Washington Appeals Court Remanded Tax Case

The court ordered further investigation into the business connections of a dental franchise firm to the state.

Updated on Sept. 22, 2026 in Remote Work

Washington Appeals Court Remanded Tax Case

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Should out-of-state companies pay taxes in every state where they maintain business connections?

The Washington Court of Appeals reversed a summary judgment against M'KNIB Company, allowing the firm to challenge a state business and occupation tax assessment. The court directed the superior court to further investigate the company's specific business ties to Washington.

Why it matters

The ruling addresses whether a company's franchise activities are sufficient to justify state tax liabilities, potentially clarifying nexus requirements for out-of-state entities. M'KNIB Company contends that its connections to Washington remain inadequate to support the tax assessment issued by state authorities.

The ruling concerns a state business and occupation tax assessment levied against M'KNIB Company, which franchises and subfranchises Comfort Dental locations. The court must now evaluate the depth of the company's operational presence in Washington.

The players

M'KNIB Company

This Colorado-based firm manages the franchising and subfranchising of Comfort Dental practices.

Washington Court of Appeals

This judicial body hears appeals from superior courts and recently ruled on the state's tax jurisdiction.

Comfort Dental

This dental care brand operates multiple practices across Washington state.

The details

The Washington Court of Appeals, Division III, found that further inquiry into the nature of the company's connections is required. M'KNIB Company, headquartered in Colorado, maintains that these ties do not reach the threshold necessary to justify the state tax assessment.

September 22, 2026: The Washington Court of Appeals, Division III, issued the ruling.

Market Landscape

This decision reflects broader industry debates regarding how state tax authorities establish jurisdiction over out-of-state franchise networks. The ongoing legal battle highlights the complexity of determining nexus for companies that manage local operations from a remote headquarters.

Business owners and franchise operators should note that the court requires clearer evidence of state connections before taxes can be assessed. This ruling could influence how out-of-state service providers structure their local franchise operations to manage tax liabilities.

The takeaway

Companies operating across state lines must maintain thorough documentation of their local business activities to challenge tax assessments effectively. This case serves as a reminder that courts are increasingly focused on the specific nexus created by franchise models.