Jubitz Corporation, V State Department Of Revenue ( 2024 )

Filed
Washington State
Court of Appeals
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
Division Two
DIVISION II May 29, 2024
JUBITZ CORPORATION, No. 57952-9-II
Appellant,
v.
STATE OF WASHINGTON, DEPARTMENT PUBLISHED OPINION
OF REVENUE,
Respondent.
MAXA, J. – Jubitz Corp. appeals the trial court’s order denying its appeal of a Business
and Occupation (B&O) tax assessment from the Department of Revenue (DOR) and its claim for
a refund.
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.
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.
No. 57952-9-II
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.
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.
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.
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
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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) in the absence of findings of fact or
conclusions of law explaining the payment arrangements 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, Jubitz is entitled to a refund
for those sales.
Accordingly, we affirm in part the trial court’s order denying Jubitz’s claim for a B&O
tax refund, but we hold that Jubitz is entitled to a refund for fuel Jubitz fuel card users obtained
from stations operated by other networks besides Pacific Pride/CFN and for fuel Jubitz sold to
fuel card users from networks other than Pacific Pride/CFN.
FACTS
Background
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
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
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No. 57952-9-II
by Jubitz. In order to receive a fuel card, Jubitz required their customers to complete a credit
application and sign a credit agreement.
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.
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.
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 itemized fuel
obtained by the user and charged the user per gallon of fuel obtained.
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
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.
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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.
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.
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.
CFN Mutual Access Agreement
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.
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.
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No. 57952-9-II
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.
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.
Similar to Pacific Pride’s joint user agreements, CFN entered into agreements with other
entities to allow for participants’ fuel card users to obtain fuel at stations in other networks.
DOR Audit
In 2014, DOR selected Jubitz for a routine excise tax audit. The audit period was January
1, 2010, through December 31, 2014. The scope of the audit included transactions involving fuel
cards, but not those transactions involving traditional credit cards like Visa.
Jubitz reported amounts received from fuel its customers obtained from non-Jubitz
stations under the service and other activities B&O tax classification, and based the tax only on
its markup from the Pacific Pride/CFN established price. Jubitz reported sales of fuel obtained at
its stations by other Pacific Pride franchisees and CFN participants under the retailing B&O tax
classification.
As a result of the audit, DOR determined that Jubitz should have reported sales to its fuel
card users for fuel obtained at non-Jubitz locations under the retailing B&O tax classification
based on the gross proceeds of sales instead of under the service and other activities B&O tax
classification based on Jubitz’s profit margin. DOR also determined that Jubitz should have
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reported its sales of fuel to fuel card users from other networks at Jubitz locations under the
wholesaling B&O tax classification instead of the retailing B&O tax classification. The
wholesaling tax rate is 0.484 percent, compared to the retailing tax rate of 0.471 percent.
Based on its findings, DOR issued a tax assessment of $435,979 for the audit period.
Jubitz paid the tax assessment and commenced an action in the trial court seeking a tax refund of
$264,574 of the assessed amount.
Bench Trial
The case proceeded to a bench trial. The trial court heard testimony from several
witnesses and also considered multiple exhibits, including the agreements Jubitz executed with
Pacific Pride and CFN.
The trial court issued detailed findings of fact and conclusions of law. The court
concluded that Jubitz engaged in retail sales of fuel to its fuel card users when they obtained fuel
at non-Jubitz locations. The court noted that Jubitz charged its fuel card users for the fuel
obtained at non-Jubitz locations. And the court concluded that although Jubitz did not take
physical possession of the fuel its fuel card users obtained at non-Jubitz locations, the Pacific
Pride and CFN agreements dictated that Jubitz obtained constructive possession of the fuel
obtained. Therefore, Jubitz’s fuel card users obtaining fuel from non-Jubitz stations was subject
to the retailing B&O tax.
Regarding fuel card users from other franchisees and participants obtaining fuel at Jubitz
stations, the trial court concluded based on the Pacific Pride and CFN agreements that Jubitz sold
fuel to other network participants, who then resold the fuel to their fuel card users. Therefore,
the court concluded that Jubitz made wholesale sales to the other participants rather than retail
sales to the fuel card users.
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Based on its conclusions of law, the trial court denied Jubitz’s claim for a tax refund.
Jubitz appeals the trial court’s order denying its claim for a B&O tax refund.
ANALYSIS
A. STANDARD OF REVIEW
We review the trial court’s decision after a bench trial to determine whether the
substantial evidence supports the findings of fact and whether the findings of fact support the
conclusions of law. Real Carriage Door Co., Inc. ex rel. Rees v. Rees, 17 Wn. App. 2d 449, 457,
486 P.3d 955 (2021). Substantial evidence is the amount of evidence sufficient to convince a
rational, fair-minded person that a premise is true. Id. All evidence and reasonable inferences
are viewed in the light most favorable to the prevailing party. Id. We review the trial court’s
application of facts to law and the conclusions of law de novo. Id.Here, Jubitz does not expressly assign error to any findings of fact.1 And Jubitz only
questions a few findings in the argument sections of its brief. Findings of fact that are
unchallenged are treated as verities on appeal. Id.B. LEGAL PRINCIPLES
Washington levies B&O taxes on companies that engage in business in the state. RCW
82.04.220(1). One way of measuring B&O taxes is by gross proceeds of sales. RCW
82.04.220(1).
A “sale” is “any transfer of the ownership of, title to, or possession of property for a
valuable consideration.” RCW 82.04.040(1). The sale of tangible personal property to
consumers is considered a “sale at retail.” RCW 82.04.050(1)(a). However, a sale to a person
1
Jubitz states its assignments of error, and then simply lists various findings of fact in
parentheticals. RAP 10.3(g) states, “A separate assignment of error for each finding of fact a
party contends was improperly made must be included with reference to the finding by number.”
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No. 57952-9-II
who purchases tangible property for the purpose of resale is not a retail sale. RCW
82.04.050(1)(a)(i). The B&O tax rate for retail sales is 0.471 percent. RCW 82.04.250(1).
A “sale at wholesale” is “any sale, which is not a sale at retail, of . . . tangible personal
property.” RCW 82.04.060(1)(a). The B&O tax rate for wholesale sales is 0.484 percent. RCW
82.04.270.
Any business activity that is not a sale at retail or a wholesale sale is taxed as a service or
other activity. RCW 82.04.290(2)(a)-(b). The B&O tax rate for services or other activities is
0.275 percent. RCW 82.04.290(1).
We look to substance, and not form, when determining tax classifications. Lowe’s Home
Centers, LLC v. Dep’t of Revenue, 195 Wn.2d 27, 33, 455 P.3d 659 (2020).
WAC 458-20-129 (Rule 129) provides that persons operating gasoline service stations
are taxable under the retailing B&O tax classification.
C. SALE OF FUEL TO JUBITZ FUEL CARD USERS AT NON-JUBITZ STATIONS
Jubitz argues that the trial court erred when it ruled that Jubitz made retail sales to Jubitz
fuel card users when they obtained fuel at Pacific Pride/CFN fueling stations. Jubitz claims that
it merely provided a service by extending credit to its fuel card users. We disagree.
The trial court determined that when Jubitz fuel card users obtained fuel from other
Pacific Pride/CFN stations, Jubitz was making a retail sale of that fuel to its fuel card users. It is
important to note that, unlike some tax cases that are resolved on summary judgment, here the
trial court conducted a trial and issued findings of fact. Therefore, the question is whether the
trial court’s relevant findings of fact – which Jubitz mostly does not challenge – support its
conclusion. Real Carriage Door, 17 Wn. App. 2d at 457.
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Typically, a consumer obtaining fuel at a gas station would constitute a retail sale by the
gas station. However, the agreements between Pacific Pride and CFN and Jubitz and the
agreement between Jubitz and its fuel card users contemplate a different transaction.
1. Pacific Pride Agreement
The trial court found that under the Pacific Pride agreement, (1) “Jubitz must purchase
from other Pacific Pride franchisees the ‘foreign purchases’ made by Jubitz fuel card users at
other franchisees’ locations,” CP at 527; (2) “[t]he price Jubitz must pay for foreign purchases is
the ‘transfer price’ set by Pacific Pride,” CP at 527; (3) Jubitz pays the other franchisees through
a debit to its account by Pacific Pride; and (4) “Jubitz may charge its own fuel card user
independently from Pacific Pride . . . whatever price it chooses,” CP at 527.
Jubitz challenges only the fourth finding, claiming that the evidence does not support the
finding. However, paragraph 4 of the Motor Fuel Use Agreement, the agreement between Jubitz
and its customers, discusses invoicing for fuel obtained, and then states, “The price charged by
[Jubitz] for each type of fuel will be a reasonable price and may be changed from time to time by
[Jubitz] to reflect market condition.” Ex. 507, at 1. And paragraph 5.5 of the Pacific Pride
agreement states, “PACIFIC PRIDE shall notify the FRANCHISEE of the Transfer Price and
Retail Transfer Price for Foreign Purchases. The FRANCHISEE shall use this information as it
desires and shall in all cases bill its Accounts at prices established by the FRANCHISEE
independently from other PACIFIC PRIDE Franchisees and PACIFIC PRIDE.” Ex. 6 at 100
(emphasis added).
Jubitz’s Motor Fuel Use Agreement and the Pacific Pride agreement confirm that Jubitz
sets the price for fuel obtained by fuel card users. The trial court also found in an unchallenged
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finding, “Jubitz sets the price for each type of fuel.” CP at 526. This unchallenged finding is a
verity on appeal. Real Carriage Door, 17 Wn. App. 2d at 457.
2. CFN Agreement
Regarding the CFN agreement, the trial court’s findings do not directly address the
treatment in the CFN agreement of Jubitz fuel card users obtaining fuel from other CFN
participants. However, the trial court did find that the CFN fuel network operated similarly to
Pacific Pride’s network. And the court found that the CFN agreement provided that (1) Jubitz
was deemed to have made a standing offer to sell fuel to another CFN participant whose fuel
card user obtained fuel from a Jubitz location, (2) the offer was accepted when the fuel card user
withdrew fuel, and (3) the CFN participant then immediately sold that fuel to its fuel card users.
The trial court did not expressly find that this process applied when Jubitz fuel card users
obtained fuel from other CFN participants. But presumably the agreement was reciprocal: when
Jubitz fuel cardholders accessed fuel from another CFN participant’s location, that participant
was deemed to have made a standing offer to sell fuel to Jubitz when Jubitz’s fuel card user
obtained fuel from their location. And Jubitz then sold the fuel to its fuel card users. The terms
of the CFN agreement confirm that reciprocal arrangement.
The trial court also found that (1) Jubitz paid other CFN participants for remote
transactions by its fuel card users through a debit to its account by CFN, (2) CFN determined the
amount Jubitz paid to other participants, and (3) Jubitz was responsible for collecting payment
from its own fuel card users for fuel obtained at other participants’ locations. These findings
confirm that the trial court’s findings regarding other participants’ fuel card users obtaining fuel
from Jubitz locations also apply to Jubitz fuel card users obtaining fuel from other participants’
locations.
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3. Analysis
The trial court concluded under both the Pacific Pride and CFN agreements, Jubitz had
constructive possession of the fuel obtained by its fuel card users at non-Jubitz locations.
Therefore, Jubitz sold the fuel to its fuel card users. And Jubitz’s consideration for selling that
fuel to its fuel card users was the price Jubitz set and charged in its invoices to the fuel card
users.
The trial court’s findings regarding the CFN agreement clearly support the conclusion
that Jubitz made a retail sale of fuel its card users obtained from CFN participants’ stations.
Jubitz expressly agreed in the CFN agreement that when Jubitz fuel card users obtained fuel
from other Pacific Pride and CFN participants, Jubitz actually purchased the fuel from the
participants at a price CFN established, and then in a simultaneous transaction Jubitz resold the
fuel to its fuel card users at a price that Jubitz established. The consideration for the sale was the
price Jubitz charged its fuel card users in its invoices. Therefore, the transactions at CFN
participants’ stations met the definition of a retail sale: “any transfer of the ownership of, title to,
or possession of property for a valuable consideration.” RCW 82.04.040(1).
The findings regarding Pacific Pride are less clear. But the key findings are that Pacific
Pride set the price that Jubitz paid to the Pacific Pride franchisee and then Jubitz charged its fuel
card user a higher price. These findings support the conclusion that Jubitz made a retail sale of
fuel its card users obtained from Pacific Pride franchisees’ stations.
4. Jubitz Arguments
First, Jubitz claims that it did not set the price of the fuel its fuel card users obtained.
Instead, it simply added a fee for the various services it provided. However, the trial court
expressly found that “Jubitz’s invoices contain no charges for ‘card services’ or ‘credit card
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services’ or ‘advancing credit and servicing credit accounts’ or similar language. The invoices
simply itemize all fuel withdrawn by the fuel card user and charges the user for each gallon of
fuel withdrawn.” CP at 529. This unchallenged finding supports the conclusion that Jubitz was
charging its fuel card users only for the fuel obtained.
Second, Jubitz argues that it was extending credit to its fuel card holders to purchase fuel
from non-Jubitz stations, not selling the fuel. But the trial court’s unchallenged findings of fact
expressly state that under the Pacific Pride and CFN agreements, Jubitz paid the other
participants for the fuel at a price set by Pacific Pride/CFN. Jubitz then charged its fuel card
users a price that Jubitz independently determined. This arrangement does not constitute an
extension of credit.
Third, Jubitz relies on Rena-Ware Distributors, Inc. v. State to argue that it merely was
extending credit. 77 Wn.2d 514, 516-17, 463 P.2d 622 (1970). In Rena-Ware, the taxpayer, a
Washington corporation, sold products to customers nationwide. Id. at 515. When customers
did not pay cash for their purchase, the taxpayer added a flat rate service charge to the purchase
price. Id. DOR did not charge B&O taxes for sales made outside of Washington, but assessed
taxes on the service charges because the servicing of accounts occurred in Washington. Id. The
taxpayer argued that the service charge was part of the purchase price. Id. The Supreme Court
held that the taxpayer’s activity amounted to servicing installment accounts, not a retail sale. Id.
at 517.
However, Rena-Ware did not involve the taxation of the underlying sales. The case
involved the taxation of an additional service charge added to a purchase price, and in a
completely different context than here. Rena-Ware, 77 Wn.2d at 515. And the case did not
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involve a transaction where the taxpayer paid a third party for the products and then billed its
customers at a different price.
Fourth, Jubitz relies on Department of Revenue v. J.C. Penney Co., 96 Wn.2d 38, 633
P.2d 870 (1981). In J.C. Penney, the taxpayer issued credit cards to its customers and assessed a
service charge if the customer did not pay the monthly balance. Id. at 40. DOR sought to
impose B&O taxes on the service charge income. Id. at 41. The taxpayer argued that a tax could
not be imposed because all activities relating to the service charges occurred in Oregon, not in
Washington. Id. at 42. The Supreme Court acknowledged that servicing the taxpayer’s account
was taxable activity. Id. at 43-44. And the court concluded that certain activities in Washington
subjected the taxpayer to Washington B&O taxes. Id. at 44.
As with Rena-Ware, J. C. Penney is inapplicable because it did not address the taxation
of the underlying sales. The case involved the taxability of credit card service charges. J. C.
Penney, 96 Wn.2d at 40-41. And the case did not involve a transaction where the taxpayer paid
a third party for the products and then billed its customers at a different price.
Fifth, Jubitz argues that no evidence supported the trial court’s conclusion that Jubitz had
constructive possession of the fuel its fuel card users obtained from non-Jubitz locations. It
argues that constructive possession requires that it be able to exercise dominion and control over
the property to transfer it to another party, and the trial court did not make any findings that
Jubitz had the ability to exercise dominion and control over the fuel owned by non-Jubitz
stations.
However, we must consider substance over form when considering the tax classification
of business activities. Lowe’s Home Centers, 195 Wn.2d at 33. The trial court expressly found
that Jubitz agreed to pay the Pacific Pride/CFN participants for the fuel obtained by Jubitz’s fuel
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card users, and then sold that fuel to its fuel card users. Therefore, Jubitz necessarily obtained
constructive possession of the fuel that it purchased from the participants. That constructive
possession allowed Jubitz to resell the fuel to its fuel card users.
We hold that the trial court did not err in concluding that Jubitz fuel card users obtaining
fuel from non-Jubitz stations constituted retail sales by Jubitz.
D. SALE OF FUEL TO PACIFIC PRIDE/CFN FUEL CARD USERS AT JUBITZ STATIONS
Jubitz argues that the trial court erred when it concluded that Jubitz made wholesale sales
when Pacific Pride and CFN fuel card holders obtained fuel at Jubitz stations. Jubitz claims that
it made retail sales to those fuel card holders. We disagree.
The trial court concluded that when fuel card users from other Pacific Pride/CFN
participants obtained fuel from Jubitz locations, Jubitz sold the fuel to the participants, who then
resold the fuel to its fuel card users. Therefore, the court concluded that Jubitz’s sale of the fuel
was a wholesale sale. As noted above, unlike some tax cases that are resolved on summary
judgment, here the trial court conducted a trial and issued findings of fact. Therefore, the
question is whether the trial court’s relevant findings of fact – which Jubitz does not challenge –
support its conclusion. Real Carriage Door, 17 Wn. App. 2d at 457.
Typically, a consumer obtaining fuel at a gas station would constitute a retail sale by the
gas station. However, the agreements between Pacific Pride and CFN and Jubitz contemplate a
different transaction.
1. Pacific Pride Agreement
The trial court found that under the Pacific Pride agreement, (1) “other Pacific Pride
franchisees must, through Pacific Pride, pay to Jubitz the price for ‘foreign sales’ made by other
franchisees’ fuel card users at Jubitz’s locations at the ‘retail transfer price’ established by
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Pacific Pride,” CP at 527; and (2) the other franchisees paid Jubitz through a debit to their
accounts and a credit to Jubitz’s account. The trial court’s findings do not directly address the
process once Pacific Pride participants purchase the fuel from Jubitz. However, the court did
find that “Jubitz may charge its own fuel card user independently from Pacific Pride or other
franchisees whatever price it chooses.” CP at 527. Presumably, this finding applies equally
when Pacific Pride franchisees purchased fuel from Jubitz: the franchisee charged its fuel card
user a price that it chose. The terms of the Pacific Pride agreement confirm that arrangement.
Jubitz does not challenge these findings, so they are verities on appeal. Real Carriage
Door, 17 Wn. App. 2d at 457.
2. CFN Agreement
The trial court found that the CFN agreement provided that (1) Jubitz was deemed to
have made a standing offer to sell fuel to another CFN participant whose fuel card user obtained
fuel from a Jubitz location at a price determined by CFN, (2) the offer was accepted when the
fuel card user withdrew fuel, (3) the CFN participant then immediately sold that fuel to its fuel
card users, and (4) the other participants paid Jubitz through a debit to their accounts and a credit
to Jubitz’s account.
Jubitz does not challenge these findings, so they are verities on appeal. Real Carriage
Door, 17 Wn. App. 2d at 457.
3. Analysis
The trial court’s unchallenged findings regarding the CFN agreement clearly support the
conclusion that Jubitz made a wholesale sale of fuel when fuel card users from CFN participants
obtained fuel from Jubitz’s stations. The findings show that when non-Jubitz fuel card users
obtained fuel from Jubitz stations, Jubitz actually sold the fuel to the CFN participants, who in a
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simultaneous transaction resold the fuel to its fuel card users. A sale to a person who purchases
tangible property for the purpose of resale is not a retail sale. RCW 82.04.050(1)(a)(i).
Again, the findings regarding Pacific Pride are less clear. But the key findings are that
Pacific Pride set the price that Pacific Pride franchisees paid to Jubitz and the implied finding is
that the franchisees could charge its fuel card user a higher price. These findings support the
conclusion that Jubitz made a wholesale sale of fuel to Pacific Pride franchisees when their fuel
card users obtained fuel from Jubitz stations.
4. Jubitz Arguments
First, Jubitz argues that it made retail sales to the Pacific Pride and CFN fuel card users
under the plain language of RCW 82.04.050(1)(a). Jubitz claims that it made a sale of tangible
property (fuel) to a consumer (fuel card user) that is using the fuel for a purpose other than resale
(driving their vehicle) in exchange for valuable consideration (the price of the fuel). But this
argument ignores the unchallenged findings of fact showing that the Pacific Pride/CFN
participants, not the fuel card users, actually purchased the fuel from Jubitz. So the fuel card
users did not provide valuable consideration to Jubitz – the participants did. And the actual
buyer – the participants – purchased the fuel for the purpose of resale to their fuel card users.
Second, Jubitz points to Rule 129, which states that “[p]ersons operating gasoline service
stations are taxable under the retailing classification.” Jubitz argues that this rule requires that
the transfer of fuel to non-Jubitz fuel card users be treated as retail sales. However, interpretive
rules “sets forth the agency’s interpretation of statutory provisions it administers.” RCW
34.05.328(5)(c)(ii). Interpretive rules do not constrain the courts. Avnet, Inc. v. Dep’t of
Revenue, 187 Wn. App. 427, 439, 348 P.3d 1273 (2015). They “ ‘are not binding on the courts
and are afforded no deference other than the power of persuasion.’ ” Id. (quoting Ass’n of Wn.
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Bus. v. Dep’t of Revenue, 155 Wn.2d 430, 447, 120 P.3d 46 (2005)). Interpretive rules “cannot
subtract from the force of the statute.” Avnet, 187 Wn. App. at 440.
Here, the findings of fact establish that Jubitz sold the fuel to Pacific Pride/CFN
participants, who resold the fuel to its fuel card users. Under RCW 82.04.050(1)(a)(i), a sale to a
person who purchases tangible property for the purpose of resale is not a retail sale. Rule 129
cannot trump this clear statutory rule.
Third, Jubitz emphasizes that a majority of out-of-state network participants whose fuel
card users obtained fuel from Jubitz stations did not register with DOR and did not report retail
sales in Washington. But how third parties calculate their tax liability cannot affect the nature of
Jubitz’s sales.
Fourth, Jubitz notes that it did not provide reseller permits to any of the participants to
which Jubitz allegedly made retail sales. The lack of a reseller permit did not bar the trial court
from finding that Jubitz made wholesale sales to other fuel network participants. There are other
ways besides a reseller permit for showing that a sale was a wholesale sale. RCW 82.04.470(5)
states that a sale can be deemed a wholesale sale based on the “facts and circumstances.” See
Protective Admin. Servs., Inc. v. Dep’t of Revenue, 24 Wn. App. 2d 319, 327, 519 P.3d 953(2022). The trial court could and did examine the facts and circumstances of the sales
transactions, specifically the Pacific Pride franchise agreement and the CFN mutual access
agreement, when it concluded that Jubitz engaged in wholesale sales.
Fifth, Jubitz argues that DOR did not treat other taxpayers with fuel card programs in the
same manner as it treated Jubitz and that DOR’s auditor was inexperienced. During the bench
trial, DOR employee acknowledged that there were concerns both within DOR and among
taxpayers about the consistency of tax treatment of companies in the fuel business. And the
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DOR auditor had never audited a company that issued fuel cards. However, Jubitz does not
explain how these facts affect the trial court’s findings and conclusions.
We hold that the trial court did not err in concluding that Jubitz made wholesale sales
when Pacific Pride and CFN fuel card users obtained fuel at Jubitz gas stations.
E. FUEL SALES INVOLVING OTHER NETWORKS
At oral argument, Jubitz argued that the trial court’s conclusions regarding when Jubitz
fuel card users obtained fuel from Pacific Pride/CFN stations do not apply when Jubitz fuel card
users obtain fuel from stations in other networks. We agree.2
The trial court found that Jubitz issued fuel cards that allowed users to obtain fuel from
various locations. Jubitz argues that it did not agree to sell fuel at retail to its fuel card users
when they obtained from other networks’ stations.
The trial court made findings of fact that the ability of Jubitz’s fuel card users to obtain
fuel from other networks’ stations resulted from agreements that Pacific Pride and CFN executed
with other card networks. But the trial court’s findings of fact and conclusions of law do not
address the payment arrangements for fuel sales at other networks’ stations. Therefore, the only
conclusion that can be drawn from this finding is that Jubitz did not make retail sales when its
fuel card users obtained fuel from other networks’ stations. Accordingly, we hold that Jubitz
fuel card users obtaining fuel from other networks’ stations cannot be classified as retail sales by
Jubitz, and that Jubitz is entitled to a refund for these sales.
2
Although this argument was not specifically raised in its opening brief, Jubitz’s arguments
against DOR’s assessment were not limited to Pacific Pride/CFN transactions.
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Similarly, Jubitz argues that the trial court’s conclusions regarding Pacific Pride/CFN
fuel card holders obtaining fuel from Jubitz stations do not apply to fuel card holders from other
networks. We agree.
The trial court found that Jubitz accepted multiple cards other than those from Pacific
Pride and CFN as payment at its gas stations, including Comdata, TCS, Voyager, T-check, EFS,
and FleetOne. Jubitz argues that they did not agree to sell to those fuel card users at wholesale.
The record indicates that Jubitz’s acceptance of other fuel cards resulted from agreements
that Pacific Pride and CFN executed with other card networks. But the trial court’s findings and
conclusions do not address the payment arrangements for Jubitz’s acceptance of these other
cards. And the only finding of fact addressing these other fuel cards state that Jubitz accepted
the cards “as payment.” CP at 526. Therefore, the only conclusion that we can draw from this
finding is that Jubitz made retail sales to the fuel card users from other networks. Accordingly,
we hold that fuel card users from other networks obtaining fuel from Jubitz stations should be
classified as retail sales, not wholesale sales, and that Jubitz is entitled to a refund for these sales.
CONCLUSION
We affirm in part the trial court’s order denying Jubitz’s claim for a B&O tax refund, but
we hold that Jubitz is entitled to a refund for fuel Jubitz fuel card users obtained from stations
operated by networks other than Pacific Pride and CFN and for fuel Jubitz sold to fuel card users
from networks other than Pacific Pride and CFN.
MAXA, J.
I concur:
CRUSER, C.J.
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PRICE, J. (dissenting) — The majority generally adopts the Department of Revenue’s
(DOR) characterization of the structure of Jubitz’s relationship with its cardholders, other affiliated
gas stations, and the clearinghouses of Pacific Pride and CFN. In doing so, the majority carefully
sets out relevant portions of the Pacific Pride and CFN agreements and, generally speaking,
accurately concludes these agreements support DOR.
But this is all form. And elevating form over substance, as our Supreme Court instructs, is
not the appropriate approach for tax classifications. See Lowe’s Home Ctrs., LLC v. Dep’t of
Revenue, 195 Wn.2d 27, 33, 455 P.3d 659 (2020). When fuel is sold to an end-user customer at a
gasoline service station, it is a retail sale. WAC 458-20-129 (Rule 129). As this case illustrates,
when credit is extended and affiliate networks become involved, fictional relationships can be
created. And perhaps because they are fictional, the relationships can be described with conflicting
terms, as they were here. For example, portions of the Pacific Pride agreements appear to
contradictorily suggest that, on the one hand, gasoline service stations are selling each other fuel
(supporting DOR’s position), and, on the other hand, the service stations are merely selling
“accounts receivables” (supporting Jubitz’s position). See Ex.6, at 99 (¶ 5.2 in “Exhibit A” to the
“Pacific Pride Franchise Agreement”).
The form of these fictional relationships may have relevance in other (non-tax) contexts,
but when we look at the substance of what is actually occurring, it is nothing unusual—an
end-user customer buys fuel from a gasoline service station in a retail sale transaction, regardless
of whether they are buying the fuel directly or on credit.
I respectfully dissent.
______________________________
PRICE, J.
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