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Washington's high court has declined to spare Citibank from a $6 million business tax bill, ruling that the bank's money-making activities amounted to a physical presence in the state despite not having any local branches open at the time.

According to a notice published online, the Washington State Supreme Court declined on Tuesday to grant Citibank South Dakota NA's petition for review of the Court of Appeals' Nov. 14 ruling. The appeals court had determined that the state Department of Revenue had appropriately assessed the bank more than $6 million in business and occupation taxes from 2007 to mid-2010.

Citibank has argued that the state shouldn't be able to force it to retroactively pay the tax on its credit card business from January 2007 to May 2010 because the bank did not have employees or offices in Washington during that time. According to the bank, the state began in 2010 to impose the tax on those engaged in business in the state, regardless of whether they had a physical presence.

In its Feb. 22 petition for review, Citibank argued that the Court of Appeals "announced new law when it reached the novel and incorrect conclusion that the department may impose tax on a service business that carries on all of the activities in generating its gross income at locations outside of Washington for years prior to the legislative enactment of the economic nexus standard."

The Department of Revenue noted in a March 27 response to the petition that Citibank earned nearly $1.7 million from credit card loans it made to Washington customers in the 2½-year period, filed more than 3,000 lawsuits in state court to collect on unpaid balances, and used in-state merchants to get new cardholders.

Affirming a ruling by the Board of Tax Appeals, a three-judge panel for the Court of Appeals concluded in its November ruling that the company satisfied the physical presence criteria during the period because it used Evergreen State courts and attorneys for collections and contracted with Washington retailers, including Sears and Home Depot, to promote private label credit cards.

A representative of Citibank declined to comment on the case Wednesday. The Washington Department of Revenue did not respond to a request for comment.

Citibank is represented by Richard A. Levy and Robin Wechkin of Sidley Austin LLP.

The Washington Department of Revenue is represented by Charles Zalesky of the Washington State Office of the Attorney General.

The case is Citibank (South Dakota) National Association v. State of Washington Department of Revenue, case number 102824-5, in the Washington State Supreme Court and case number 571277 in the Washington Court of Appeals, Division II.