Jubitz Corp. v. Dep't of Revenue

553 P.3d 700

JUBITZ CORPORATION, Appellant,

v.State of Washington, DEPARTMENT OF REVENUE, Respondent

No. 57952-9-II

Court of Appeals of Washington, Division 2.

Filed August 6, 2024

Appeal from Thurston Superior Court, Docket No: 19-2-00004-7, Honorable Carol A. Murphy, Judge

Scott M. Edwards, Callie Anne Castillo, Lane Powell PC, 1420 5th Ave, Ste, 4200, Seattle, WA, 98101-2375, for Appellant.

David M. Hankins, Attorney Generals Office/Revenue Division, 7141 Cleanwater Drive Sw., Olympia, WA, 98504-0123, Travis Yonker, Attorney General’s Office, P.O. Box 40123, Tumwater, WA, 98501, Dept of Revenue A.g. Office, Attorney at Law, 7141 Cleanwater Lane Sw., P.O. Box 40123, Olympia, WA, 98504-0123, for Respondent.

PUBLISHED OPINION

Maxa, J.

¶1 Jubitz Corp. appeals the trial court’s order denying its appeal of a Business and Occupation (B&C) tax assessment from the Department of Revenue (DOR) and its claim for a refund.

¶2 During the audit period, Jubitz operated several fueling stations in Washington. Jubitz also participated in two large fuel networks, Pacific Pride and CFN. Jubitz issued fuel cards to qualified customers that allowed the customers to obtain fuel both at Jubitz stations and at other fueling stations in the Pacific Pride/CFN networks. Jubitz billed its fuel card users for the fuel obtained. Pacific Pride and CFN set the price of the fuel, but Jubitz was free to charge its fuel card users a different amount. Jubitz fuel card users also could obtain fuel from stations in other networks besides Pacific Pride and CFN.

¶3 In addition, fuel card users of other participants in the Pacific Pride/CFN networks could obtain fuel at Jubitz’s stations. The participants billed their own fuel card users for the fuel obtained. Jubitz also accepted fuel cards at its stations from users from other networks besides Pacific Pride and CFN.

¶4 DOR’s audit assessed B&O taxes at the retailing rate when Jubitz fuel card users obtained fuel at other stations and at the wholesaling rate when non-Jubitz fuel card users obtained fuel at Jubitz’s stations.

¶5 Jubitz argues that (1) Jubitz fuel card users obtaining fuel from other Pacific Pride/CFN participants’ fueling stations should be classified as a retail sale from those participants, and Jubitz should be taxed only for the amounts above the Pacific Pride/CFN price it charged its fuel card users under the service tax rate; (2) non-Jubitz fuel card users obtaining fuel from Jubitz fueling stations should be classified as retail sales from Jubitz and taxed under the retailing rate; and (3) even if DOR correctly taxed transactions involving Pacific Pride/CFN stations and fuel card users, Jubitz fuel card users obtaining fuel from networks other than Pacific Pride/CFN and fuel card users from other networks obtaining fuel from Jubitz stations should be taxed at different rates.

¶6 DOR argues that based on the terms of Jubitz’s agreements with Pacific Pride and CFN, (1) when Jubitz fuel card users obtained fuel from other Pacific Pride/CFN participants’ fueling stations, the transaction should be classified as a retail sale from Jubitz because Jubitz actually purchased the fuel from the participants and then immediately resold the fuel to its fuel card users; and (2) when non-Jubitz fuel card users obtained fuel from a Jubitz station, the transaction should be classified as a wholesale sale from Jubitz because Jubitz actually sold the fuel to the other participants, who then immediately resold the fuel to their fuel card users.

¶7 We hold that (1) Jubitz made retail sales to its fuel card users when they obtained fuel from other Pacific Pride/CFN fueling stations, because in those transactions Jubitz purchased the fuel from the fuel network participant at a price set by the fuel network and then resold the fuel to the Jubitz fuel card user at a price determined by Jubitz; (2) Jubitz made wholesale sales of fuel to Pacific Pride/CFN participants when their fuel card users obtained fuel at Jubitz stations, because Jubitz sold the fuel to the participant at a price set by the fuel network and the participant then resold the fuel to its fuel card user; and (3) the tax treatment for transactions when Jubitz fuel card users obtained fuel from stations operated by other networks besides Pacific Pride and CFN and when Jubitz accepted fuel cards from networks other than Pacific Pride and CFN, is the same as the transactions involving Pacific Pride/CFN participants.

¶8 Accordingly, we affirm the trial court’s order denying Jubitz’s claim for a B&O tax refund.

FACTS

Background

¶9 Jubitz is a company based in Portland, Oregon. Jubitz provides fleet services, which involves operating fueling stations and providing credit services to customers. During the January 1, 2010 through December 31, 2014 audit period, Jubitz operated seven fueling stations in Washington. The stations dispensed on-road fuel, including gasoline and diesel, off-road or dyed diesel, and diesel exhaust fluid. Jubitz accepted several different fuel cards at its gas stations, including Pacific Pride, CFN, Comdata, TCS, Voyager, Wex, T-check, EFS, and Fleet One.

Jubitz Fuel Cards

¶10 Jubitz issued fuel cards to certain qualified customers. The fuel cards allowed customers to obtain fuel from various gas stations and pay for the fuel at a later date through invoices issued by Jubitz. In order to receive a fuel card, Jubitz required their customers to complete a credit application and sign a credit agreement.

¶11 If Jubitz approved a customer’s credit application, Jubitz entered into a "Motor Fuel Use Agreement" with the customer. Clerk’s Papers (CP) at 526. The agreement stated that Jubitz would set the price charged for each type of fuel the customer purchased, and that the price was subject to change by Jubitz.

¶12 Jubitz periodically invoiced its customers for fuel obtained through use of the fuel card. The invoices included fuel obtained from Jubitz locations and non-Jubitz locations, without any distinction between the two.

¶13 Jubitz’s invoices contained no charges for "card services," "credit card services," or "advancing credit and servicing credit accounts." CP at 529. The invoices listed item- ized fuel obtained by the user and charged the user per gallon of fuel obtained.

¶14 Jubitz participated in two large fuel networks: Pacific Pride and CFN. Jubitz had agreements with both Pacific Pride and CFN. Under these agreements, Jubitz fuel card holders could obtain fuel at other network stations and Jubitz would allow fuel card users from other network participants at their stations.

Pacific Pride Franchise Agreement

¶15 Under the Pacific Pride franchise agreement, Jubitz was required to purchase from other Pacific Pride franchisees fuel that Jubitz fuel card users obtained from those franchisees, called "foreign purchases." CP at 527. The price Jubitz paid to other franchisees for foreign purchases was set by Pacific Pride, called the "transfer price." CP at 527. But Jubitz could charge its customers whatever price it chose.

¶16 Other franchisees were required to pay Jubitz for fuel obtained at Jubitz stations by those franchisees’ fuel card users, called "foreign sales." CP at 527. The price the other franchisees paid to Jubitz was set by Pacific Pride called the "retail transfer price." CP at 527.

¶17 Pacific Pride acted as a clearinghouse, facilitating payments to and from Jubitz and other franchisees. Pacific Pride debited Jubitz’s account for foreign purchases and credited Jubitz’s account for foreign sales for transactions that took place during a billing cycle. In other words, Jubitz paid other franchisees for foreign purchases and the other franchisees paid Jubitz for foreign sales.

¶18 Pacific Pride entered into joint user agreements with non-Pacific Pride entities, which allowed Pacific Pride franchisees’ fuel card users to obtain fuel from gas stations in other networks. Under these agreements, Jubitz also accepted fuel cards from other networks as payment at its stations.

CFN Mutual Access Agreement

¶19 Under the CFN mutual access agreement, other CFN participants agreed to make a standing offer to sell fuel to Jubitz when a Jubitz fuel card user obtained fuel from the station of another CFN participant, called "remote transactions." Ex. 19, at 12 (¶ 5.6); CP at 528. Acceptance of that offer occurred when the Jubitz fuel card users withdrew fuel. Jubitz then immediately resold that fuel to its fuel card users. Jubitz subsequently invoiced and collected payments from its fuel card users for the fuel withdrawn at other participants’ stations.

¶20 Jubitz agreed to make a standing offer to sell fuel to any other CFN participant when their fuel card user accessed fuel from a Jubitz station, called "foreign transactions." CP at 528. Acceptance of that offer occurred when the other CFN participants’ fuel card users withdrew fuel. The CFN participants then immediately resold that fuel to their fuel card users.

¶21 CFN determined the price Jubitz was required to pay to other CFN participants for remote transactions and the price other CFN participants were required to pay Jubitz for foreign transactions.

¶22 CFN acted as a clearinghouse, facilitating payments to and from Jubitz and other participants. CFN issued statements to participants that debited Jubitz’s account for all remote transactions and credited Jubitz’s account for all foreign transactions. In other words, Jubitz paid other participants for remote transactions and the other participants paid Jubitz for foreign transactions.

¶23 Similar to Pacific Pride’s joint user agreements, CFN entered into agreements with other entities to allow for those entities’ fuel card users to obtain fuel at stations in other networks. And under these agreements, Jubitz accepted fuel cards from other networks as payment at its stations.

DOR Audit

¶24 In 2014, DOR selected Jubitz for a routine excise tax: audit. The audit period was January 1, 2010, through December 31,...