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 business
(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
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.
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
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
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 Tem., concur. 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 (i.e., 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
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.
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:
(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".
Although rule 106 provides:
(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 I-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
The letter stated further:
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
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.
FootNotes
"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.)
"`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."
"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 mine.)
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