Washington Court Remanded M'KNIB Tax Assessment Case
The ruling allows a franchisor to challenge state tax assessments regarding its local operational ties.
Updated on Sept. 22, 2026 in Remote Work
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The Washington Court of Appeals, Division III, reversed a summary judgment regarding a business and occupation tax assessment for M'KNIB Company. The case now returns to the superior court to further investigate the extent of the company's business connections to Washington.
Why it matters
The ruling highlights the shifting legal threshold for when remote franchisors can be subject to state-level tax obligations. Businesses must clarify their operational nexus to avoid unexpected state tax liabilities.
The Washington Court of Appeals remanded the tax case following a reversal of a summary judgment. The scope of this legal challenge impacts M'KNIB Company, which manages a network of Comfort Dental franchises and subfranchises.
The players
M'KNIB Company
A Colorado-based firm that manages the franchising and subfranchising of dental practice locations.
Comfort Dental
A brand of dental practices that operates multiple locations throughout the state of Washington.
Washington Court of Appeals, Division III
A state judicial body responsible for reviewing legal challenges to lower court rulings and state tax interpretations.
The details
The appellate court determined that the lower court must conduct further inquiries into whether the company's activities within Washington create a sufficient tax nexus. M'KNIB Company, which is headquartered in Colorado, argued that its involvement in franchising and subfranchising local Comfort Dental practices did not meet the necessary threshold to justify the state's tax assessment. The superior court will now re-examine these business ties to determine if the state tax assessment is valid.
Timeline
September 22, 2026: The Washington Court of Appeals issued its ruling.
Market Landscape
This decision follows the broader trend established by the Wayfair v. South Dakota nexus standard regarding the extent of state taxing authority. It signals that courts are increasingly scrutinizing whether remote administrative roles create a sufficient tax footprint.
Operators should review their inter-state service agreements and verify if their activities constitute a physical or economic nexus in states where they collect revenue. Consult with your tax counsel to document how much administrative oversight is performed remotely versus in-state.
The takeaway
The court's decision underscores that simple presence as a franchisor may not automatically trigger local tax jurisdiction without sufficient operational ties. Business owners should maintain precise records of in-state versus out-of-state activities to support potential tax challenges.
Further reading
For broader insights on managing operational footprints across state borders, visit our Remote Work section.
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Should out-of-state companies pay taxes in every state where they maintain business connections?
