Court Opinion

ID: 4716846
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:45:46.737474+00
Date Added: 2024-06-11T08:07:28.804677
License: Public Domain

Gordon McCloud, J.
(dissenting)
¶40 Washington’s business and occupation (B&O) tax falls on wholesalers “for *69the 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 drop-shipped 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.
¶41 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 Avnet’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 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,8 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
¶42 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 inter*70pretive 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. Const, art. VII, § 5.1 therefore summarize the background of this case in detail.
A. The Department of Revenue Determined That Avnet Was Liable for B&O Taxes on Both National and Drop-Shipped Sales
¶43 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. Avnet 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 Avnet, national and drop-shipped 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.
¶44 The Department’s auditor accepted Avnet’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).
B. The Administrative Appeals Division of the Department Affirmed the Department’s Tax Assessment
¶45 Avnet raised the same arguments in its administrative appeal. The administrative law judge rejected them. The administrative law judge denied Avnet’s claims under *71Rule 193(7) and its claims of dissociation under the dormant commerce clause because Avnet had failed to show that its national and drop-shipped 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.
¶46 That judge then granted Avnet’s motion for reconsideration. During the rehearing, Avnet 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.
¶47 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 Thur-ston County Superior Court based on the same challenges.
C. The Thurston County Superior Court Granted Avnet a Tax Refund on Drop-Shipped Sales, but Not National Sales
¶48 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
¶49 Avnet appealed its continued tax liability for national sales, and the Department cross appealed the dis*72missal of its tax assessments on the drop-shipped sales. Division Two of the Court of Appeals held that Avnet’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).
¶50 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 (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-of-state 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 other grounds by Tyler Pipe, 483 U.S. at 242-48).
¶51 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)).
¶52 Avnet petitioned this court for review, which we granted. 184 Wn.2d 1026.
*73ANALYSIS
¶53 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 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 outside—depending 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).
¶54 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
¶55 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. Const. 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 P.3d 788 (2011). This case implicates the commerce clause’s implied restriction, the dormant commerce clause.
*74¶56 A tax on interstate commerce does not violate the dormant commerce clause if the tax “ ‘[(1)] 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, 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.” Id.
¶57 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 [in-state] sales only by showing that particular transactions are dissociated from the local business and interstate in nature” (emphasis added)).
¶58 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 Indus., Inc. 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 *75if that transaction is “dissociated from the local business and interstate in nature.” Norton, 340 U.S. at 537.9
¶59 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 taxes on all those transactions.
¶60 Instead, Avnet 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.10 Avnet relies on the United States Supreme Court’s decision in Norton for that argument.
¶61 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 *76held that those interstate sales were sufficiently “dissociated” from Norton’s in-state activities to be constitutionally exempt from B&O taxation under the dormant commerce clause. Id. at 536.
¶62 This case involves the exact same facts. Everyone agrees—Avnet, 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 60. 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 60. 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. Specifically, it relies on General Motors, Standard Pressed Steel, and Tyler Pipe.
¶63 None of those cases support the lead opinion’s conclusion.
¶64 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)).11 Nowhere in Tyler Pipe did the Court discuss the concept of dissociation or Norton. So that case is inapplicable here.12
*77¶65 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.
¶66 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 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. Id. at 447. 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. Id. 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.
¶67 The Court reached a different result from Norton again in Standard Pressed Steel. But that different result *78was 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-of-state 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. Id. The Court 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.
¶68 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 463 (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. Id. 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 Bridge’s many in-state employees to complete by way of site surveys, site preparations, and assemblage. Id. at 818-19, 821-22.
*79¶69 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 drop-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
¶70 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 particular sale. The B&O tax will not apply if one of these elements is missing.” Id. Thus, even if there is constitutional nexus, the State cannot tax the transaction unless “the purchaser” also took “receipt” of the goods in Washington.
¶71 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.
¶72 But it is also undisputed that Avnet’s third party drop-shipped sales were not received by the purchaser in *80this state. They were received instead by an independent entity in this state: the purchaser’s customer or some other third party recipient.13 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.” Id. (emphasis added).
¶73 The lead opinion concludes that the answer must be yes—there must be some interpretation of “purchaser” that includes the nonpurchasing third party recipient—because the legislature intended to tax all constitutionally taxable events even if it 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 FilmWorks, Inc. v. Dep’t of Revenue, 106 Wn. App. 448, 453, 24 P.3d 460 (2001); see also In re Estate of Bracken, 175 Wn.2d 549, 563, 290 P.3d 99 (2012) (quoting Lamtec, 170 Wn.2d at 842-43).
¶74 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).
¶75 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. Id.14 Avnet is not *81claiming 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, Avnet should receive the benefit from any ambiguity.
¶76 But Rule 193 is not ambiguous. It defines “received” as meaning “the 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 Xpurchases 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(ll)(h) (emphasis added). If the purchaser (Company X) does not 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 have dominion or control *82over the goods through either its employees or its agents. Rule 193(2)(d).
¶77 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).
¶78 In addition, this conclusion is in accord with internal e-mails from department employees acknowledging that they were advised to inform taxpayers that drop-shipped sales were not subject to Washington’s B&O tax. It is certainly not fair to characterize Avnet’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 63-64.
¶79 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 64, 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 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) (plurality opinion). 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 tax*83ation (the issue the lead opinion addresses), the Department was still required to exempt those sales from taxation under its then-effective Rule 193.15
¶80 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 business’ 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
¶81 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-of-state 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 drop-shipped sales. *84Rule 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 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.
¶82 I therefore respectfully dissent.
Johnson and Stephens, JJ., concur with Gordon McCloud, J.

 Norton Co. v. Dep’t of Revenue, 340 U.S. 534, 537, 539, 71 S. Ct. 377, 95 L. Ed. 517 (1951).

 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’’).

 The lead opinion claims that General Motors and its progeny drew no distinction between these two inquiries. Lead opinion at 52 n.2. This is incorrect. In General Motors itself, General Motors “admitted” that its activities satisfied the first inquiry. 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.

 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.

 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." Lamtec, 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 59.

 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 62. But Avnet is arguing the exact opposite position. Avnet 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.

 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 U.S.A. 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).

 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. Department of Revenue, 105 Wn.2d 912, 916-17, 719 P.2d 541 (1986), is therefore unavailing. It relates to the former question; this case relates to the latter.