General aviation

From the 2024 DOR Tax Exemption Study

Det. No. 18-0194, 38 WTD 261 (December 31, 2019) 262 ISSUE Has Taxpayer shown that certain parts it manufactures and sells are FAA-certified “components” as defined in RCW 82.32.550(2), thereby entitling Taxpayer to the B&O tax rate for aerospace manufacturers in RCW 82.04.260(11)(a)? FINDINGS OF FACT . . . (Taxpayer) operates a machine shop in . . . WA that specializes in custom gear and spline cutting,2 Computer Numerical Control (CNC)3 turning, and CNC milling for items of tangible personal property designed to be installed into aircraft. Taxpayer contracts with vendors to manufacture parts to design specifications provided by their vendor’s customers, who are certain aircraft manufacturers. Taxpayer generally sells the custom parts to the vendors, who in turn sell the parts directly to the aircraft manufacturers. The Department of Revenue’s (Department) Audit Division (Audit) audited Taxpayer’s business activities for the period from January 1, 2013, through June 30, 2016 (Audit Period). Taxpayer reported certain income under the B&O tax classification for “manufacturers and processors for hire of commercial airplanes or component parts of commercial airplanes” (“Aerospace Manu