DocketNumber: No. 89734-4
Citation Numbers: 183 Wash. 2d 842
Judges: Fairhurst, González, Johnson, Madsen, McCloud, Owens, Stephens, Wiggins
Filed Date: 8/27/2015
Status: Precedential
Modified Date: 8/12/2021
¶1 After several Indian tribes successfully challenged imposition of state fuel taxes on tribal retailers, our legislature both authorized the governor to resolve fuel tax controversies with tribes by agreement and attempted to change state fuel tax law to avoid tribal immunity. Since then, the State and various tribes have signed many agreements under which the tribes agree to buy taxed fuel and the State agrees to refund a portion of the fuel tax receipts to the tribes. An industry group has challenged the lawfulness of these agreements.
Background
¶3 Washington State taxes fuel. Laws of 1921, ch. 173, § 2. Not long after the state began taxing fuel, the people approved the 18th amendment to our constitution. This provision limits the use of motor fuel taxes to “highway purposes,” including “[r]efunds authorized by law for taxes paid on motor vehicle fuels.” Wash. Const, art. II, § 40(d).
¶4 Several Indian tribes in Washington State own and operate gas stations on tribal lands. Federal law limits the States’ ability to tax tribes and tribal enterprises. Cohen’s Handbook of Federal Indian Law § 8.03[1][a], [b] at 696-97 (Nell Jessup Newton ed., 2012) (citing Richard D. Pomp, The Unfilled Promise of the Indian Commerce Clause and State Taxation, 63 Tax. L. 897 (2010)).
¶5 Conflict over the State’s power to tax fuels sold on tribal land has existed in this state since at least 1930. See Sale to Indian on Reservation of Liquid Fuel as Taxable, 20 Op. Att’y Gen. 629-30 (1929-30) (advising the state treasurer that sale to an Indian retailer on Indian land was taxable). Recent years have seen many more tribal enterprises operating gas stations on tribal land and many more conflicts between states and tribes regarding fuel taxes. Cohen, supra, § 8.03[1][b] at 697 (citing Okla. Tax Comm’n v. Chickasaw Nation, 515 U.S. 450, 456-62, 115 S. Ct. 2214, 132 L. Ed. 2d 400 (1995)). In Chickasaw Nation, the United States Supreme Court resolved some of the conflicts by holding that “when Congress does not instruct otherwise, a
¶6 The Chickasaw Nation case sparked two legislative actions in the 1990s that led to the conflict before us. First, in a very brief bill, the legislature authorized the Washington State Department of Licensing to enter into deals with the tribes to settle legal conflicts regarding fuel taxes “upon terms substantially the same as those in the consent decree entered by the federal district court (Eastern District of Washington) in Confederated Tribes of the Colville Reservation v. [Department of Licensing] et al.” Laws of 1995, ch. 320, §§ 2-3. Under the consent decree, the tribes agreed to buy only fuel that had already been taxed, record whether they sold the fuel to tribal or nontribal members, and allow the State to review their records. In return, the State would “refund ... the amount of motor vehicle fuel tax and special fuel tax that any seller, distributor or dealer of such fuels has paid to the State and passed on to . . . the Tribes,” measured by gallons of such fuel used by the tribes or purchased by tribal members or businesses. Clerk’s Papers (CP) at 1037-38 (consent decree).
As a matter of federal law, the State of Washington’s motor vehicle fuel taxes may not be applied to motor vehicle fuels, delivered to, received by, or sold by any retail fuel station that is owned by an Indian tribe, tribal enterprise, or tribal member and that is located within the tribe’s Indian Country].]
Defendant [State of Washington] is permanently enjoined from imposing or collecting motor vehicle fuel taxes, or otherwise*848 seeking to enforce RCW chapter 82.36 with respect to motor vehicle fuels, delivered to, received by, or sold by Plaintiffs’ retail fuel stations within their respective Indian Country.
CP at 494. The record suggests that at least as of the summary judgment hearing below, the injunction was still in effect.
¶8 After Judge Zilly’s injunction issued, the legislature considered moving from a tax-at-the-pump model to a tax-at-the-rack model, in another attempt to put the legal incidence of the tax outside of Indian Country and on someone other than the retailer. S.B. 6785, at 5, 59th Leg., Reg. Sess. (Wash. 2006); S.B. Rep. on S.B. 6785, 59th Leg., Reg. Sess. (Wash. 2006). An attorney representing the Squaxin Island Tribe testified that if the bill passed, “tribes like Squaxin Island Tribe, and others, already are and will be looking at how to occupy the supplier position. Wherever you move the legal incidence of the tax, ... if it falls on a tribe or its members on their own land . . . we’re going to seek to occupy that position.” CP at 530, 534 (transcript of testimony before Senate Transportation Committee on S.B. 6785). The bill did not pass.
¶9 After the 2006 legislative session ended, “the State, tribal representatives, and a variety of other stakeholders worked on a compromise that would allow the State to gain the efficiencies of moving the incidence of the fuel tax up to the supplier level.” CP at 284. Meanwhile, the United States Supreme Court affirmed the imposition of a Kansas State distributor-level fuel tax on fuel that was later sold by tribal enterprises on tribal land, finding that Kansas had successfully imposed the legal incidence of the tax off the tribe and outside of the tribal lands. Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 103, 126 S. Ct. 676, 163 L. Ed. 2d 429 (2005). In 2007, a tax-at-the-rack bill did pass, with the support of at least one Indian tribe. S.B. Rep. on S.B. 5272, at 3,60th Leg., Reg. Sess. (Wash. 2007); CP at 545 (testimony of Kelly Croman, representative of the Squaxin Island Tribe); Laws of 2007, ch. 515. A representative from
¶10 Under the 2007 amendments, the motor fuel tax is imposed (1) when a supplier removes fuel from a terminal rack and sells it to a distributor, (2) when fuel is produced, (3) when fuel is imported, or (4) when fuel is blended in the state, whichever comes first. Laws of 2007, ch. 515, § 2 (codified at RCW 82.36.020(1), (2)). The tribes agreed to purchase tax burdened fuel in return for a refund of 75
¶11 The fact that no court has ever analyzed whether the 2007 legislation successfully moved the legal incidence of the tax off of tribal retailers is likely a consequence of the fact that since the legislation was passed, nearly all the litigation between the tribes and the State has been settled. Since 2007, the State has entered into many “75 Percent Refund/25 Percent (75/25) State Tax Agreements” with tribes who operate gas stations. See Tribal Fuel Tax Agreement Report, supra, at 1-2.
¶12 While the State and the tribes seem to have largely settled (at least temporarily) their conflicts over fuel taxes, that harmony has not spread to all other players in the industry. AUTO, “a nonprofit trade association consisting of independent gasoline and automotive service retailers,” brought this case seeking declaratory and injunctive relief and a writ of prohibition against the State to prevent it from making “refunds” of fuel taxes to the tribes from the Washington State Motor Vehicle Fund. CP at 1-2. It alleged in its complaint that the agreements with the tribes violate our constitution’s limits on the use of fuel taxes, violate the privileges and immunities clause, and are the product of an unconstitutional delegation of legislative power to the executive. AUTO also contends that its members are specifically injured because “prices are substantially lower (in the range of 5 cents or more per gallon) at tribal retailers compared with similarly branded non-tribal retailers in the same region.” Id. at 182. It alleges the lower prices are a result of the refunds.
¶14 On remand, the parties proceeded to discovery, which centered on the various agreements with the tribes, the amount of money refunded to the tribes, and the way the tribes used that money. Discovery revealed that by the time this case went to summary judgment in 2013, tribes had received more than $150 million dollars in refunds from the State. Discovery results also suggest that the tribes may have used some of the refund money for a childcare development center, which appears to be outside the scope of the contractual provisions allowed by RCW 82.36.450(3)(b), though of course since the tribes are not parties to the case, this fact has not been tested. AUTO found evidence that tribal gas stations charged less than their competitors, though this fact is disputed and also has not been tested. The State presented a declaration from an expert who testified that he found no evidence that gas prices at tribal gas stations were consistently lower than their competitors and no evidence that tribes were subsidizing gas prices with the refunds.
¶15 Both parties moved for summary judgment on the merits. Perhaps because the tribes are not parties, the legal question whether the legal incidence of the tax still fell on tribal retailers was alluded to by both sides but not squarely confronted as an issue below. AUTO argued that under article II, section 40, “revenues from fuel taxes [must] be spent exclusively for the betterment of Washington’s
¶16 Judge Godfrey concluded that article II, section 40 plainly allows for refunds and that the refunds at issue were properly authorized by the legislature. Verbatim Report of Proceedings (VRP) (Nov. 25, 2013) at 49-50. He denied AUTO’s motion, granted the State’s motion, and dismissed the case. We granted AUTO’s motion for direct review. The Washington Policy Center has filed an amicus brief in support of AUTO. Fifteen tribes
Analysis
¶17 This case is here on appeal from summary judgment. Our review is de novo. Freeman v. State, 178 Wn.2d 387, 393, 309 P.3d 437 (2013) (citing Dowler v. Clover Park Sch. Dist. No. 400, 172 Wn.2d 471, 484, 258 P.3d 676 (2011)). In essence, plaintiffs are challenging the constitutionality of RCW 82.36.450, RCW 82.38.310, and related statutes that authorize executive officers to negotiate fuel tax refunds to tribes, and also the application of RCW
1. Article II, Section 40
¶18 First, we are asked to decide whether it violates article II, section 40 of our constitution for the State to refund a portion of fuel taxes to the tribes pursuant to RCW 82.36.450 and RCW 82.38.310. Article II, section 40 provides in most relevant part:
All... excise taxes collected by the State of Washington on the sale, distribution or use of motor vehicle fuel . . . shall be paid into the state treasury and placed in a special fund to be used exclusively for highway purposes. Such highway purposes shall be construed to include the following:
(d) Refunds authorized by law for taxes paid on motor vehicle fuels.
RCW 82.36.450(1) provides:
The governor may enter into an agreement with any federally recognized Indian tribe located on a reservation within this state regarding motor vehicle fuel taxes included in the price of fuel delivered to a retail station wholly owned and operated by a tribe, tribal enterprise, or tribal member licensed by the tribe to operate a retail station located on reservation or trust property. The agreement may provide mutually agreeable means to address any tribal immunities or any preemption of the state motor vehicle fuel tax.
RCW 82.38.310(1) makes similar provisions for agreements regarding special fuel taxes. The State argues, and the trial
¶19 AUTO’s argument that the disbursements from the motor vehicle fund under the agreements are not properly refunds rests on two main contentions. First, it contends that to qualify as a refund, the original tax must have been paid even though it was not due. Br. of Appellant at 28 (citing Tiger Oil Corp. v. Dep’t of Licensing, 88 Wn. App. 925, 937, 946 P.2d 1235 (1997)). Amicus Washington Policy Center strongly supports this contention. Br. of Amicus Curiae Wash. Policy Center at 6-12. Second, to qualify as a refund, it “must provide a targeted and substantial benefit to the class of taxpayers who paid the tax but are exempted from it.” Br. of Appellant at 28 (citing Wash. Off Highway Vehicle All. v. State, 176 Wn.2d 225, 235, 290 P.3d 954 (2012) (WOHVA) (Owens, J., lead opinion); id. at 241, 243 (J.M. Johnson, J., dissenting). It contends the disbursements to the tribes do not satisfy this standard. It also argues that the tribes are misusing the refunds and that there is insufficient statutory authorization for the refunds.
A. Refunds under Article II, Section 40
¶20 First, AUTO contends that article II, section 40 refunds are limited to cases where the tax was paid by a taxpayer who did not owe it. While this is an interesting question, no Washington case has found such an implicit constitutional requirement. Tiger Oil does not establish that proposition. In relevant part, the Court of Appeals was
¶21 More importantly, AUTO has not established that the tribes were legally obligated to pay the tax outside of their contractual agreement to do so. Thus, a factual predicate for our consideration of this issue is not present. Whether the legislature has overcome tribal immunity turns on whether the legal incidence falls on the tribe. Chickasaw Nation, 515 U.S. at 458-59. This was not meaningfully briefed or considered at the trial court level, squarely presented as an issue for review, or argued in the briefs. We leave for another day, with the proper parties, whether the State successfully moved the legal incidence of the tax away from the tribal retailers. Thus, we treat AUTO’s assertion that the legal incidence of the tax has moved off of the tribal reservation as not proved and leave for another day whether a refund must be based on taxes paid when not owed.
¶22 Second, AUTO argues that the disbursements to the tribes are not refunds because they do not provide a sufficient targeted and substantial benefit to the taxpayers who paid the tax. This seems to be predicated on the belief that the refund must benefit the class of taxpayers who paid the tax, rather than the taxpayers who bought the tax burdened fuel. While this is not a proposition of law that has been squarely examined in our case law, we conclude our case law does not support it. Under the tax schema in place at the time of both WOHVA and Northwest Motorcycle, the taxes would have (or, at least, should have) been paid up the distribution chain and passed on to users who
¶23 The State also provides little controlling helpful authority on the nature of refunds, but it has the benefit of the legislature’s plenary authority to legislate, the presumption of constitutionality, and the plain language of the constitution that allows “[r]efunds authorized by law for taxes paid on motor vehicle fuels,” Wash. Const, art. II, § 40(d). AUTO has not established that the refunds to the tribes under agreements executed pursuant to RCW 82.36-.450(1) and related statutes are not refunds for the purposes of article II, section 40. We find that the disbursements to the tribes under RCW 82.36.450 are refunds as contemplated by article II, section 40(d).
B. Statutory Authorization
¶24 AUTO also argues that the disbursements to the tribes are not refunds because they are not authorized by law. As AUTO properly acknowledges, the term “authorized by law” has not been defined in the context of article II, section 40. First, AUTO argues that the State has conceded
¶25 Next, AUTO argues that the needed “authority of law” is missing because RCW 82.36.450 and RCW 82.38.310 do not specifically direct the State to pay refunds to the tribes. The State argues that RCW 82.36.450 and RCW 82.38.310, which authorize the governor to enter into these agreements with tribes, and RCW 82.36.330 and RCW 46.68.090(1), which authorize the state treasurer to make disbursements from the treasury to pay refunds, provide the needed authority of law. We agree with the State. Read as a whole, it is plain that the legislature that passed Laws of 2007, chapter 515 meant to authorize the governor to negotiate with the tribes tax compacts that would contain refunds. The act amended laws that authorized agreements with terms similar to those in the Colville settlement— which required refunds — with laws that authorized the governor to negotiate agreements that “may provide mutually agreeable means to address any tribal immunities or any preemption of the state motor vehicle fuel tax.” Laws of 2007, ch. 515, §§ 19(1), 31(1). It preserved existing agreements and consent decrees, all of which that have been provided in this record include tax refunds. Id. §§ 19(2), 31(2). It included some specific provisions that must be present in every agreement, including a requirement that the tribes purchase tax burdened fuel. Id. §§ 19(3), 31(3). Plainly, the legislature contemplated that the governor would have something to offer the tribes in return for their
¶26 We hold that the refunds to the tribes under the agreements and RCW 82.36.450, RCW 82.38.310, RCW 82.36.330 and RCW 46.68.090(1) are “refunds authorized by law” under article II, section 40(d).
2. Unconstitutional Delegation
¶27 Next, AUTO contends the legislature improperly delegated legislative authority to the executive to enter into fuel tax agreements with the tribes. “The Legislature is prohibited from delegating its purely legislative functions” to other branches of government. Diversified Inv. P’ship v. Dep’t of Soc. & Health Servs., 113 Wn.2d 19, 24, 775 P.2d 947 (1989) (citing Hi-Starr, Inc. v. Liquor Control Bd., 106 Wn.2d 455, 458, 722 P.2d 808 (1986)). Separation of powers is violated when “ ‘the activity of one branch threatens the independence or integrity or invades the prerogatives of another.’ ” Hale v. Wellpinit School Dist. No. 49, 165 Wn.2d 494, 507, 198 P.3d 1021 (2009) (internal quotation marks omitted) (quoting Carrick v. Locke, 125 Wn.2d 129, 135, 882 P.2d 173 (1994)).
¶28 However, the legislature may authorize the executive to take actions, and a delegation of legislative power is constitutional
when it can be shown (1) that the legislature has provided standards or guidelines which define in general terms what is*860 to be done and the instrumentality or administrative body which is to accomplish it; and (2) that procedural safeguards exist to control arbitrary administrative action and any administrative abuse of discretionary power.
Barry & Barry, Inc. v. Dep’t of Motor Vehicles, 81 Wn.2d 155, 159, 500 P.2d 540 (1972). AUTO contends that neither requirement has been met here.
¶29 The legislature has provided fairly detailed standards and guidelines. The statutes grant the governor the authority to negotiate agreements with the tribes. RCW 82.36.450(1); RCW 82.38.310(1). They grant the governor the authority to delegate that authority to the Department of Licensing. RCW 82.36.450(5); RCW 82.38.310(5). They allow the tribe and the governor to agree to a dispute resolution mechanism to resolve questions of tribal immunity or preemption. RCW 82.36.450(1); RCW 82.38.310(1). They require the tribes to purchase previously taxed fuel. RCW 82.36.450(3); RCW 82.38.310(3). They limit the use of the refunds to “[planning, construction, and maintenance of roads, bridges, and boat ramps; transit services and facilities; transportation planning; police services; and other highway-related purposes.” RCW 82.36.450(3)(b); RCW 82.38.310(3)(b). They require provisions for audits to ensure compliance. RCW 82.36.450(3)(c); RCW 82.38.310(3)(c).
¶30 AUTO complains that the legislature has provided insufficient guidance, though, because the statutes grant the governor permission to enter into these agreements and grant the governor and tribes permission to agree to a dispute resolution mechanism. But it points to no case where the fact that the operation of the statute turns on what individuals “may” do rendered the statute unconstitutional. This court has rejected separation of powers challenges to legislation the effectiveness of which depended on negotiation with third parties who may have chosen not to negotiate or execute contracts. See, e.g., Brower v. State, 137 Wn.2d 44, 55, 969 P.2d 42 (1998) (“[T]he Legislature may
¶31 AUTO also complains that the statutes fail the first requirement because they do not define the objective of the agreements or explicitly state that the tribes are entitled to payment. Br. of Appellant at 46. A fair reading of the statutes, though, shows that they are aimed at coming to agreements to avoid conflicts over tribal immunity and the State’s desire to collect fuel taxes. RCW 82.36.450(1); RCW 82.38.310(1). It is hard to imagine that would not involve payment.
¶32 AUTO also argues that the statutes fail the second requirement — “that procedural safeguards exist to control arbitrary administrative action and any administrative abuse of discretionary power.” Barry & Barry, 81 Wn.2d at 159 (emphasis omitted). The statutes require regular audits and reports to the legislature, RCW 82.36.450(3)(c), (6); RCW 82.38.310(3)(c), (6), which AUTO deems inadequate. It is certainly correct that RCW 82.36.450 and RCW 82.38.310 themselves do not contain strong procedural safeguards against the legislature, governor, and the tribes failing to police the agreements. But separation of powers does not require the safeguards be found in the same statute under challenge — just that the safeguards exist. Barry & Barry, 81 Wn.2d at 158-59. We have found sufficient safeguards exist because of administrative review and the availability of writs of certiorari, among other things. See, e.g., id.; City of Auburn v. King County, 114 Wn.2d 447, 452-53, 788 P.2d 534 (1990); McDonald v. Hogness, 92 Wn.2d 431, 445-47, 598 P.2d 707 (1979). No obvious route for administrative review appears here, but should the executive and legislature both fail to police against administrative abuse of power, third parties would not be completely without a remedy. They could, for example, as AUTO did below, challenge the agreements on the grounds the legislature is
¶33 We hold that AUTO has not met its burden of showing that the legislature violated separation of powers by authorizing the governor to negotiate agreements with the tribes.
Conclusion
¶34 AUTO bears the burden of showing that the disbursements to the tribes are not “[r]efunds authorized by law for taxes paid on motor vehicle fuels” under article II, section 40(d). We find that it has not met that burden. We also find no unconstitutional delegation of legislative power. The judgment of the trial court is affirmed.
Perhaps because the tribes are not parties to this case, whether the legislature has successfully avoided tribal immunity in the fuel tax arena has not been squarely litigated by the parties in this case or addressed in any published court opinion.
Much of the record arrived at this court sealed, including the tribal fuel tax compacts that both the State and the tribes assert are publically available, Br. of Resp’ts at 2; Br. Amicus Curiae Indian Tribal Gov’ts at 16, and a federal injunction and consent decree that are available on the Internet. It is questionable whether these and many of the other documents in this case were properly sealed under GR15, but since no party or intervener has challenged the sealing, whether it was appropriate is not before us. We modify the trial court’s broad sealing order only to the extent necessary for a full statement of the case.
These statutes, along with most of the statutes before the court today, were repealed effective July 1, 2015, while this case was pending at this court. Laws op 2013, ch. 225, §§ 501(64), 103, 130. Chapter 225 is an enormous bill that appears to coordinate disparate provisions of the fuel tax system across about 20 chapters and 8 titles of the RCW. The effect of these amendments is not before us. We note for the reader that subsequent citations to these statutes in this opinion are also to the former 2007 versions.
As of 2013, the State has entered into “75/25” agreements with the Chehalis Confederated Tribes, the Colville Confederated Tribes, the Jamestown S’Klallam Tribe, the Kalispel Tribe, the Nisqually Tribe, the Nooksack Tribe, the Port Gamble S’Klallam Tribe, the Puyallup Tribe, the Shoalwater Bay Tribe, the Skokomish Tribe, the Snoqualmie Tribe, the Spokane Tribe, the Squaxin Island Tribe, the Stillaguamish Tribe, the Suquamish Tribe, the Swinomish Tribe, the Tulalip Tribes, and the Upper Skagit Tribe. See Tribal Fuel Tax Agreement Report, supra, at 2. Many of these tribes appear as amici in this case.
The State has entered into per-capita fuel tax agreements with the Lummi Nation, the Makah Tribe, the Muckleshoot Tribe, the Quileute Tribe, and the Quinault Nation. Tribal Fuel Agreement Report, supra, at 2.
These tribes are the Confederated Tribes of the Chehalis Reservation, the Jamestown S’Klallam Tribe, the Kalispel Tribe of Indians, the Nisqually Indian Tribe, the Port Gamble S’Klallam Tribe, the Puyallup Tribe of Indians, the Shoalwater Bay Indian Tribe, the Skokomish Indian Tribe, the Spokane Tribe of Indians, the Squaxin Island Tribe, the Stillaguamish Tribe of Indians, the Suquamish Tribe, the Swinomish Indian Tribal Community, the Tulalip Tribes, and the Upper Skagit Indian Tribe. This is all but three of the tribes who, as of 2013, had 75/25 agreements with the State. Tribal Fuel Agreement Report, supra, at 2.
AUTO also contends, for the first time on appeal, that the refunds are not “authorized by law” under article II, section 40 because the legislature did not make a specific appropriation under article VIII, section 4 of our state constitution. This issue was not briefed or argued below and may reach many stakeholders who have not had a meaningful opportunity to comment. For these reasons, we decline to reach it today. Cf. Lummi Indian Nation, 170 Wn.2d at 256 n.1 (quoting State v. Waste Mgmt. of Wis., Inc., 81 Wis.2d 555, 564, 261 N.W.2d 147 (1978)). Similarly, given that the tribes are not parties to this case and given AUTO’s concession that if the refunds are proper, article II, section 40 places no limitations on the tribes’ use of the disbursements, we decline to consider whether the tribes are using the refunds properly under their contracts. See CP at 400.
AUTO’s request for costs on appeal is denied. The State’s motion to strike AUTO’s second statement of additional authorities as being beyond the permissible bounds of RAP 10.8 is also denied.