Tribal Compacts

The Hazardous Substance Tax suit

In 1988, the public approved Initiative 97 creating the Model Toxics Control Act that included a Hazardous Substance Tax on petroleum products. Recently, the Legislature diverted over $100 million in HST taxes to general revenue purposes which AUTO believes is contrary to both votes of the people.

Further, during the 2010 Legislative Session, HB3181 was introduced and endorsed by Governor Gregoire, Speaker of the House Chopp, and Senate Majority Leader Brown. The measure would place up to approximately 6 cents per gallon of additional excise taxes on motor fuel that would ultimately be paid in the form of higher pump prices. Nearly 75% of the tax would be permanently diverted into general revenue accounts and spent for purposes other than transportation.

With elected officials seemingly determined to continue to press for funding non-transportation issues with increased taxes on motor fuels, AUTO retained former Supreme Court Justice Phil Talmadge and the firm Talmadge/Fitzpatrick. On March 22, 2010 AUTO filed suit in King County contesting the application of the Hazardous Substance Tax on motor fuels sold for consumption on public highways. (Download the suit and legal briefs below)

On Oct 4th, the Supreme Court issued its ruling on AUTO's suit challenging the HST tax. The suit challenged a lower court dismissal ruling on three points: 1) Laches (AUTO waited too long to file the suit); 2) the HST tax on "possession" of petroleum products was in fact a disguised excise tax on motor fuels; and 3) all excise taxes on motor fuel sold for consumption on public highways must be deposited into the motor vehicle account and dedicated to roads. The court ruled in AUTO's favor on the first two. Then, unfortunately it broke with legal tradition by ruling that the 18th Amendment to the state constitution does not require that excises taxes on motor fuel be used for transportation purposes.

The confusing part of the 18th Amendment is it has two separate and seemingly opposite, statements regarding where taxes collected on motor fuels must be deposited and used. The "enactment" sections seem to clearly state that any excise tax placed on motor fuel must be deposited into the motor vehicle account and dedicated to transportation. Then, the "proviso" section provides that the state can collect a tax on fuels and use it for other purposes provided the tax had a stated purpose other than transportation.

The state argued the proviso gave it the authority to tax motor fuels for any purpose it chose and AUTO's position would negate the proviso entirely. AUTO argued that the proviso was placed into the 18th to "grandfather in" taxes that existed back at the time the 18th was approved by the voters and the state's position would effectively eliminate the enactment sections which should rise above the proviso.

The Supreme Court came down with a third scenario wherein both positions could stand together. If the Leg passes a tax on motor fuels dedicated to transportation, the taxes collected must be deposited into the 18th protected account. If the new tax is intended for a purpose other than transportation, the tax collected is left to the Legislature's discretion every January when it convenes in Olympia just as all other taxes.

AUTO's attempt to stop the Legislature from raiding and diverting tax dollars that the public was promised would to be used for a specific purpose over to another purpose came out somewhat a "mixed bag". If in the future the Legislature passes a motor fuel tax or license fee wherein the public is told it will be used on roads, the 18th will protect it from diversion. However, if the Leg wants to pass a tax on fuels for non-transportation purposes and then divert it later, it may do so as well. However, politicians in Olympia will no longer be able to credibly hide behind creative language that attempts to disguises the tax as something other than an increased tax rate paid by motorists at the pump.

Suits and legal briefs for download:
Talmadge / Fitzpatrick