Court Opinion

ID: 9793998
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:56:28.251389+00
Date Added: 2024-06-11T08:09:35.706393
License: Public Domain

Stafford, J.
(dissenting)—Budget Rent-A-Car, as its name implies, is in the business of renting automobiles. A business and occupation tax was imposed on the gross proceeds generated therefrom. That tax has not been challenged.
The operation of a car rental business requires a continuing supply of late model automobiles. As a result, between January 1, 1962 and June 30, 1966, Budget purchased new automobiles and continually replaced them at the end of their useful rental life (ie., either at the end of 9 months or 10,000 miles of service). The cycle of replacing “overaged” vehicles with new automobiles was maintained solely for the purpose of supplying the rental trade with new cars.
Although a few of the “overage” automobiles were sold at random to unsolicited casual customers, the bulk were disposed of by means of “buy-back” agreements with manufacturers and local dealers. Under such a plan, Budget would purchase new automobiles at fleet prices and thereafter would return them to the dealers and manufacturers at the end of the cars’ useful rental life. At the time of the exchange, Budget would receive credit for the “trade-in” value on the fleet price of new automobiles. Budget’s sale, replacement or trade-in of “overage” cars was not carried on for gain or profit. In fact, it was operated at a loss. While the business and occupation tax is not a tax on profit or net gain, the fact of gain or loss from the questioned operation may be properly considered in the overall picture of determining whether Budget was in the business of selling used automobiles or whether it was in fact only selling capital assets.
The Washington State Department of Revenue conducted *178an audit of Budget’s business and assessed an additional business and occupation tax based on gross proceeds of sale2 claimed to have been derived from Budget’s recycling of “overage” cars. Budget paid the tax and interest under protest and appealed from an adverse order of the Tax Commission. RCW 82.32.180.
On appeal, the superior court entered judgment overruling the Tax Commission’s order. The Department of Revenue appealed.
The Department of Revenue has assigned error only to part of the trial court’s finding of fact No. 3. However, it is important to note that the department’s brief has presented no argument challenging that portion thereof which finds that the automobiles constituted a capital asset. The majority has chosen to ignore this vital fact. We must assume the Department of Revenue has abandoned the assignment of error, at least to that extent. Cummings v. Nordmark, 73 Wn.2d 322, 438 P.2d 605 (1968); Sepich v. Department of Labor & Indus., 75 Wn.2d 312, 450 P.2d 940 (1969). Furthermore, the department has made no contention that Budget’s disposition of “overage” cars was other than the sale of a capital asset, another fact overlooked by the majority.
Thus, the true narrow issue is whether gross proceeds derived from the sale, replacement or trade-in of these particular capital assets is exempt from the business and occupation tax.
A determination of the issue requires one to review RCW 82.04.040, the Tax Commission’s rule applicable thereto, and the Tax Commission’s interpretation of its own rule.
*179RCW 82.32.300 grants rule-making power to the Tax Commission:
The tax commission shall make and publish rules and regulations, not inconsistent therewith, necessary to enforce their provisions, which shall have the same force and effect as if specifically included therein, unless declared invalid by the judgment of a court of record not appealed from.
Rules and regulations thus adopted are entitled to considerable weight in determining legislative intent unless they are inconsistent with the basic statute or inconsistent with each other. Earley v. State, 48 Wn.2d 667, 296 P.2d 530 (1956); Pierce County v. State, 66 Wn.2d 728, 404 P.2d 1002 (1965).
RCW 82.04.040 defines “sale” and “casual or isolated sale” 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 mine.)
The Tax Commission clarified RCW 82.04.040 by WAC 458-20-106 (also known as rule 106). The rule, issued long prior to the genesis of the instant dispute, provides that the business and occupation tax does not apply to “casual sales” made at either retail or wholesale. It also provides the sale of a capital asset by a wholesaler or retailer is an example of a “casual sale”.3 Neither party has questioned *180the rule. Thus, one should assume, for the purpose of this case, that it properly defines “casual sales” made at either retail or wholesale, except for the majority’s sua sponte treatment to the contrary.
Although rule 106 provides:
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 . . .
(italics mine) the record indicates Budget did not hold itself out to the public as making sales of automobiles at retail or wholesale. The gist of finding of fact No. 4 is that Budget carried on no advertising or other sales promotion and it employed no car salesmen for the disposal of its “overaged” cars. The great bulk were disposed of by means of the buy-back agreements; however, a small number were sold at random to an occasional unsolicited casual customer. The Department of Revenue has assigned no error to that finding of fact. Thus, we should assume that it is correct. ROA 1-43; Pagliaro v. Maples, 75 Wn.2d 580, 452 P.2d 727 (1969); Riley v. Rhay, 76 Wn.2d 32, 454 P.2d 820 (1969). Nevertheless, the majority has brushed over this finding of fact as well.
The Tax Commission further interpreted rule 106 and *181RCW 82.04.040 in a letter dated September 16, 1966. It indicated therein that property was not deemed to be held primarily for sale and the business and occupation tax was not considered applicable to trade-ins when, as here, the taxpayer was not otherwise engaged in making wholesale sales of automobiles, and all vehicles were traded in solely for the purpose of replacing them with new property for rental purposes. In arriving at that conclusion, the letter observed:
The Commission noted that the Internal Revenue Service, under similar circumstances had adopted a rule that one who disposes of property only for the purpose of replacing it with new property for the same purpose when its productive life had expired, was not holding the property “primarily for sale” and was disposing of the property as an incident to the leasing business and, accordingly, was not engaged in the business of selling as a dealer.
The letter stated further:4
However, from the standpoint of consistency and equity I feel that the 1963 ruling is correct. All businesses such as manufacturers and contractors regularly trade-in tools and equipment when purchasing new equipment for use in the conduct of the business and we have not asserted a Wholesaling Tax on these trade-ins.
Rule 106, the Tax Commission’s interpretation thereof and its stated practice thereunder, indicate that whether such disposal of “overage” cars by replacement, trade-in or sale is exempt from the operation of the business and occupation tax as “casual sales” is not necessarily gauged by the mere volume thereof. The determining factor is the nature and type of exchange by replacement, by trade-in or by sale, and the manner in which it relates to the business of the wholesaler or retailer. Both RCW 82.04.040 and rule 106 provide that a sale is classified as “casual” if made by one who is not engaged in the business of selling the type of *182property involved. The commission’s interpretive letter indicates that Budget was not deemed to have been engaged in the business of selling the type of property involved.
Granted, the department might have been entitled to a more favorable result had its assignments of error and brief presented the dispute in a different posture. This, however, does not give us license to “back-fill” or ignore holes in the department’s case merely because we dislike the result.
The Tax Commission’s rule and its own interpretation thereof support the ruling of the trial court. Thus, we should properly conclude:
1. Sales are deemed “casual” when made by one who is not engaged in the business of selling the type of property involved.
2. Budget was not engaged in the selling of the type of property involved.
3. Budget’s automobiles constituted a capital asset.
4. The disposal of “overage” automobiles by sale, replacement or trade-in, solely for the purpose of supplying new rental automobiles for the rental trade, is the sale of a capital asset.
5. Thus, Budget’s disposal of “overage” automobiles in that manner and for that purpose was the sale of a capital asset.
6. The sale of a capital asset by a wholesaler or retailer is a “casual sale” unless the seller holds himself out to the public as selling the type of property involved.
7. Budget did not hold itself out to the public as selling automobiles. Thus, the sale of its capital assets was a “casual sale”.
8. The business and occupation tax does not apply to “casual sales” made at either retail or wholesale.
9. The business and occupation tax does not apply to Budget’s disposal of “overage” automobiles by sale, replacement or trade-in because it is, by commission rule and the commission’s interpretation of the rule, a “casual sale”.
The trial court should be affirmed.
Neill and Utter, JJ., concur with Stafford, J.
Petition for rehearing denied October 30, 1972.

The tax imposed upon either retailing or wholesaling is measured by “gross proceeds of sales” defined by RCW 82.04.070 as:
“ ‘Gross proceeds of sales’ means the value proceeding or accruing from the sale of tangible personal property and/or for services rendered, without any deduction on account of the cost of property sold, the cost of materials used, labor costs, interest, discount paid, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses.”

WAC 458-20-106. To the extent material, rule 106 provides:
“Sales are deemed to be casual or isolated when made by a person *180who 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 mine.)

“The rules and interpretations of an administrative agency to which rule-making authority has been delegated are entitled to considerable weight in determining legislative intent.” (Italics mine.) Earley v. State, 48 Wn.2d 667, 673, 296 P.2d 530 (1956).