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City of Seattle Wins Case to Tax Imports

Posted Friday, April 6, 2012 by Michael A. Larson

alt text On April 2, 2012, Division I of the Court of Appeals in Washington found against American Honda Motor Company (Honda) that the Seattle B&O tax was properly applied to imports delivered to Seattle customers. Despite having a rule that appeared to allow an import exemption similar to that allowed by the State of Washington, the City of Seattle begin denying the use of the import exemption around 2002. Honda challenged an assessment by the City of Seattle on imports that it sold to Seattle customers.

The court examined more recent current cases under the Import-Export Clause of the Constitution and held that there was no constitutional prohibition preventing the City of Seattle from imposing its B&O tax on imports delivered to Seattle customers. Apparently, the court also accepted the City’s argument that its own rule, 5-44-193C, did not provide relief because delivery of the goods took them out of the “import stream,” despite years of interpretation by both the City of Seattle and the State of Washington to the contrary.

It should be noted that this case has absolutely no effect on the availability of the import exemption at the state level. Washington adopted a statutory exemption at RCW 82.04.610 in 2007 shortly after the Appeals Division of the Washington Department of Revenue had questioned the continuing viability of the state’s import exemption based solely on constitutional law principles. The Washington legislature saw the importance of protecting the ports’ activities in Washington, which could have been significantly harmed by any change to Washington’s long-standing exemption of imports from B&O taxation.

For more information, please contact Ronald Bueing at RBueing@PivotalLawGroup.com.

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