The Supreme Court on Tuesday turned away, without comment, an appeal by Ford Motor Co. in a tax dispute with the cities of Seattle and Tacoma.
The court's action means the Dearborn, Mich.-based automaker won't be able to recover the $1.7 million in taxes it paid the two cities after they audited the company and assessed it for back taxes in 2003.
While the financial stakes are small, several business groups urged the court to take the case because they argued that more and more localities are imposing the type of tax at issue. Seattle and Tacoma impose a 'business activity' tax on a company's gross receipts from wholesale sales.
'Without the Court's guidance, businesses will be subject to an increasing number of unapportioned business taxes, resulting in multiple taxes' in different jurisdictions, the U.S. Chamber of Commerce, National Association of Manufacturers and other groups said.
Lawyers for the cities said the tax is neither an income tax nor sales tax but a tax on 'the privilege of doing business' in their jurisdictions. They also said in court papers that the tax has been in existence for decades and its use hasn't significantly spread.
Seattle and Tacoma assess their business activity taxes on 100 percent of the gross receipts Ford receives from wholesale sales of cars to Ford dealers in the two cities.
But the automaker argued in court papers that much of its wholesale activity, such as invoicing and transfer of ownership, takes place outside Washington state. As a result, it should pay taxes on only a portion of its receipts, the company said.
The Supreme Court's refusal to consider the case lets stand a ruling by the Washington state Supreme Court in favor of the cities.