Washington Administrative Code Title 458 - Revenue, Department of
Overview of WAC Title 458
WAC Title 458 contains the administrative rules and regulations developed by the Washington State Department of Revenue (DOR). These rules interpret and implement the Revised Code of Washington (RCW) related to taxation and revenue collection. The DOR is the agency responsible for administering various tax programs, including sales tax, use tax, business and occupation (B&O) tax, property tax, and others.
Title 458 is organized into chapters, each addressing a specific area of tax law. These rules are legally binding on taxpayers and provide guidance on how the Department interprets and enforces Washington’s tax statutes.
Major Areas Covered in WAC Title 458
Here are some key chapters and their roles:
1. Sales and Use Tax (e.g., Chapter 458-20, “Excise Tax Rules”)
Also known as the "ETA" (Excise Tax Advisory) rules.
Covers topics like taxability of goods and services, sourcing, exemptions, and credits.
Rule 458-20-193: Taxation of interstate sales.
Rule 458-20-136: Manufacturing, processing for hire, fabricating.
Example Case:
Dept. of Revenue v. Schaake Packing Co., Inc., 100 Wn.2d 79 (1983)
Schaake argued that their activities were not subject to B&O tax under the "processing for hire" rules.
The court upheld the Department's interpretation in WAC 458-20-136, confirming that if you process goods for someone else, it constitutes "processing for hire" and is taxable under B&O.
2. Business and Occupation (B&O) Tax
A gross receipts tax on business activity.
WAC rules clarify definitions, such as “engaging in business,” and exemptions.
Example Case:
Avon Fauntleroy Community Church v. Dep’t of Revenue, 132 Wn. App. 412 (2006)
Nonprofit argued that B&O taxes shouldn’t apply due to religious status.
The court held that even nonprofits are subject to B&O tax unless a specific exemption applies.
The decision referenced WAC rules that define exempt activities and criteria.
3. Property Tax (e.g., Chapter 458-07, 458-12)
Covers property valuation, assessment procedures, and exemptions.
WAC 458-12-010: Definitions related to property taxes.
WAC 458-16: Property tax exemptions (charities, churches, etc.).
Example Case:
Sacred Heart Medical Center v. Yakima County, 127 Wn.2d 272 (1995)
Concerned tax exemption for nonprofit hospitals.
The court examined WAC 458-16-260 (relating to charitable exemptions) and held that Sacred Heart qualified for exemption under RCW 84.36 and the WAC’s guidance.
4. Administrative Procedures and Appeals (Chapter 458-14)
Governs appeals to county boards of equalization.
Covers timelines, burden of proof, and administrative remedies.
Example Case:
Olympic Tug & Barge, Inc. v. Department of Revenue, 163 Wn. App. 598 (2011)
Olympic Tug contested a tax assessment through the administrative process under WAC 458-14.
The court emphasized the need to exhaust administrative remedies and follow procedures as outlined in WAC rules before seeking judicial review.
5. Taxpayer Rights and Refunds (e.g., WAC 458-20-229)
Explains how taxpayers may claim refunds and their rights during audits.
Details on penalties, interest, and reasonable cause exceptions.
Example Case:
Kmart Corp. v. Department of Revenue, 81 Wn. App. 580 (1996)
Kmart sought a refund for taxes paid on cash rebates from manufacturers.
The court reviewed WAC 458-20-108 (Documenting deductions) and WAC 458-20-229.
Held that Kmart was not entitled to a refund due to insufficient documentation per WAC requirements.
Interpretation of WAC by Courts
Washington courts give “substantial deference” to the Department of Revenue’s interpretation of tax laws, as long as the interpretation is not arbitrary or clearly wrong. This means WAC rules have considerable weight in disputes, especially when they interpret ambiguous statutory language.
However, courts can override WAC rules if they contradict the enabling statute or exceed the agency’s authority.
Example Principle:
Statutory > Regulatory: If an RCW (statute) and WAC (regulation) conflict, the RCW controls.
WACs must stay within the scope authorized by the Legislature in the RCW.
Constitutional Considerations
Agencies like the DOR cannot create taxes; they can only administer what the Legislature enacts.
If a WAC is interpreted to create a tax not authorized by statute, courts will strike it down.
Case Example:
Caron v. State, 79 Wn.2d 857 (1971)
The court invalidated a tax interpretation that extended beyond the scope of the statute.
Reinforced that WACs must reflect legislative intent, not create new obligations.
Conclusion
WAC Title 458 is essential to understanding how Washington administers and enforces its complex tax system. These rules carry the force of law and often determine outcomes in administrative and court proceedings. Courts generally uphold these regulations unless they clearly conflict with statute or constitutional principles. Familiarity with specific chapters—particularly those related to excise tax, B&O tax, and property tax—is key for businesses and legal practitioners dealing with Washington tax issues.
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