Avista Energy, the energy-trading unit of Spokane-based Avista Corp., has paid a $741,000 settlement to resolve a 4-year-old dispute with Washington state over a $14.5 million business-and-occupation tax assessment, says Avista Corp. spokesman Hugh Imhof.


The Washington state Department of Revenue had claimed Avista Energy owed the money in connection with wholesale energy-trading activities, but Avista Energy contended the state misapplied the tax to gross receipts, rather than just to gains, on a portion of its transactions.


Of the settlement, Imhof says, I think we are pleased with it, and it validates our position that we had all along.


Avista Corp. had considered the issue to be unusual, since the now thriving wholesale-energy market was just emerging when the taxation dispute arose. Avista Energy has been a large national seller of wholesale power and Avista Corp.s hottest-performing subsidiary.


Avista Corp. disclosed in its 2000 annual report that Avista Energy had received the notice of tax assessment from the Department of Revenue after it conducted an audit on the company for the years 1997 through mid-2000.


Washingtons business-and-occupation tax generally applies to gross receipts from business activities, except for financial trading involving stocks, bonds, and futures contracts, in which case just gains are taxed.


Avista Energy trades electricity and natural gas as commodities for consumption, including to commercial and industrial end-users, and also for resale, such as through price-speculative futures contracts and options.


Avista Corp. said the state made a distinction in its audit between certain types of trades, ruling that about 20 percent of Avista Energys trading volume during the audit period should not be treated as securities trades.


A hearing was held in 2001 on an appeal filed by Avista Corp., and the Department of Revenue issued a proposed determination in 2002 that reiterated the original $14.5 million assessment.