963). Whether a profit is realized on the transactions is immaterial, for the tax is on the gross revenues received in the course of doing business. RCW 82.04.220. Thus, taxpayer’s claim, that it realized no profit in selling the cars for less than it paid for them, is without relevance for the statute imposes the tax regardless of whether the business is losing or making money on the transaction. Further, the term “profit,” when related to the sale of these automobiles, is of little significance here for taxpayer has not reckoned the financial value derived from their use as rental automobiles. The extremely broad and *174all-encompassing statutory definitions of what constitutes a business (RCW 82.04.140) and the equally broad definition of sale (RCW 82.04.040) within the statutory business and occupation tax scheme, show that the legislature intended few if any exemptions in either category.
Budget Rent-A-Car contends that these buy-back sales are “casual or isolated” sales, as defined in RCW 82.04.040; and that, under this statute, they amount to a “sale made by a person who is not engaged in the business of selling the type of property involved,” and are, therefore, exempt from the tax. It urges WAC 458-20-106 as a basis for overturning the department’s ruling of taxability.1 That exemption, in our opinion, is not open to this taxpayer for these sales are neither isolated nor casual. In turning over by sale and delivery virtually all of its rental cars, the taxpayer is engaged in the business as defined by statute of selling a particular type of property as an important phase of its business activities.
Exemptions to a tax law must be narrowly construed. Yakima Fruit Growers Ass’n v. Henneford, 187 Wash. 252, 60 P.2d 62 (1936); All-State Constr. Co. v. Gordon, 70 Wn.2d 657, 425 P.2d 16 (1967). Taxation is the rule and exemption is the exception. Fibreboard Paper Prods. Corp. v. State, 66 Wn.2d 87, 401 P.2d 623 (1965). Anyone *175claiming a benefit or deduction from a taxable category has the burden of showing that he qualifies for it. Group Health Coop. of Puget Sound, Inc. v. State Tax Comm’n, 72 Wn.2d 422, 433 P.2d 201 (1967).
Exemptions thus do no more than carve out of the general law imposing the tax a narrow niche where the tax law does not reach. That the statute imposing the tax is very broad and the exemptions correspondingly narrow is, as earlier noted, evidenced by the all-encompassing definition of business, RCW 82.04.140, and sale, RCW 82.04.040, and the sweeping definition of gross proceeds, RCW 82.04.070. When read together, these provisions leave practically no business and commerce free of the business and occupation tax. To fall outside this extremely broad and all-inclusive tax scheme, so far as pertinent here, the taxpayer’s transaction must come within that tiny niche reserved for casual and isolated sales, that is, the event must be a sale made by a person “not engaged in the business of selling the type of property involved.” RCW 82.04.040.
The 458 sales, amounting to virtually the total stock of taxpayer’s merchandise turned over regularly and in the ordinary course of business, although under an agreement made in advance with the buyers, must be regarded as an integral part of the operation of the business and the exact opposite of what is meant by “casual and isolated sale.” To hold that the sales of these automobiles, amounting to a turnover and transfer within a 4-year interval of 458 cars at an average sale price of only $399.81 below purchase price, constitute casual and isolated sales, would so distort the exemption provision in our judgment as to render it virtually meaningless. The sell-back operation does not differ substantially from the retailer’s familiar inventory clearance of late-model used automobiles to make room for the needed new ones. No matter how the parties to the transaction may describe them, the sales constitute a regular form of merchandising of used automobiles. We are, therefore, unable to conclude that these are sales made by a *176person “not engaged in the business of selling the type of property [here] involved.” RCW 82.04.040.
Budget, on the question of casual sales of capital assets, refers to WAC 458-20-106, a Department of Revenue regulation, which says that sales of capital assets by a “wholesaler or retailer” are examples of casual sales. But the term “capital asset” as used there, in our opinion, means something that is held only for use—a device or article kept, maintained, employed and utilized in the conduct and operation of the business, and one not regularly sold or held out for sale in a business activity from which the taxpayer derives a substantial part of its revenue. The statute here does not exempt sales of capital assets but only casual sales, for it is quite conceivable that under some circumstances the sale of capital assets might well be considered a part of the goods, wares and merchandise held out for sale. The regulation, in referring to sales of capital assets simply as examples of exempt casual sales, thus does not rule out such a possibility. But even if the department had intended by regulation to exempt all sales of capital assets, giving the label capital asset to the articles sold does not change the nature of the transaction for purposes of taxation. Whatever label may be applied to the automobiles, their sale falls within the taxation provision and not the exemption provision, for the department is without authority to amend the statute by regulation. It cannot properly carve out an exemption for regular noncasual sales when the statute makes no such exemption. Accordingly, under RCW 82.04.140, the regular sale of all rental automobiles constituting as they do an integral part of the taxpayer’s business, “with the object of . . . advantage to the taxpayer,” by statutory definition, puts the taxpayer in the “business” of selling the items, and, therefore, within the terms of the statute levying the tax.
Under current revenue laws, then, we think that Budget’s operation involved at least two distinct taxable aspects: the rental of automobiles at retail to the public, and the sale of late-model used cars at wholesale. Each aspect of *177the business is a taxable operation under the business and occupation tax.
The trial court is reversed and the order of the Department of Revenue is reinstated.
Hamilton, C.J., Finley, Rosellini, and Hunter, JJ., and Shorett, J. Pro Tern., concur.

WAC 458-20-106. To the extent material, rule 106 provides:
“Sales are deemed to be casual or isolated when made by a person who is not engaged in the business of selling the type of property involved (RCW 82.04.040.) Examples of casual sales are the following:
“1. Sale of a capital asset by a . . . wholesaler or retailer.
“On the other hand, the sale at retail by a manufacturer or wholesaler of an article of merchandise manufactured or handled by him is not a casual sale, even though he may make but one such sale.
“Furthermore, persons who hold themselves out to the public as making sales at retail or wholesale are deemed to be engaged in the business of selling, and sales made by them of the type of property which they hold themselves out as selling, are not casual sales even though such sales are not made frequently.
“Business and Occupation Tax
“The business and occupation tax does not apply to casual sales made at either retail or wholesale.” (Italics ours.)