Yesterday the Washington Supreme Court recognized that taxpayers may immediately turn to courts for relief if a municipality ignores a request for a tax refund.  In CMS v. Lakewood, the Court held that the exhaustion of administrative remedies doctrine does not bar a suit for a tax refund if the taxing authority fails to respond to a refund request.  But in so holding, the Court clarified that exhaustion of administrative remedies remains a vital prerequisite to bringing suit, even if it is not a jurisdictional requirement. 


Cost Management Services, Inc. (“CMS”), an energy consulting firm, paid an “occupations” tax to the City of Lakewood from 2004 to 2008.  In September 2008 CMS learned that Lakewood did not impose such a tax and immediately stopped paying the tax.  In November 2008 CMS requested a refund for the occupations taxes it had previously paid.

Rather than respond to this request, Lakewood sent CMS a demand notice for taxes allegedly due from October 2008 forward.  CMS refused to pay these taxes and filed suit against Lakewood seeking a refund.

The trial court ruled in CMS’ favor for the period of June 24, 2006 to September 2008, but concluded that CMS’ refund claim for the period before June 24, 2006, was barred by the applicable statute of limitations.  CMS, in response, filed a writ of mandamus to compel Lakewood to respond to the refund request for the time-barred period.  The trial court granted the writ.

The Court of Appeals affirmed the award and order granting mandamus.  Lakewood then appealed to the Washington Supreme Court arguing: (1) CMS failed to exhaust its administrative remedies; and (2) the trial court erred in granting CMS’ petition for mandamus.


Starting with the first issue – whether CMS exhausted its administrative remedies – the Washington Supreme Court held that CMS was not required to exhaust its administrative remedies before suing Lakewood.   In doing so, the Court, for the first time, stated the standard of review of a lower court’s determination regarding exhaustion of administrative remedies is de novo.  Applying this standard of review, the court held that because Lakewood refused to respond to CMS’ demand for a refund, CMS had no other administrative mechanisms to pursue a refund.  As such, the court held that CMS had satisfied its requirement to exhaust all administrative remedies.

Turning to the second issue of whether the trial court properly granted CMS’ petition for writ of mandamus, the Supreme Court reversed, reasoning that “the administrative process can[not] be used to provide a way around the statute of limitations.”


While the Washington Supreme Court’s holdings will likely provide taxpayers some guidance in dealing with municipalities regarding tax refunds, the most significant part of this opinion may well be the Court’s discussion of the interplay between the exhaustion-of-remedies doctrine and a trial court’s original jurisdiction.  To this point, the Court clarified what seems self-evident: “even if original jurisdiction in a case lies with the superior court, exhaustion of administrative remedies is still required.”    This statement clarifies prior Supreme Court cases (specifically Qwest Corp. v. City of Bellevue, 161 Wn.2d 353, 166 P.3d 667 (2007)) holding otherwise.  In making this point, the Court noted that the exhaustion-of-remedies doctrine is a “doctrine of judicial administration” that should not be blurred with “jurisdictional principles.”  Going forward, therefore, a claimant cannot try to circumvent the exhaustion-of-remedies doctrine (or likely any other doctrine of judicial administration, such as abstention) by arguing that the trial court has original jurisdiction.