W.R. Grace & Co. v. Department of Revenue

973 P.2d 1011, 137 Wash. 2d 580, 1999 Wash. LEXIS 192

• Court: Washington Supreme Court
• Decided: April 1, 1999
• Docket: Nos. 64335-1; 65608-8
• Status: Published

Opinions

Talmadge, J.

This is our sixth,¹ and hopefully final, decision in the recent round of cases on the constitutionality of Washington’s Business and Occupation (B&O) tax on interstate manufacturers and sellers. Yet again, we are asked if the United States Supreme Court opinion in Tyler Pipe applies retroactively and, if so, what remedies are available to taxpayers who paid B&O taxes under the unconstitutional tax scheme identified by the United States Supreme Court in that decision, particularly for those periods prior to June 23, 1987, the date of the issuance of the Court’s opinion. Tyler Pipe Indus., Inc. v. Department of Revenue, 105 Wn.2d 318, 715 P.2d 123 (1986), judgment vacated by 483 U.S. 232, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987). We are also asked to decide if the various taxpayers (taxpayers) in these cases have standing to request relief or whether their cases are barred under' principles of issue/claim preclusion.

Our prior decisions resolve the core issues in these cases. The holding of the United States Supreme Court in Tyler Pipe applies retroactively. Similarly, the legislative remedy for the unconstitutionality of Washington’s B&O tax system enacted in 1987² providing credits to those who paid the constitutionally defective tax applies retroactively as well. In light of our resolution of these issues, we do not reach the Department of Revenue’s (DOR) standing or issue/ claim preclusion issues, preserving those questions for trial court resolution on remand, as may be necessary.

ISSUES

1. Does Tyler Pipe apply retroactively?

2. Do taxpayers assert any viable grounds for revisiting the issue of the constitutionality of Washington’s B&O tax scheme?

FACTS

The facts surrounding the constitutionality of Washington’s B&O tax on interstate sales and manufacturing under the Commerce Clause of the United States Constitution have been amply discussed in our numerous prior opinions. We recount the specific facts of the taxpayers involved in these cases.

W.R. Grace (Grace) and Chrysler Corporation (Chrysler) were among a group of 71 taxpayers seeking refunds of B&O taxes in National Can I, claiming that the taxes they had paid violated the Commerce Clause. National Can Corp. v. Department of Revenue, 105 Wn.2d 327, 732 P.2d 134 (1986), judgment vacated by 483 U.S. 232, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987) (National Can I). On June 23, 1987, the United States Supreme Court reversed in part and affirmed in part our decisions in Tyler Pipe and National Can I. Tyler Pipe Indus., Inc. v. Department of Revenue, 483 U.S. 232, 240, 107 S. Ct. 2810, 2816, 97 L. Ed. 2d 199 (1987). The Court held that the “multiple activities exemption” in RCW 82.04.440 discriminated against interstate commerce, Tyler Pipe, 483 U.S. at 240-48, but only partially invalidated the State’s tax scheme, rejecting taxpayers’ nexus and apportionment challenges to Washington’s B&O tax, as we did. Id. at 248-51, 253; cf. National Can I, 105 Wn.2d at 340-42; Tyler Pipe, 105 Wn.2d at 322-27; see also American Nat’l Can Corp. v. Department of Revenue, 114 Wn.2d 236, 248, 787 P.2d 545, cert. denied, 498 U.S. 880, 111 S. Ct. 213, 112 L. Ed. 2d 173 (1990) (American Nat’l Can). The Court remanded the case to us for resolution of the “remedial issues.” Tyler Pipe, 483 U.S. at 253. On remand, we held the Supreme Court’s holding in Tyler Pipe applied prospectively only and denied the taxpayers like Grace and Chrysler any refunds for taxable activities before June 23, 1987, the date of the Supreme Court decision. National Can Corp. v. Department of Revenue, 109 Wn.2d 878, 895, 749 P.2d 1286, cert. denied, 486 U.S. 1040, 108 S. Ct. 2030, 100 L. Ed. 2d 615 (1988) (National Can II). The United States Supreme Court dismissed the taxpayers’ appeals from that decision. Tyler Pipe, 486 U.S. 1040 (1988).

On August 11, 1987, Governor Booth Gardner signed a two-way credit law, the multiple activities tax credit (MATC), which was designed to eliminate the constitutional defects in Washington’s B&O tax identified by the Supreme Court in Tyler Pipe. Laws of 1987, 2d Ex. Sess., ch. 3. Under the new law, all persons engaged in manufacturing activities in Washington must pay a manufacturing tax. All persons engaged in selling in Washington must pay a selling tax. Fersons paying a selling tax may take a credit against that tax for any manufacturing tax paid to Washington or any other jurisdiction on the same product. In addition, persons paying a manufacturing tax and selling out-of-state can take a credit against that tax for any selling tax paid on the same product. Section 3 provided such credits were the exclusive remedy available to taxpayers in the event a court should deem relief appropriate regarding the former multiple activities exemption for any tax periods before the August 12, 1987 effective date of the law.³

Grace and Chrysler, along with many other taxpayers, next challenged the 1987 two-way credit law, as well as the retroactive application of the two-way credit to the seven-week “interim period” from June 23, 1987 through August 11, 1987, claiming the 1987 law “discriminates against interstate commerce, violates principles of equal protection, and violates their right to due process of law.” American Nat’l Can, 114 Wn.2d at 241. In American Nat’l Can, we upheld the MATC and applied it retroactively to the interim period. We rejected the argument that because interstate taxpayers claimed only $1.3 million in credits between June 1987 and October 1988, the 1987 law had no practical effect. Id. at 240, 246-47.

In this most recent litigation, DOR imposed three final tax assessments against Grace, covering tax periods from January 1980 through December 1990, for unpaid taxes and interest. Grace filed a complaint in superior court for declaratory judgment, injunctive relief, and recovery of damages against the Governor, the Attorney General, the Director of DOR, and DOR, contending to the extent the defendants were seeking to collect B&O taxes for periods through June 23, 1987, the defendants were seeking to collect unconstitutional taxes in light of Tyler Pipe. Grace later voluntarily dismissed the three individual defendants. DOR answered, asserting affirmative defenses of issue preclusion based on Grace’s involvement in National Can II and American Nat’l Can. DOR also pleaded a counterclaim for unpaid taxes, penalties, and interest.

Similarly, DOR assessed Chrysler for unpaid taxes and interest covering tax periods from January 1984 through June 1988. Chrysler timely filed an administrative appeal of the assessments, which under RCW 82.32.160 automatically prevented the assessments from becoming final until DOR acted on the appeal. While the administrative appeal was still pending, Chrysler filed a superior court action similar to Grace’s seeking declaratory judgment, injunctive relief, and recovery of damages against the Attorney General, the Director of DOR, and DOR, and then subsequently withdrew its administrative appeal. Chrysler later filed an amended complaint seeking relief against DOR only, alleging Commerce Clause violations similar to those made by Grace. DOR again asserted issue preclusion based on Chrysler’s participation in National Can II and American Nat’l Can, and sought unpaid taxes, interest and penalties by counterclaim.

All of the parties filed motions for partial summary judgment. DOR sought dismissal of all claims based on issue preclusion, while the taxpayers’ motions sought application of Tyler Pipe retroactively from its June 23, 1987 release date, and invalidation of B&O taxes imposed before and after such date. The trial court issued detailed memorandum opinions in the two actions applying Tyler Pipe retroactively, upholding the constitutionality of the 1987 MATC legislation and applying it retroactively, and remanding the cases to DOR to recompute the taxpayers’ assessments in order to retroactively apply the two-way credit found at ROW 82.04.440. The trial court denied DOR’s motions as to issue preclusion. The parties moved for reconsideration with Grace and Chrysler specifically arguing no penalties should be imposed against them.⁴ In the meanwhile, our Digital decision was issued. Digital Equip. Corp. v. Department of Revenue, 129 Wn.2d 177, 916 P.2d 933 (1996), cert. denied, 520 U.S. 1273, 117 S. Ct. 2452, 138 L. Ed. 2d 210 (1997). The trial court requested additional briefing on the effect of the Digital decision. The trial court ultimately denied the parties’ motions for reconsideration, ruled no penalties would be included in DOR’s money judgments against the taxpayers, hut that interest may be assessed, and concluded Digital confirmed its earlier ruling that Tyler Pipe applied retroactively. The various parties’ appeals are now before us.

In December 1984, Buffelen Woodworking Company (Buffelen) filed a complaint in Thurston County Superior Court for refund of B&O taxes paid since January 1980 in violation of the Commerce Clause. Buffelen’s action was one of nearly 100 similar refund actions filed that month alone in Thurston County Superior Court. National Can I, 105 Wn.2d at 329. More than 300 similar refund actions were originally filed between 1984 and 1990. In December 1993, plaintiff taxpayers in 104 of the remaining refund actions moved to consolidate the actions. DOR opposed the motion, but the trial court granted consolidation of 103 of the cases under the Buffelen⁵ caption. Buffelen Woodworking Co. v. State, No. 84-2-01897-3 (Thurston County Super. Ct. July 18, 1997).

The taxpayers in the consolidated actions filed a joint motion for partial summary judgment contending Tyler Pipe retroactively invalidated taxes paid by appellants prior to June 1987 and they were entitled to full refunds of any unconstitutional taxes they might have paid. DOR moved to strike certain evidence offered in support of the taxpayers’ motion.

Relying on its ruling in Grace and Chrysler, the trial court entered orders similar to its orders in those cases ruling that Tyler Pipe should be applied retroactively, but that refunds for pre-Tyler Pipe tax periods would be limited to credits for gross receipts taxes the taxpayers paid to other jurisdictions.⁶ Because the taxpayers waived any refund claims based on such credits, the trial court awarded no tax refunds to any of them. DOR filed motions for reconsideration in both cases, which were denied. Both the taxpayers and DOR appealed. We granted direct review. RAP 4.2(a)(4). For purposes of argument, Grace/Chrysler (Grace & Co., et al. v. State, No. 94-2-00079-6 (Thurston County Super. Ct. June 28, 1996)) and Buffelen/Anheuser-Busch (Anheuser-Busch, Inc. v. State, No. 86-2-02675-1 (Thurston County Super. Ct. July 18, 1997)) were treated as separate cases, but we resolve the issues in those cases in this single opinion.

ANALYSIS

As a preliminary matter, DOR has raised a number of procedural issues including standing, issue/claim preclusion, the propriety of the consolidation of cases in Buffelen, the designation of evidence relied upon in the summary judgment orders under CR 56(h)/RAP 9.12, and the admissibility of the affidavit of John Piper, one of the taxpayers’ attorneys.

In light of the sheer volume of cases confronting the trial court, we give significant latitude to its efforts to process the many cases before it. First, CR 42(a) confers substantial discretion on trial courts with respect to consolidation of common questions of law or fact. DOR has failed to demonstrate the trial court abused its discretion in consolidating the tax refund actions under the Buffelen/Anheuser-Busch captions. Leader Nat’l Ins. Co. v. Torres, 51 Wn. App. 136, 142, 751 P.2d 1252 (1988) (“CR 42(a) allows a court to consolidate actions which involve a common question of law or fact. Consolidation is within the discretion of the trial court and will be reversed only upon a showing of abuse and that the moving party was prejudiced.”), aff’d, 113 Wn.2d 366, 779 P.2d 722 (1989). We affirm the trial court’s consolidation order in Buffelen as DOR demonstrates no abuse of discretion by the trial court. State v. Norby, 122 Wn.2d 258, 265, 858 P.2d 210 (1993) (trial court’s ruling consolidating cases is reviewed under the abuse of discretion standard); Port of Seattle v. Equitable Capital Group, Inc., 127 Wn.2d 202, 213, 898 P.2d 275 (1995) (discretionary decision or order of the triál court will not be disturbed on review except on a clear showing of abuse, that is, discretion manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons).

Second, with respect to the listing of evidence, DOR faults the summary judgment orders entered by the trial court in Buffelen and Anheuser-Busch because they do not include seven affidavits presented by DOR in the listing of evidence the trial court considered. However, because the trial court indicated it had indeed read six of the seven affidavits, and the affidavits are included in the record before us, DOR’s assertion that CR 56(h) and RAP 9.12 require the listing of such evidence in the judgment is of no moment. Because the affidavits are included in the record on appeal, any error in failing to list the affidavits in the summary judgment order is harmless. State v. Jackson, 102 Wn.2d 689, 695, 689 P.2d 76 (1984) (an error, not of constitutional magnitude, is harmless if there is a reasonable probability that absent the error the result would have been the same).

Third, as to the Piper affidavit, the admissibility of evidence is within the discretion of the trial court. See State v. Brown, 132 Wn.2d 529, 571-72, 940 P.2d 546 (1997) (trial court’s admission of evidence is reviewed for abuse of discretion), cert denied, 523 U.S. 1007 (1998). DOR asserts the trial court erred in refusing to strike the affidavits of John T. Piper, arguing the information contained therein is irrelevant and inadmissible. It further asserts nearly half the materials attached to the Piper affidavit are exact copies of evidence the taxpayers presented in American Nat’l Can; and, because the affidavits were offered to support taxpayers’ renewed discrimination challenge to the MATC, from which taxpayers are precluded from relitigating, the affidavits should have been stricken. As the trial court essentially found in DOR’s favor on the issues the affidavit concerned (i.e., taxpayers’ constitutional challenges to the MATC), we do not reach this issue. State v. Gentry, 125 Wn.2d 570, 616-17, 888 P.2d 1105, cert. denied, 516 U.S. 843, 116 S. Ct. 131, 133 L. Ed. 2d 79 (1995) (purely academic discussions of moot issues are inappropriate).

Finally, the standing and issue/claim preclusion issues DOR raises are plainly the most significant and meritorious of its many procedural arguments. Grace and Chrysler were parties in both National Can I/Tyler Pipe and American Nat’l Can. The former case rejected taxpayers’ apportionment argument and the latter case both noted the resolution of the apportionment claim in Tyler Pipe and rejected taxpayers’ constitutional challenges to Washington’s amended B&O tax scheme. See Tyler Pipe, 483 U.S. at 240, 248-53; American Nat’l Can, 114 Wn.2d at 248-49.⁷ Thus, with respect to many of the issues raised by the taxpayers, they may well have had their day in court on those issues, although the taxpayers assert that the United States Supreme Court jurisprudence on taxation and the Commerce Clause requires these issues to be reexamined.

DOR also contends a number of the plaintiff taxpayers in the Buffelen litigation failed to prove their standing to make the Commerce Clause challenges in those actions. We note, however, the trial court did not reach the standing issue because the substantive grounds upon which it ruled were dispositive of the case. Issues upon which the trial court has made no final determination are not ripe for review. Department of Ecology v. Acquavella, 131 Wn.2d 746, 759-60, 935 P.2d 595 (1997) (where the trial court made no finding whether an irrigation district had forfeited a portion of its water rights, that issue was not ripe for review).

To lay to rest, once and for all, any lingering uncertainty regarding the application of Tyler Pipe and the 1987 remedial legislation, we prefer to resolve the substantive issues of the constitutional defect in Washington’s B&O tax system and remedies for such defect. We take this unusual step because of the unique circumstances of this case and the public importance of the issues here, and do not intend this exceptional approach to become the rule on review. Schmidt v. Cornerstone Invs., Inc., 115 Wn.2d 148, 165-66, 795 P.2d 1143 (1990) (a reviewing court is not obliged to decide all the issues raised by the parties, but only those which are determinative). With respect to any issues of issue/claim preclusion and standing affecting individual parties, DOR’s right to raise them to the trial court, if necessary, is fully preserved.⁸

A. Tyler Pipe Applies Retroactively

DOR argues Tyler Pipe’s invalidation on commerce clause grounds of former ROW 82.04.440, exempting instate manufacturers of goods sold in this state but not other manufacturers, does not apply retroactively to tax periods prior to June 23, 1987. We have already ruled on this issue, however, in Digital, holding the Tyler Pipe decision to apply retroactively.

Although we issued three opinions in Digital, we held Tyler Pipe applies retroactively. As we recently held in Davidson v. Hensen, 135 Wn.2d 112, 128, 954 P.2d 1327 (1998), “[w]here there is no majority agreement as to the rationale for a decision, the holding of the court is the position taken by those concurring on the narrowest grounds.” While expressing different reasoning for their conclusions, five members of this court, in the lead and concurring opinions, indicated Tyler Pipe applies retroactively. Digital Equip. Corp. v. Department of Revenue, 129 Wn.2d 177, 188 (“To the extent our decision in National Can II holds that Tyler Pipe applies only on a prospective basis, we overrule it.” (Smith, J., majority op.); “Tyler Pipe must be applied retroactively to tax periods predating its pronouncement[.]” Id. at 194. See also id. at 195 (Durham, C.J., concurring opinion), agreeing with the majority’s decision to overrule National Can II’s determination Tyler Pipe would apply only prospectively, and clearly concluding “I would hold that. . . Tyler Pipe applies retroactively . . . id. at 205.) The five-member decision in Digital is controlling on the issue of retroactivity. On principles of stare decisis, we affirm the trial court’s decision on this issue.⁹

B. Remedy for Washington’s Constitutionally Defective B&O Tax

The taxpayers assert Washington’s B&O tax is a nullity and they do not have to pay any B&O taxes whatsoever. They renew certain commerce clause challenges to application of the 1987 MATC credit, alleging the credit discriminates against interstate commerce and fails to properly apportion the B&O tax to interstate and intrastate activities of taxpayers. They also assert the MATC credit offends due process as both a “bait and switch” tactic forbidden by the United States Constitution, and by reaching too far back in time.

1. Washington’s B&O Tax Scheme is Not a Nullity

The taxpayers argue the United States Supreme Court’s decision in Tyler Pipe rendered that tax a nullity, totally void from its inception, and incapable of being cured by any legislative amendment. Therefore, they argue, they do not have to pay any B&O taxes whatsoever. They rely on antiquated Supreme Court authority, Norton v. Shelby County, 118 U.S. 425, 6 S. Ct. 1121, 1125, 30 L. Ed. 178 (1886),¹⁰ and our statement in Boeing Co. v. State, 74 Wn.2d 82, 88-89, 442 P.2d 970 (1968) of the general rule that an invalid statute is a nullity. However, controlling law on this issue is found in a more recent United States Supreme Court precedent, which we have specifically adopted.

In McKesson Corp. v. Division of Alcoholic Beverages & Tobacco, 496 U.S. 18, 110 S. Ct. 2238, 110 L. Ed. 2d 17 (1990), the United States Supreme Court recognized where a State imposes an unconstitutional tax that is not beyond the power of the legislature to impose or does not fall on persons immune from taxation, the state legislature may modify the offending statute retroactively to correct the constitutional defect. In McKesson, the Court struck down a Florida liquor tax statute which favored instate products. However, the Court did not treat the statute as a nullity:

a State found to have imposed an impermissibly discriminatory tax retains flexibility in responding to this determination. Florida may reformulate and enforce the Liquor Tax during the contested tax period in any way that treats petitioner and its competitors in a manner consistent with the dictates of the Commerce Clause. Having done so, the State may retain the tax appropriately levied upon petitioner pursuant to this reformulated scheme because this retention would deprive petitioner of its property pursuant to a tax scheme that is valid under the Commerce Clause.

McKesson, 496 U.S. at 39-40. Similarly, in Associated Industries v. Lohman, 511 U.S. 641, 114 S. Ct. 1815, 128 L. Ed. 2d 639 (1994), the Court stated:

That we have declared the tax scheme impermissibly discriminatory in some localities does not in itself dictate the relief that the State must provide. As we noted in McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Fla. Dept. of Business Regulation, 496 U.S. 18, 39-40[, 110 S. Ct. 2238, 2252, 110 L. Ed. 2d 17] (1990), a “State found to have imposed an impermissibly discriminatory tax retains flexibility in responding to this determination.” . . . [T]he Due Process Clause would demand only that, “to cure the illegality of the tax as originally imposed, the State must ultimately collect a tax for the contested tax period that in no respect impermissibly discriminates against interstate commerce.” Id., at 44, [, 110 S. Ct; at 2254 n.27]. The methods best adapted to achieving equal treatment in this case, whether partial or complete refunds or other measures, are similarly matters properly left for determination on remand.

Lohman, 511 U.S. at 656. See also Reynoldsville Casket Co. v. Hyde, 514 U.S. 749, 755, 115 S. Ct. 1745, 1750, 131 L. Ed. 2d 820 (1995) (citing McKesson, noting the “special circumstances” of tax cases involving a particular kind of constitutional violation, a discriminatory tax, which the State may cure without repaying back taxes).

In American Nat’l Can we acknowledged the dual purpose of the 1987 curative legislation to both establish parity among taxpayers and preserve the integrity of the B&O tax system, finding the new tax law constitutional. American Nat’l Can, at 247-49. We specifically adopted the McKesson analysis in Digital, at 189-91, holding the 1987 legislation cured any constitutional defect in Washington’s B&O tax. We adhere again to those rulings: Washington’s B&O tax is not a nullity because of the defects identified in Tyler Pipe where the 1987 remedial legislation cures such constitutional defects.

2. Taxpayers Commerce Clause Arguments Are Merit-less

Taxpayers assert Washington’s B&O tax, including the curative 1987 MATC, and that provision’s reporting requirements, discriminates against interstate commerce. They also claim “[apportionment is the only permanent cure for the discrimination manifest in Washington’s B&O Tax.” G. Appellants’ Br. at 41, B. Appellants’ Br. at 31.

We put to rest taxpayers’ discrimination and other constitutional challenges in American Nat’l Can, holding the 1987 MATC does not discriminate against interstate commerce, nor does it offend the requirements of equal protection or due process in curing any constitutional defects in Washington’s B&O tax. Id. at 248-53. We also acknowledged the apportionment issue has been settled.

A long line of precedent has held that Washington’s B&O tax meets the fair apportionment test. [Citations omitted.] This court ruled that the B&O tax without the 2-way credit posed no apportionment problem in National Can Corp. v. Department of Rev., 105 Wn.2d 327, 340-42, 732 P.2d 134 (1986). The Supreme Court did not disagree. Indeed, it rejected Tyler’s fair apportionment challenge to the wholesale tax. Tyler, 483 U.S. at 253.

American Nat’l Can, 114 Wn.2d at 248. See also Harper v. Virginia Dep’t of Taxation, 509 U.S. 86, 100-02, 113 S. Ct. 2510, 2519-20, 125 L. Ed. 2d 74 (1993) (state may craft a remedy in response to determination that it has imposed a tax that discriminates against interstate commerce).

Taxpayers ask us to ignore our own and the United States Supreme Court’s rulings and revisit the apportionment issue. Relying on a law review article criticizing the Supreme Court’s approach in several cases,¹¹ including Tyler Pipe, as inconsistent with Oklahoma State Tax Commission v. Jefferson Lines, Inc., 514 U.S. 175, 115 S. Ct. 1331, 131 L. Ed. 2d 261 (1995), the taxpayers urge us to seize this opportunity to apply Jefferson Lines and correct what they see as a misconceived analogy between the retail sales tax and gross receipts taxes.

We believe the taxpayers reliance on Jefferson Lines is misplaced. Nothing in that case purports to overturn or limit Tyler Pipe, including Tyler Pipe’s rejection of an apportionment challenge to Washington’s B&O tax. Noting that Tyler Pipe struck down Washington’s gross receipts wholesaling tax exempting in-state, but not out-of-state, manufacturers, the United States Supreme Court went on to explain:

Although we have not held that a State imposing an apportioned gross receipts tax that grants a credit for sales taxes paid in-state must also extend such a credit to sales taxes paid out-of-state, we have noted that equality of treatment of interstate and intrastate activity has been the common theme among the paired (or “compensating”) tax schemes that have passed constitutional muster. We have indeed never upheld a tax in the face of a substantiated charge that it provided credits for the taxpayer’s payment of in-state taxes but failed to extend such credit to payment of equivalent out-of-state taxes. To the contrary, in upholding tax schemes providing credits for taxes paid in-state and occasioned by the same transaction, we have often pointed to the concomitant credit provisions for taxes paid out of state as supporting our conclusion that a particular tax passed muster because it treated out-of-state and in-state taxpayers alike. A general requirement of equal treatment is thus amply clear from our precedent. We express no opinion on the need for equal treatment when a credit is allowed for payment of in- or out-of-state taxes by a third party.

Jefferson Lines, 514 U.S. at 192 n.6 (citations omitted). The taxpayers’ premise that Jefferson Lines implicitly struck down or limited Tyler Pipe is inaccurate. Jefferson Lines also approves a credit for taxes paid out-of-state as provided by the MATC. We believe the guidelines enunciated by the United States Supreme Court in McKesson remain the applicable law here. We adhere again to our rulings in American Nat’l Can and Digital which comport with McKesson. The 1987 MATC cures the unconstitutional impact of Washington’s B&O tax on interstate commerce identified by the United States Supreme Court in Tyler Pipe.

3. Application of the 1987 MATC Does Not Offend Due Process

The taxpayers also assert because the B&O tax was found unconstitutional in Tyler Pipe, anything less than either the enjoining of the collection of taxes pursuant to RCW 82.32.150, or the full refund of taxes paid, amounts to a “bait and switch” which offends due process principles. They contend that the exclusive remedy feature of the 1987 remedial legislation deprives them of the statutory opportunity to enjoin collection of the unconstitutional tax, or have such taxes refunded. But the authority they cite, Newsweek, Inc. v. Florida Dep’t of Revenue, 522 U.S. 442, 118 S. Ct. 904, 139 L. Ed. 2d 888 (1998) does not appear to advance their position.

Newsweek (citing Reich v. Collins, 513 U.S. 106, 115 S. Ct. 547, 130 L. Ed. 2d 454 (1994)), holds that where Florida law provided a taxpayer with a choice of either prepayment or postpayment challenges to an assessed tax, it violated due process to deprive a taxpayer of the postpayment challenge option where he had paid the assessed taxes while reasonably relying on the availability of such option. The taxpayers here have not been deprived of the opportunity to challenge the Washington B&O tax scheme, as the taxpayers’ many appearances before us challenging Washington’s B&O tax attest. See also McKesson, 496 U.S. at 40 (“In the end, the State’s postdeprivation procedure would provide petitioner with all of the process it is due: an opportunity to contest the validity of the tax and a ‘clear and certain remedy’ designed to render the opportunity meaningful by preventing any permanent unlawful deprivation of property.”). The taxpayers have a right to challenge the imposition of an unconstitutional tax and such a right is preserved both in prepayment or postpayment settings. As we previously determined, credits provided in the 1987 remedial statute are the appropriate remedy in this instance.¹²

We have specifically rejected taxpayers’ argument that “the 1987 credit law, as an exclusive remedy, does not meet the requirements of federal due process.” Digital, 129 Wn.2d at 189, 190. Moreover, it is difficult to envision that the taxpayers “bait and switch” argument carries any strength when the United States Supreme Court specifically approved the credit remedy set forth in the 1987 remedial legislation. Tyler Pipe, 483 U.S. at 249. See also McKesson, 496 U.S. at 39-40. Harper, 509 U.S. at 100-01 (noting federal law does not necessarily mandate refund of a tax found to be impermissibly discriminatory, and that states retain flexibility to craft a remedy which satisfies federal due process).

We next turn to the question of the retroactive application of the 1987 remedial legislation. The trial court here held the 1987 curative legislation applied retroactively and cured any defects in the Washington B&O tax. The taxpayers argue retroactive application of the 1987 curative legislation offends due process because it reaches back too far in time, citing Welch v. Henry, 305 U.S. 134, 59 S. Ct. 121, 83 L. Ed. 2d 87, 118 A.L.R. 1142 (1938) (approving a two-year retroactive application of a tax statute); State v. Pacific Tel. & Tel. Co., 9 Wn.2d 11, 17, 113 P.2d 542, 545 (1941) (striking a four-year period of tax statute retroactivity); and United States v. Carlton, 512 U.S. 26, 114 S. Ct. 2018, 129 L. Ed. 2d 22 (1994) (approving a slightly greater than one-year retroactive application of a tax statute).

We have already decided this issue as well. In American Nat’l Can, we applied the 1987 legislation retroactively to the so-called interim period of June 23, 1987, the date of the Tyler Pipe decision, to August 11, 1987, the effective date of the 1987 legislation. American Nat’l Can, 114 Wn.2d at 253. In Digital, we went an additional step and rejected a due process challenge to the 1987 curative legislation, denying Digital’s request for a refund of B&O taxes paid between January 1, 1983, and August 11, 1987, in effect applying the 1987 legislation retroactively for a period of some four and a half years. We stated:

Retroactive application of the 1987 credit law, designed to cure the constitutional infirmities of the B&O tax exemption scheme, satisfies the requirements of federal due process as a postdeprivation remedy. By providing manufacturers with tax credits for unconstitutional taxes paid, a clear and certain remedy is provided which cures the unconstitutional deprivation by equalizing the tax disparity between those manufacturers and manufacturers who were not subjected to the unconstitutional B&O taxes.

Digital, 129 Wn.2d at 194-95.¹³ Our Digital decision on retroactivity is consistent with the legislative intent expressed in section 3 of the 1987 act to apply the MATC retroactively, if necessary, to cure any problems with Washington’s B&O tax. Laws of 1987, 2d Ex. Sess., ch. 3, §3.

Our holding in Digital finds support in federal case law. In Welch, the United States Supreme Court upheld retroactive application of a 1935 Wisconsin income tax on dividends received in 1933, relying on well-established precedent holding “a tax is not necessarily unconstitutional because retroactive[,]” 305 U.S. at 146, and noting similar contexts in which due process challenges to tax statutes had been rejected. 305 U.S. at 149.

In Temple University v. United States, 769 F.2d 126 (3d Cir. 1985), cert. denied, 476 U.S. 1182, 106 S. Ct. 2914, 91 L. Ed. 2d 544 (1986), the Third Circuit relied on Welch in rejecting taxpayers due process challenge to 1984 curative legislation which cut off taxpayers claim for FICA tax refunds reaching back to 1979. The Third Circuit held (1) Congress may, without violating the due process clause, enact legislation having retroactive application if it is justified by a rational legislative purpose, (2) when such legislation is “curative” in character the retroactive application is entitled to be liberally construed, and (3) courts afford greater tolerance toward retroactive application of laws which coincide "with long-standing public policy. Id. at 134.

In reaching its conclusion the Third Circuit discussed the implications of Welch, disagreeing with some state courts which applied Welch narrowly in declaring unconstitutional tax statutes which reached back in time more than one year prior to the statute’s enactment. Noting the Supreme Court has never actually prohibited such retroac-tivity, the Third Circuit found compelling the flexible standard provided in Welch, coupled with the fact the Supreme Court had spoken only in general terms, permitting an income tax statute to be retroactively applied to “recent transactions,” and no federal court of appeals had yet adopted an absolute temporal limitation on retroactivity.

We find some guidance in the rather flexible criteria delineated by the Court in Welch v. Henry. “In each case it is necessary to consider the nature of the tax and the circumstances in which it is laid before it can be said that its retroactive application is so harsh and oppressive as to transgress the constitutional limitation.” 305 U.S. at 147, 59 S. Ct. at 126. The federal courts have generally interpreted these criteria as indicating that “[rjetroactive operation is constitutional where it is not harsh, arbitrary or unfair.” An amplification of this principle is provided by an earlier case:

The decisive test in this instance is whether this taxpayer has had its expectations as to taxation unreasonably disappointed. . . . [Rjetroactive taxation is not so arbitrary and oppressive as to be unconstitutional if it is no more burdensome than the taxpayer should have expected it to be when he did the thing which created the tax liability. . . . And when it is not, whether the period of retroactivity is comparatively long or short is of little consequence provided it isn’t too long to be within reason.

Temple, 769 F.2d at 135 (alteration in original) (citations and footnotes omitted). As in Temple, it cannot be said taxpayers here have had their “expectations as to taxation unreasonably disappointed,” or retroactive application of the 1987 curative credit, designed to benefit taxpayers, has made their tax liability more burdensome.

In Carlton, the Supreme Court again emphasized retroactive tax legislation has been repeatedly upheld against a due process challenge, 512 U.S. 30, and explained the key inquiry as follows:

Some . . . decisions have stated that the validity of a retroactive tax provision under the Due Process Clause depends upon whether “retroactive application is so harsh and oppressive as to transgress the constitutional limitation.” The “harsh and oppressive” formulation, however, “does not differ from the prohibition against arbitrary and irrational legislation” that applies generally to enactments in the sphere of economic policy. The due process standard to be applied to tax statutes with retroactive effect, therefore, is the same as that generally applicable to retroactive economic legislation:

“Provided that the retroactive application of a statute is supported by a legitimate legislative purpose furthered by rational means, judgments about the wisdom of such legislation remain within the exclusive province of the legislative and executive branches. . . .

“To be sure,. . . retroactive legislation does have to meet a burden not faced by legislation that has only future effects. . . . ‘The retroactive aspects of legislation, as well as the prospective aspects, must meet the test of due process, and the justifications for the latter may not suffice for the former’. . . . But that burden is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose."

Carlton, 512 U.S. at 30-31 (citations omitted) (emphasis added). We have previously approved the motives of the legislature as proper in enacting the 1987 credit law to establish parity among taxpayers. American Nat’l Can, 114 Wn.2d at 248. Thus, the rational legislative purpose which Carlton requires is present.

The United States Supreme Court has not set a specific duration to the retroactive effect of tax legislation, preferring to rely on legislative decisions in this context. We adhere to our prior rulings in American Nat’l Can and Digital: retroactive application of the 1987 remedial legislation is called for by the statute and does not offend constitutional principles.

CONCLUSION

The time has come for this litigation to end. More than a decade ago in Tyler Pipe, the United States Supreme Court found Washington’s B&O tax, as it applies to interstate sales and manufacturing, to offend the Commerce Clause. The Tyler Pipe decision applies retroactively.

Within two months of the Tyler Pipe decision the Legislature responded by enacting remedial legislation. That 1987 MATC legislation addressed the constitutional defects in a fashion specifically suggested by the United States Supreme Court itself. We reject here, as we have done previously, the taxpayers’ commerce clause and due process challenges to the MATC. As cured by the MATC, Washington’s B&O tax on interstate sales and manufacturing is not a nullity. The taxpayers’ relief is limited to MATC credits. Thus, we apply the 1987 curative legislation retroactively. Such a retroactive application comports with the statutory directive and does not offend due process principles.

We affirm the trial court judgments on these key points and remand the cases to the trial court for further action consistent with this opinion.

Guy, C.J., Durham, Smith, Johnson, and Alexander, JJ., and Dolliver, J. Pro Tern., concur.

1 Tyler Pipe Indus. Inc. v. Department of Revenue, 105 Wn.2d 318, 715 P.2d 123 (1986), judgment vacated by 483 U.S. 232, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987); National Can Corp. v. Department of Revenue, 105 Wn.2d 327, 732 P.2d 134 (1986) judgment vacated by 483 U.S. 232, 107 S. Ct. 2810, 97 L. Ed. 2d 199 (1987) (National Can I); National Can Corp. v. Department of Revenue, 109 Wn.2d 878, 749 P.2d 1286, cert. denied, 486 U.S. 1040, 108 S. Ct. 2030, 100 L. Ed. 2d 615 (1988) (National Can II); American Nat’l Can Corp. v. Department of Revenue, 114 Wn.2d 236, 787 P.2d 545, cert. denied, 498 U.S. 880, 111 S. Ct. 213, 112 L. Ed. 2d 173 (1990) (American Nat’l Can); Digital Equip. Corp. v. Department of Revenue, 129 Wn.2d 177, 916 P.2d 933 (1996), cert. denied, 520 U.S. 1273, 117 S. Ct. 2452, 138 L. Ed. 2d 210 (1997) (Digital).

2 Laws of 1987, 2d Ex. Sess., ch. 3.

3 If it is determined by a court . . . that relief is appropriate for any tax reporting periods before the effective date of this act, in respect to [the multiple activities exemption] as it existed before the effective date of this act, it is the intent of the legislature that the credits . . . shall be applied . . . and that relief... be limited to the granting of such credits.

Laws or 1987, 2d Ex. Sess., ch. 3, § 3.

4 The taxpayers filed notices of appeal to this court in July 1996, long before the trial court heard argument on the parties’ respective motions for reconsideration. We consolidated the cases on appeal and stayed all appellate procedures until the trial court resolved the motions for reconsideration.

5 By 1997, only 47 of the 103 actions remained, the rest having been dismissed by stipulation or by motion of DOR. The trial court later granted motions to bring three more pending actions, with a total of five plaintiffs, under the Buffelen caption.

6 The trial court severed three plaintiffs, Anheuser-Busch, Inc., Apple Computer, Inc., and Herman Miller, Inc., allegedly with “place of sale claims,” and consolidated their refund claims under the caption of Anheuser-Busch, Inc. v. State, No. 86-2-02675-1 (Thurston Co. Super. Ct. July 18, 1997). The court then entered summary judgments in Anheuser-Busch as well.

7 Indeed, taxpayers in American Nat’l Can conceded Washington’s B&O tax is fairly apportioned. American Nat’l Can, 114 Wn.2d at 248.

8 Likewise, given our disposition of this case we deem it unnecessary at this time to address the preclusion issue decided by the trial court in Grace/Chrysler. Our review of this issue is specifically reserved however, should further review be required. See Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 277, 104 S. Ct. 3049, 3058, 82 L. Ed. 2d 200 (1984) (noting remand to state courts for further proceedings is appropriate where “the federal constitutional issues involved may well be intertwined with, or their consideration obviated by, issues of state law”); Fulton Corp. v. Faulkner, 516 U.S. 325, 347, 116 S. Ct. 848, 862, 133 L. Ed. 2d 796 (1996) (citing Bacchus, remanding for determination of whether taxpayer complied with state law procedural requirements); James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 544, 111 S. Ct. 2439, 2448, 115 L. Ed. 2d 481 (1991) (remanding for further proceedings, citing Bacchus, holding that the Court’s ruling, requiring a rule of law be applied equally to all litigants who are not barred by procedural requirements or res judicata, did not deprive respondents of their opportunity to raise procedural bars to recovery under state law).

9 See State v. Gentry, 125 Wn.2d 570, 587 n.12, 888 P.2d 1105 (writing justice whose dissenting views in prior case were not accepted by majority of the court was bound by doctrine of stare decisis to accede to the view of the majority on that issue in subsequent case), cert. denied, 516 U.S. 843, 116 S. Ct. 131, 133 L. Ed. 2d 79 (1995).

10 The “void ab initio” doctrine upon which taxpayers rely, as expressed in Norton, has been abandoned by the Supreme Court. See Lemon v. Kurtzman, 411 U.S. 192, 197-99, 93 S. Ct. 1463, 1468-69, 36 L. Ed. 2d 151 (1973) (recognizing the abandonment of Norton); Ryan v. County of DuPage, 45 F.3d 1090, 1094 (7th Cir. 1995) (same).

11 Walter Hellerstein et al., Commerce Clause Restraints on State Taxation After Jefferson Lines, 51 Tax L. Rev. 47 (1995).

12 At oral argument, taxpayers asserted that Reich, Newsweek and Dryden v. Madison County, 522 U.S. 1145, 118 S. Ct. 1162, 140 L. Ed. 2d 173 (1998), an opinion which vacated a Florida Supreme Court decision and remanded in light of Newsweek, are dispositive of this case, suggesting the Supreme Court has retreated from the approach it announced in McKesson. However, none of these cases addresses a credit provision analogous to this case. Furthermore, these cases, read together with Lohman and Reynoldsville Casket, do not indicate the Supreme Court has either abandoned the “flexibility” it enunciated in McKesson, nor reversed itself regarding the credits it stated in Tyler Pipe would cure the defect in Washington’s B&O tax.

13 With the exception of Newsweek and Dryden, our determination in Digital postdates the authority relied upon by taxpayers. In Digital, as in our other post-Tyler Pipe cases, we continue to rely and build upon the pronouncements of the Supreme Court in Tyler Pipe (see n.12 above). Absent a clear directive from that Court to do otherwise, we will continue to rely on the road map provided to us in Tyler Pipe. Thus, Digital is dispositive of taxpayers’ due process challenge.