OLYMPIA, Wash. (Legal Newsline)-Tesoro Refining and Marketing Company is responsible for a nearly $1 million state tax bill, the Washington state Supreme Court ruled this week.

The 5-4 ruling affects the tax bill from Tesoro's refinery in Anacortes, Wash., where the company creates so-called refinery gas, some of which is used to heat crude oil at the facility to extract salable products such as gasoline, jet and diesel fuel, propane, and asphalt.

The Washington Department of Revenue assessed Tesoro nearly $1 million for failing to pay a hazardous substance tax on the refinery gas.

San Antonio, Texas-based Tesoro argued it was exempt from the tax because hazardous substances that are consumed creating other hazardous products cannot be taxed under state law.

The Thurston County Superior Court rejected the argument, agreeing the $937,889 in back taxes was owed to the state. Tesoro appealed the decision to the state Supreme Court.

In affirming the lower court's ruling, Justice Mary Fairhurst wrote for the majority that the tax code does not "unambiguously assesses a tax on the privilege of possessing refinery gas."

Tesoro Corp., the largest oil refiner in the Western United States, operates six refineries in the West, with a combined rated crude oil capacity of nearly 560,000 barrels per day.

From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.