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Washington use tax on newly constructed home-built.

akschu

akschu

Well Known Member
Patron
I see that WA produced this document years ago that says use tax is due on cost of materials for construction: https://www.zillionforms.com/2009/P4149099.PDF but I can't find that statement in the statutes nor can I find where it was changed.

Aircraft prices are through the roof right now so I'm trying to figure out how to get the airplane registered and pay the tax without them dinging me for whatever they think it might be worth which will be significantly more as well as the lameness of being taxed on your own labor.

Anyone go through this recently and can point me to statues that show that newly built airplanes are taxed on materials?

Thanks!
 
akschu said:
I see that WA produced this document years ago that says use tax is due on cost of materials for construction: https://www.zillionforms.com/2009/P4149099.PDF but I can't find that statement in the statutes nor can I find where it was changed.

Aircraft prices are through the roof right now so I'm trying to figure out how to get the airplane registered and pay the tax without them dinging me for whatever they think it might be worth which will be significantly more as well as the lameness of being taxed on your own labor.

Anyone go through this recently and can point me to statues that show that newly built airplanes are taxed on materials?

Thanks!
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Print that policy and take it, along with your stack of receipts (with all of it totaled up) into the local tax office. That is a basis for the value. You can negotiate a little. One argument is that it isn't worth nearly as much as market since it is in the testing phase.
 
My experience depended on who I spoke to. First person mentioned taxing me on the value of a flying aircraft. Needless to say they made me more than a little anxious. Then I was given the number of a public servant who actually knew what they were doing. I gathered all of the big receipts and sent them off in an email. Used phone and emails for a fairly painless experience.
I can look in my records for his number and fwd to you. It's only been a few years so hopefully he's still there.
danny
 
danny said:
My experience depended on who I spoke to. First person mentioned taxing me on the value of a flying aircraft. Needless to say they made me more than a little anxious. Then I was given the number of a public servant who actually knew what they were doing. I gathered all of the big receipts and sent them off in an email. Used phone and emails for a fairly painless experience.
I can look in my records for his number and fwd to you. It's only been a few years so hopefully he's still there.
danny
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That would be amazing, I'll private message you my email address and phone number. Thanks!
 
Funny story, I registered my airplane as soon as I purchased the plans and had a serial number. When the state hit me up, I had the plans, no parts. I showed those receipts and paid tax on that. No airplane existed yet so nothing else to tax. Of coarse, I paid tax on all parts I purchased to build the airplane though.
 
I see a certain amount of confusion here. ‘Use tax’ is a sales tax, owed on whatever you bought. It has nothing to do with the value of the aircraft, only what you paid for its parts. ‘Property tax’, OTOH, is typically assessed on what the state and/or county thinks is the ‘fair market value’ of your airplane; this is where the real fights begin.
 
WA will find a way to F$#K any aircraft owner. I registered mine immediately online with WA and FAA. Payed "excise/Use" tax. Received letter 6 months later asking for 6K and additional 2K fine for not paying when I registered. No warnings, and no real option to fight it. Sure left a really bad taste in my mouth for a new WA transplant.
Jon
 
You are supposed to pay the tax when you buy the parts. I waited and then before it was registered gathered all receipts and met with them in person. The guy I got said I should have paid as I bought the parts but since I showed up before they found out, I was forgiven. No penalty etc…
If you don’t pay and they catch you, they will hit you with interest, fines, etc…. as noted above.
This was 20 years ago. They may not be so nice today….
Jon also….
 
Jonathan Alvord said:
WA will find a way to F$#K any aircraft owner. I registered mine immediately online with WA and FAA. Payed "excise/Use" tax. Received letter 6 months later asking for 6K and additional 2K fine for not paying when I registered. No warnings, and no real option to fight it. Sure left a really bad taste in my mouth for a new WA transplant.
Jon
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I don’t understand. Your post says you paid the use tax, but then 6 months later received a bill?
 
I agree about the so-called irony of paying taxes on your own labor to build the plane, but most of us have been taxed on our own labor for all of our adult working lives. It's kind of how the beast eats and always has been.

When it comes to annual personal property taxes on an aircraft, I always roll my eyes knowing the county I live in does zero to promote aviation or maintain any aviation infrastructure in its borders - I do that for them by owning and grooming a landing facility that they also charge me taxes on every year, as if to remind me that I don't own private property, I merely rent it. I pay the tax, but would sure like to see something, anything, in return for the privilege some day. Perhaps they are going to surprise me with a public paved airport or a GPS approach into mine one day.
 
I feel ya Bill.
Washington State doesn’t tax personal property. That’s what the use tax does. So, they only tax the parts, not labor, and only once, when you buy the parts. They don’t care about “value” unless you move into State, then they use tax you on what you bring in.
They will actually sit at the border between Oregon, a no sales tax State, and look for contractors coming across that bought parts in Oregon for their job in Washington.
 
BobTurner said:
I don’t understand. Your post says you paid the use tax, but then 6 months later received a bill?
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yes! When I originally registered online, I paid a $35 excise tax. but because I registered online I did not get any further bills/statements. Then the state sent me a nice note stated I needed to pay another 6K and 2K fine for not paying in the first place. Was very shady, either way I would have had to pay the 6K when I moved the plane, I didn't want to deal with attorneys and fees to fight it so I paid it. grrrr
 
Jonathan Alvord said:
yes! When I originally registered online, I paid a $35 excise tax. but because I registered online I did not get any further bills/statements. Then the state sent me a nice note stated I needed to pay another 6K and 2K fine for not paying in the first place. Was very shady, either way I would have had to pay the 6K when I moved the plane, I didn't want to deal with attorneys and fees to fight it so I paid it. grrrr
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More and More, government is taking the position that the citizen is obligated to know all the tax laws, and follow them. Here in CA last summer the DMV 'forgot' to send out registration renewal notices. They then characterized the renewal notices as "curtesy reminders", said not getting one was not an excuse for late payments (there was a 30% penalty). But really, it's everywhere. To keep this aviation related: When you studied for your private pilot exam,I'd bet that no one ever taught you the rules about "sharing expenses" on a flight. Heck, most CFI's I know get them wrong. But if you violate them, ignorance won't get you off the hook with the FAA.
 
I'm loving Montana more and more each day, even when she hits -37F and the training area furnace exhaust freezes like a crappy old VCR.
 
RVDan said:
Funny story, I registered my airplane as soon as I purchased the plans and had a serial number. When the state hit me up, I had the plans, no parts. I showed those receipts and paid tax on that. No airplane existed yet so nothing else to tax. Of coarse, I paid tax on all parts I purchased to build the airplane though.
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Interesting. I tried that and was told to wait until it was finished. The rationale seemed to be it would be worth more as a finished product. I mentioned they couldn't tax my labor but the person on the other end of the line thought differently. Apparently the people working at the DOR are not all using the same rules.
danny
 
From my experience (2021), the trigger that notifies the state of your aircraft completion is the act of registering the aircraft with the Feds. I also think that they understand the experimental building process (vaguely) and also know that there is such a thing as "no tax" sales, that is, a sale where the tax is not collected at point of sale. Whether or not they choose to punish you for not reporting each "no tax" sale at the time of purchase is up to the office, but it's hard to imagine a way that their system could handle such a process.

Just after the time of registering, I contacted the Wa Department of Revenue (DOR) and provided a 1. Letter showing the summary of purchases and any taxes already paid, (2). Completed Confidential Tax Information Authorization form (3). Bill of Sale from Vans (4). copy of every receipt I in my possession showing tax paid on each and a (5). list of all other purchases, where tax was still due with the amount. Some of this was "estimated", but you're signing a document saying it is true ... just say'in.

This packet was sent via email (all conversations were email) and was 57 pages long. I suspect they never read past the summary page. The office soon replied with an amount of tax outstanding. I paid that and now hold a letter stating that all outstanding taxes have been paid in full.

I recommend that you approach this issue proactively, professionally, and in a friendly manner. They're just people doing their job. Death and Taxes ... suck it up.
 
Who did you contact? You just called the number? The local guys don’t seem to understand that it’s based on materials, and since the kit was purchased in 2008, the price difference between materials and value is probably $10k in taxation.
 
danny said:
Interesting. I tried that and was told to wait until it was finished. The rationale seemed to be it would be worth more as a finished product. I mentioned they couldn't tax my labor but the person on the other end of the line thought differently. Apparently the people working at the DOR are not all using the same rules.
danny
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This is the problem, if you talk to the people in the know apparently you pay the cost of materials, but the local people are happy to sock it to you. I’m trying to find something definitive that says that I’m only liable for materials or figure out who to talk to.
 
akschu said:
This is the problem, if you talk to the people in the know apparently you pay the cost of materials, but the local people are happy to sock it to you. I’m trying to find something definitive that says that I’m only liable for materials or figure out who to talk to.
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Ken Hare, Revenue Agent, Washington State DOR
 
OKAV8r said:
Print that policy and take it, along with your stack of receipts (with all of it totaled up) into the local tax office. That is a basis for the value. You can negotiate a little. One argument is that it isn't worth nearly as much as market since it is in the testing phase.
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I did this last spring - RV3B new build, they totaled all receipts that I did not pay tax on and based the tax or payment on that.
Got a receipt, stating all is good.
They didn't and would not charge or tax on my completed aircraft that included my labor.
Canyon Park office North of Seattle.
Phase 1 or two had nothing to do with it.
MG
 
Jonathan Alvord said:
yes! When I originally registered online, I paid a $35 excise tax. but because I registered online I did not get any further bills/statements. Then the state sent me a nice note stated I needed to pay another 6K and 2K fine for not paying in the first place. Was very shady, either way I would have had to pay the 6K when I moved the plane, I didn't want to deal with attorneys and fees to fight it so I paid it. grrrr
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I believe that 35 was the washington state registration fee, not anything to do with tax (except that you're supposed to pay the tax and provide proof before you can register in WA)
 
I went through the process a couple of years ago in WA. What I gleaned is that since no aircraft title exists (initially) on a new construction, normal goods & services tax code applies since no sale occurs at state registering. The "use" tax document was a useful interpretation of what that means in a bigger picture. It seems to effectively recognize the "experimental-AB" federal guideline of "recreation and education" (not for profit) so labor value is not a factor. Also tax paid on scrap/reject parts were not double counted as they don't exist in the final, titled, plane value.

I provided to the state a spreadsheet (and major receipts) listing component/kit purchases with tax paid and those not tax paid, I also listed and deducted some wastage where tax was paid. The spreadsheet allowed me to see my tax value paid and the all important amount not-yet-taxed.

It certainly becomes a job keeping track of it all. After title/registration with FAA, the WA state registration is needed which requires the tax paid document. After obtaining the WA tax document I registered the plane with the state (WA-DOT-aviation not DOL). One tip: Since the plane has no airworthiness doc, the WA DOT-aviation will defer the registration fee (upon request) until the airworthiness document is obtained. State registration fee was then applied, pro-rated.

Everyone at the agencies I dealt with in the process seemed helpful. All theses entities have their own website which made things a bit more work...

In short: It's not a plane till its titled is the view of some entities, at other times it is not a plane till airworthy document is done.

Hope that helps
 
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WillG said:
I did this last spring - RV3B new build, they totaled all receipts that I did not pay tax on and based the tax or payment on that.
Got a receipt, stating all is good.
They didn't and would not charge or tax on my completed aircraft that included my labor.
Canyon Park office North of Seattle.
Phase 1 or two had nothing to do with it.
MG
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Guess it depends upon which tax agent you're dealing with. My comment was from actual experience in Kent, WA. DOR
 
Here’s my notes on paying the use tax for my RV-7A:

Use Tax

Make Excel spreadsheet with expenses and tax paid.

Make PDF with Invoices. Include hangar agreement.

Send to:
[email protected]
Ken or Brian at 360-704-5858.

Very transparent process. They issued a certificate which certified that I had paid the tax which I presented to register the aircraft. I had already paid sales tax on most of the parts, so just had to pay what hadn’t been charged on the Invoices.

They wanted the hangar agreement to determine the tax rate to apply: you don’t pay the rate at your residence but rather where the airplane is “residing”.

Leonard Westermeyer
N17LW
 
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