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socrateaser, Lawyer
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Relative to interstate commerce transportation, can you provide

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Relative to interstate commerce transportation, can you provide a legal definition with respect to products with orgin and destination, both outside a state, but sit within that state in a public warehouse.

Backgound: WA State has a Hazardous Substance Tax based on first possession in its state. However, an present expemption to this tax is applied to products arriving for temporary storage within interstate movement where origin and final destination are both outside the state. The WA State DOR claims this expemption applies only to these products that are presold and on a through Bill of Lading.

Thank you.
Jim Ewers
CEO - IEDS Logistics


The most relevant appellate case law on this issue is: TESORO REFINING v. Dept. of Revenue, 135 Wash.App. 411, 144 P. 3d 368 (2006). In Tesoro, the Wa. Court of Appeals writes: "RCW 82.21.030(1) is plain on its face. It imposes a tax 'on the privilege of possession of hazardous substances' within this state. RCW 82.21.030(1). And RCW 82.21.020(3) says that a taxpayer possesses the hazardous substance if it has the power to control it."


Also, in TESORO REFINING & MARKETING v. STATE, DOR, 190 P. 3d 28 (2008), the Wa Supreme Court writes: "`Possession'" means "control of a hazardous substance" within Washington, including "both actual and constructive possession." RCW 32*32 82.21.020(3). The essence of possession revolves around the idea of "`[c]ontrol,'" which is defined as "the power to sell or use a hazardous substance or to authorize the sale or use by another." Id.

The Tesoro courts expressly declined to interpret the statutes in a manner other than as described in the statutory language. On your facts, the issue is not where the hazardous substance comes from or where it is destined, but only whether or not the person has the ability to control the substance while it is located within Washington territorial boundaries. If yes, then that person owes the tax -- otherwise not.

If you are trying to argue that the substance was at all times, under control of a third party carrier or storage facility, while in the state, then that could be a reasonable argument. By example, if your carrier was paid to move the substance from Oregon to Idaho, through Washington, and during the time it was located in Washington, you had no control over its disposition, but that you were merely awaiting final delivery, then you may have grounds for an appeal. The presence of a bill of lading, in my view, is not controlling. The statute says nothing about the legal or physical mechanics of the shipment process. It speaks only of control. If the substance was not under your control, then you don't owe the tax -- assuming that we accept the appellate case law as precedent.

Please let me know if my answer is helpful. And, thanks for using!

Customer: replied 3 years ago.

Thank you. I'm familiar with the case mentioned.


We, being the public warehouse, are acting as the regional distribution center for the manufacturer. Therefore, the WA State DOR is requiring the manufacturer (our customer in N. Carolina) to pay this tax, even though the tax specifical exempts interstate movement of products "temporarily stored" with points of origina and destination outside the state. The manufacturer ships its products to the regional distribution center (our public warehouse in WA State), and later sells the product to points in the Pacific Northwest, 40% of sales are outside the state.

Given the spedific exemption for products moving within interstate commerce, it appears the interpretation of this exemption is taking "control" into consideration. Can you comment? I understand the issue of control, but the exemption is clearly defining interstate commerce where at such times when product passes through a public warehouse, control is maintained.

Thank you.


To my knowledge, neither the statutory language, nor any case law, specifically exempts the tax on substances being moved interstate. RCW 82.21.040(5) provides an exemption for, "Persons or activities which the state is prohibited from taxing under the United States Constitution."

In order to obtain the benefit of the exemption, you would have to obtain a favorable interpretation of your activity on constitutional grounds from a court of appropriate jurisdiction.

In Complete Auto Transit v. Brady, 430 U.S. 274 (1977), the U.S. Supreme Court set out a four-part test for state taxes to be valid under the Commerce Clause. The tax must:

  1. Be applied to an activity that has substantial nexus with the state;
  2. Be fairly apportioned to activities in the state;
  3. Not discriminate against interstate commerce;
  4. Be fairly related to services provided by the state.


The most frequently litigated and arguably the most important of these four rules is the prohibition on discriminating against interstate commerce. It is a longstanding rule, dating to the late 19th century. The Court has described the rule as follows: [N]o State, consistent with the Commerce Clause, may “impose a tax which discriminates against interstate providing a direct commercial advantage to a local business.” This antidiscrimination principle “follows inexorably from the basic purpose of the Clause” to prohibit the multiplication of preferential trade areas destructive of the free commerce anticipated by the Constitution. Maryland v. Louisiana, 451 U.S. 725, 754 (1981) (citations omitted).

The above represents the basis for any challenge to an tax imposed upon interstate commerce. The hazardous substance tax does not appear to discriminate against local businesses. However, if the only activity in the state is temporary storage and transfer, then perhaps the better argument is that the tax is not apportioned to the activity within the state -- because the activity is practically nonexistent, and were it applied uniformly throughout the 50 states, there would be a toll imposed on every movement between state jurisdictions, making the movement of hazardous substances unreasonably costly -- and thereby violative of the Commerce Clause.

Hope this helps.
Customer: replied 3 years ago.

The HST in WA State actually does have the below interstate commerce exemption:


(iv) However, the tax will not apply with respect to possessions of substances which are only temporarily stored or possessed in this state in connection with through, interstate movement of the substances from points of origin to points of destination both of which are outside of this state.


The question then becomes the definition of interstate commerce. I understand the tax is applied to possession and control, but an exemption is an exemption. It clearly exempts interstate commerce, which should trump possession and control within the definition of interstate commerce. Obviously, the case law overrules us, but avoids the interstate commerce exemption as it is written. Therefore, we seek a legislative fix, but our lobbyist was hoping we could get our hands on the definition of interstate commerce. Do you know of any such federal definition? ICC no long exists.


Thanks for all your consult. Very imformative and helpful.


Best regards,


The most frequently used definition of interstate commerce is provided by 18 U.S.C. 921(a)(2).

Hope this helps.

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