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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
ECHO GLOBAL LOGISTICS, INC., ) No. 83548-3-I ) Appellant, ) DIVISION ONE ) v. ) PUBLISHED OPINION ) STATE OF WASHINGTON, ) DEPARTMENT OF REVENUE ) ) Respondent. ) )
HAZELRIGG, J. — Echo Global Logistics, Inc. appeals a determination by the
Board of Tax Appeals, arguing it is subject to a public utility tax rather than a
business & occupation tax. Because Echo fails to demonstrate the Board
erroneously interpreted or applied the law, we affirm.
FACTS
Echo Global Logistics, Inc. (Echo) is a freight broker; it contracts with motor
carriers and customers to facilitate and coordinate the transportation of goods
nationally. In November 2014, the Department of Revenue (Department)
performed a desk examination of Echo’s business and occupation (B&O) tax
returns and reclassified the freight broker under the “service and other” business
classification for tax purposes. Echo appealed this determination to the Board of
Tax Appeals (Board), arguing it was subject to the public utility tax (PUT), not a For the current opinion, go to https://www.lexisnexis.com/clients/wareports/. No. 83548-3-I/2
B&O tax, despite the fact that it had been paying B&O tax for approximately four
years at that point. The Department moved for summary judgment, which was
granted. Echo then appealed to the Clark County Superior Court, which affirmed
the Board’s decision. Echo timely appealed.
ANALYSIS
I. Standard of Review
This court reviews decisions by the Board under the Administrative
Procedure Act (APA).1 Steven Klein, Inc. v. Dep’t of Revenue, 183 Wn.2d 889,
895, 357 P.3d 59 (2015) (citing RCW 82.03.180). “Under the APA, we may grant
relief from an agency order when ‘[t]he agency has erroneously interpreted or
applied the law.’” Id. (quoting RCW 34.05.570(3)(d)). We apply the APA “‘directly
to the record before the agency, sitting in the same position as the superior court.’”
Dep’t of Revenue v. Bi-Mor, Inc., 171 Wn. App. 197, 201–02, 286 P.3d 417 (2012)
(quoting Honesty in Envtl. Analysis & Legis. (HEAL) v. Cent. Puget Sound Growth
Mgmt. Hr’g Bd., 96 Wn. App. 522, 526, 979 P.2d 864 (1999)). If the Board
dismissed an administrative appeal on summary judgment, “we overlay the APA
‘error of law’ standard of review with the summary judgment standard, and review
an agency’s interpretation or application of the law de novo while viewing the facts
in the light most favorable to the nonmoving party.” Bi-Mor, Inc., 171 Wn. App. at
202.
1 Ch. 34.05 RCW.
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II. Definition of “Operates”
Echo first asserts it is a motor transportation business under RCW
82.16.010(6) because it “operate[s]” motor vehicles by “‘exert[ing] power or
influence’ over a motor vehicle by contracting with a third party.” The Department
responds Echo does not “operate” a motor vehicle because it merely “arrang[es]
for transportation by a third party” rather than physically moving goods.
Statutory interpretation is a question of law reviewed de novo. Puget Sound
Energy v. Dep’t of Revenue, 158 Wn. App. 616, 620, 248 P.3d 1043 (2010). The
court’s “objective is to ascertain and carry out the legislature’s intent.” Id.
“Generally, Washington’s B & O tax applies to the act or privilege of engaging in
business activities,” unless those activities are “explicitly taxed elsewhere in the
statutory scheme.” First Student, Inc. v. Dep’t of Revenue, 194 Wn.2d 707, 711,
451 P.3d 1094 (2019) (citing RCW 84.04.220, .290(2)). Businesses that are
subject to the PUT are not subject to the B&O tax under RCW 82.04.310(1). Id.
RCW 82.16.020(1)(f) lists businesses subject to the PUT, including “[m]otor
transportation, railroad, railroad car, and tugboat businesses.” “Motor
transportation business” is defined in RCW 82.16.010(6) as:
[T]he business (except urban transportation business) of operating any motor propelled vehicle by which persons or property of others are conveyed for hire, and includes, but is not limited to, the operation of any motor propelled vehicle as an auto transportation company (except urban transportation business), common carrier, or contract carrier as defined by RCW 81.68.010 and 81.80.010.
RCW 81.80.010 in turn defines the terms “common carrier” and “contract carrier.”
A common carrier is “any person who undertakes to transport property for the
general public by motor vehicle for compensation,” and a contract carrier “includes
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all motor vehicle operators not included under the terms ‘common carrier’ and
‘private carrier,’” in addition to “any person who under special and individual
contracts or agreements transports property by motor vehicle for compensation.”
RCW 81.80.010(1), (2). “[B]rokers and forwarders” are explicitly included as
“common carriers” and “contract carriers.” RCW 81.80.010(3).
While interpreting a statute, this court “‘endeavor[s] to effectuate the
legislature’s intent by applying the statute’s plain meaning, considering the relevant
statutory text, its context, and the statutory scheme.’” Olympic Tug & Barge, Inc.
v. Dep’t of Revenue, 188 Wn. App. 949, 952, 355 P.3d 1199 (2015) (quoting
Cashmere Valley Bank v. Dep’t of Revenue, 181 Wn.2d 622, 631, 334 P.3d 1100
(2014)). In a plain meaning inquiry, the court “may resort to an applicable
dictionary definition to determine the plain and ordinary meaning of a word that is
not otherwise defined by the statute.” First Student, Inc., 194 Wn.2d at 711. After
investigating the plain meaning, if “the statute remains susceptible to more than
one reasonable meaning, the statute is ambiguous and it is appropriate to resort
to aids to construction, including legislative history.” Dep’t of Ecology v. Campbell
& Gwinn, LLC, 146 Wn.2d 1, 12, 43 P.3d 4 (2002).
The word “operate” is not defined by the statute. Echo and the Department
submitted differing dictionary definitions: Echo cites the 1976 version of Webster’s
Third New International Dictionary, while the Department cites the 2002 version.
Echo’s cited definition for operate is “to perform a work or labor : exert power or
influence : produce an effect.” W EBSTER’S THIRD NEW INTERNATIONAL DICTIONARY
OF THE ENGLISH LANGUAGE, UNABRIDGED, 1580 (1976). The Department’s cited
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definition is “to cause to function [usually] by direct personal effort: work [as in
operate] a car.” W EBSTER THIRD NEW INTERNATIONAL DICTIONARY, UNABRIDGED,
1581 (2002).
“We employ traditional rules of grammar in discerning the plain language of
the statute.” Diaz v. North Star Tr., LLC, 16 Wn. App. 2d 341, 353, 481 P.3d 557
(2021). As the Department notes, “operating” is a transitive verb within the statute,
with “motor transportation business” as the subject and “motor propelled vehicle”
as the direct object. Echo’s cited dictionary definition of “produce as effect” would
alter the grammatical structure of the sentence by changing the direct object from
“motor propelled vehicle” to “transportation” as the effect is the transportation of
goods, rather than a motor propelled vehicle. Its other two definitions do not suffer
from the same grammatical shortcoming, but also do not encompass the broad
reading of “operate” that Echo asks this court to find. “[T]o perform a work or labor”
or to “exert power or influence” both suggest a direct connection between the
performance or exertion and the consequential result on the direct object: a motor
propelled vehicle. Echo’s “work or labor” or “power or influence” is the coordination
and management of the movement of goods, not the impact on a motor propelled
vehicle. Echo’s actions are too attenuated from the physical movement of a motor
propelled vehicle to reasonably fall within even its own proposed grammatically
appropriate dictionary definition of “operate.” Under the plain language of the
statute, Echo is not a motor transportation business and the Board did not err in
so holding.
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III. Public Service Business
Echo alternatively argues it falls within the scope of the PUT as a “‘business
subject to control by the state,’” or as one “‘declared by the legislature to be of a
public service nature.’” (Quoting RCW 82.16.010(7)(a)).
Under RCW 82.16.020(1)(f), the PUT applies to “all public service
businesses other than the ones mentioned above.” A public service business is
defined as “any business subject to control by the state, or having the powers of
eminent domain and the duties incident thereto, or any business hereafter declared
by the legislature to be of a public service nature.” RCW 82.16.010(7)(a). “It
includes, among others, without limiting the scope hereof: Airplane transportation,
boom, dock, ferry, pipe line, toll bridge, toll logging road, water transportation and
wharf businesses.” Id.
A. Subject to State Control
Echo largely relies on article XII, section 13 of the Washington Constitution
to argue it is subject to control by the state. This section governs the regulation of
common carriers, holding “[a]ll railroad, canal and other transportation companies
are declared to be common carriers and subject to legislative control.” W ASH.
CONST. art. XII, § 13. The Board found freight brokers “are not subject to any
meaningful control by the State, which is defined . . . as the control over rates
charged for services rendered.” Echo alleges this was error because the
legislature could constitutionally exercise control over freight brokers. The
Department contends that until the legislature exercises “actual ‘control’” over
freight broker rates or services, brokers are not subject to control by the state. It
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avers that if this court held Echo is subject to state control based solely on some
possible future exercise of the delegation authority of in the state constitution, there
would be a “sea-change in the tax treatment of numerous businesses” because all
businesses required to comply with state registration requirements would be
deemed subject to state control.
In Continental Grain Company v. State, our Supreme Court found a
warehouse was subject to state control because it (1) “annually applied for and
received a public-grain-warehouse license,” (2) filed “evidence of proper
insurance, a financial statement and schedule[ ] of charges,” (3) “furnish[ed] a
warehouse bond,” and (4) provided “warehouse receipts to its customers upon
forms prescribed by the Department of Agriculture.” 66 Wn.2d 194, 197, 401 P.2d
870 (1965). In Shurguard Mini-Storage of Tumwater v. Department of Revenue,
Division II of this court analyzed whether a warehouse was subject to control,
relying on “the rule of noscitur a scoiis,[2] which teaches that the meaning of
doubtful words may be determined by reference to their relationship with other
associated words and phrases.” 40 Wn. App. 721, 727, 700 P.2d 1176 (1985).
The court rooted its analysis in the last sentence of RCW 82.16.010(11), which
gave examples of businesses regulated by the state, including those which
“required licensing by the state and the filing of rates.” Id. at 727–28.
Mirroring the language in the two cases set out above, WAC 458-20-
179(b)(i) defines “subject to control by the state” as “control by the utilities and
2 “‘[A] word is known by the company it keeps.’” McDonnell v. United States, 579 U.S. 550,
569, 136 S. Ct. 2355, 195 L. Ed. 2d 639 (2016) (quoting Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307, 81 S. Ct. 1579, 6 L. Ed. 2d 859 (1961)).
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transportation commission or any other state agency required by law to exercise
control of a business of a public service nature regarding rates charged or services
rendered.” (Emphasis added.) As a common or contract carrier,3 Echo is required
to obtain a permit from the Washington State Utilities and Transportation
Commission. RCW 81.80.070(1). In order to successfully obtain a permit, a carrier
must “establish safety fitness and proof of minimum financial responsibility as
provided in this chapter.” RCW 81.80.070(3). Echo does not expand on what
these requirements entail and it concedes it is not subject to rate regulation by law
or by the Commission. This is not sufficient under the definition set out in WAC
458-20-179.
The State’s potential power to regulate freight brokers is also limited by
federal preemption. Under 49 USC § 14501(b)(1), “no State or political subdivision
. . . shall enact or enforce any law, rule, regulation, standard, or other provision
having the force and effect of law relating to intrastate rates, intrastate routes, or
intrastate services of any freight forwarder or broker.” The next section of this
statute provides that no state may “enact or enforce a law, regulation, or other
provision having the force and effect of law related to a price, route, or service of .
. . any motor private carrier, broker, or freight forwarder with respect to the
transportation of property.” 49 USC § 14501(c)(1).
Based on the definition in WAC 458-20-179 and under federal law, freight
brokers are not subject to control by the state.
3 “Common carrier” and “contract carrier” includes freight brokers. See RCW 81.80.010(3).
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B. Declared to Be of a Public Service Nature
Finally, Echo argues the legislature has declared that freight brokers are
public service businesses. Under RCW 82.16.010, a public service business
includes “any business hereinafter declared by the legislature to be of a public
service nature.”
Echo relies on RCW 81.80.010 and .020 in support of this proposition.
RCW 81.80.020 states “[t]he business of operating as a motor carrier of freight for
compensation along the highways of this state is declared to be a business
affected with a public interest.” RCW 81.80.010 defines “public service company”
as “any person, firm, association, or corporation, whether public or private,
operating a utility or public service enterprise subject in any respect to regulation
by the utilities and transportation commission under the provisions of this title or
Title 22 RCW.” The Department counters that RCW 81.80.020 applies only to
businesses “operating as a motor carrier of freight,” which excludes freight brokers
because it does not transport freight. The Department also correctly notes that
neither statutory provision explicitly mentions freight brokers, but Echo contends
that “motor carrier” includes common and contract carriers, which do explicitly
include brokers. See RCW 81.80.010(3).
RCW 81.80.020 states that “[t]he rapid increase of motor carrier freight
traffic and the fact that under the existing law many motor trucks are not effectively
regulated have increased the dangers and hazards on public highways and make
it imperative that regulation to the fullest extent allowed . . . should be employed.”
The statute focuses on the proper development and preservation of public
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highways and the stability of public transportation services for the public. This
plain language contradicts Echo’s argument that the statute captures freight
brokers because brokers do not directly transport goods on public highways, nor
does they provide a transportation service to the public; brokers like Echo provide
coordination and facilitation services between customers and carriers who do
operate motor transportation vehicles.
Additionally, the Department correctly notes that “a business affected with
a public interest” and a “business . . . of a public nature” are different. “We presume
the legislature intends a different meaning when it uses different terms.” Foster v.
Dep’t of Ecology, 184 Wn.2d 465, 473, 362 P.3d 959 (2015). RCW
82.16.010(7)(a) defines a public service business as “any business hereafter
declared by the legislature to be of a public service nature,” while RCW 81.80.020
declares that “[t]he business of operating as a motor carrier of freight for
compensation along the highways of this state is declared to be a business
affected with a public interest.” (Emphasis added.) In Merriam-Webster Online
Dictionary, the definition of “nature” includes “disposition, temperament,” “the
inherent character or basic constitution . . . of a person or thing: essence” or “a
kind or class usually distinguished by fundamental or essential characteristics.”
https://www.merriam-webster.com/dictionary/nature (last visited June 10, 2022).
Merriam-Webster defines “affected” as “inclined, disposed.” https://www.merriam-
webster.com/dictionary/affected (last visited June 10, 2022). We presume that the
legislature used these different terms to mean different things; “nature” implies a
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fundamental characteristic distinguishing one category from another, while
“affected” is a more ancillary characteristic or inclination.
The full declaration of policy in RCW 81.80.020 highlights this distinction:
the statute discusses the importance of preserving public highways and the need
for “stabilized service and rate structure” of motor carriers for the public. This
supports a reading of “affected with a public interest” as implicating a community-
wide concern, rather than distinguishing a business category from others. Under
the plain language of the statute, there is not a clear statement from the legislature
that freight brokers are “of a public service nature” and therefore Echo does not
qualify for the PUT.
Affirmed.
WE CONCUR:
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