HomeMy WebLinkAboutNotice of Appeal to Hearing Examiner - 2020-23 Assessment
1301 Second Avenue, Suite 2800
Seattle, WA 98101-2930
Tel: 206.223.7000
www.ballardspahr.com
SCOTT M. EDWARDS
206.223.7010
edwardss@ballardspahr.com
August 13, 2025
CONFIDENTIAL
VIA ELECTRONIC MAIL
City Clerk
City of Renton
Renton City Hall
1055 S. Grady Way
Renton, WA 98057
CityClerk@Rentonwa.gov
Re: Spirit AeroSystems, Inc.
Appeal of B&O Tax Determination & Assessments
Dear City Hearing Examiner:
Pursuant to Renton Municipal Code (“RMC”) 5-26-18.B, Spirit AeroSystems, Inc. (“Spirit”)
submits the following appeal of the City of Renton’s (“City”) Final Tax Determination and
Amended Assessment for the Tax Years 2020-23 dated July 24, 2025 (“Assessment”). This
appeal petition is presented to the City Clerk as required by RMC 5-26-18.B. The appeal is for
the tax period January 1, 2020, through December 31, 2023 (the “Tax Period”). The $150 filing
fee was remitted via check on August 13, 2025.
All “Personal Information,” as defined in RCW 42.56.230, relating to the tax assessment
referenced in the July 24, 2025 letter, or related to this appeal, is confidential and not subject
to disclosure under the Public Records Act. Any unauthorized disclosure of Spirit’s Personal
Information or Tax Information is a gross misdemeanor subject to prosecution. See RCW
84.08.210; 82.32.330.
1. Taxpayer Information: The taxpayer in this appeal is Spirit AeroSystems, Inc., whose
business address and telephone number are:
3801 S Oliver St.
MC K11-60
Wichita, KS 67210
Spirit AeroSystems, Inc.
Appeal of Amended Assessment
Page 2
CONFIDENTIAL
(316) 523-1747
2. Determination Under Appeal: Spirit hereby appeals the July 24, 2025, Amended
Notice of Assessment for the 2020-23 Tax Years issued by the City of Renton Tax and
License Division.
3. Receipt: A copy of the receipt evidencing payment of the contested assessment is
attached as Exhibit A.
4. Statement of Grounds for Appeal:
A. Factual Background
Spirit AeroSystems is headquartered in Wichita, Kansas and is one of the world’s largest
manufacturers of aerostructures for commercial airplanes. The company’s core products
include fuselages, integrated wings and wing components, pylons, and nacelles. Boeing and
Airbus are Spirit’s two largest customers. Currently, Spirit is the largest independent supplier
of aerostructures to Boeing. Spirit manufactures aerostructures for every Boeing commercial
aircraft currently in production, including the majority of the airframe content for the Boeing
737.
Under Spirit’s contracts with Boeing, Boeing takes title to and possession of the products sold
to Boeing at Spirit’s plants in Wichita, Kansas and Tulsa, Oklahoma. As part of federally
mandated quality assurance programs, Boeing employees work at Spirit’s plants as part of
Boeing’s acceptance of the fuselages and parts manufactured by Spirit.
In 2019, the City of Renton amended its business and occupation (“B&O”) tax to impose tax
on the business activity of selling aerospace parts at wholesale in Renton. The City audited
Spirit for the 2020-23 tax years and issued an assessment of approximately $17.8 million,
inclusive of interest and penalties, based on its worldwide revenue. Following a request for
correction under RMC 5-26-18, the City issued its final Tax Determination for the 2020-23 tax
years on July 24, 2025, reducing the Assessment to approximately $9 million, inclusive of
interest and penalties. This Notice of Appeal follows.
B. Legal Analysis
Washington cities do not have inherent taxing authority. As creatures of the state, they only
have such taxing power as is granted to them by the state legislature. Community Telecable of
Seattle, Inc. v. City of Seattle, 164 Wn.2d 35, 41; 186 P.3d 1032, (2008). Cities’ authority to
impose B&O taxes are governed by Ch. 35.102 RCW. Among other things, city authority to
impose B&O taxes on sales of tangible personal property is limited to taxing sales where
“delivery to the buyer” occurs in the taxing city. RCW 35.102.130(1)(a). This limitation also
reflects the constraint that a city “has no power either to authorize, license, or tax activities
Spirit AeroSystems, Inc.
Appeal of Amended Assessment
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CONFIDENTIAL
beyond its territorial limits.” Lone Star Cement Corp. v. City of Seattle, 71 Wn.2d 564, 572,
429 P.2d 909 (1967).
Delivery occurs where the buyer first takes possession of the property. Possession can either
be physical possession or constructive possession.
Physical possession occurs when the buyer takes physical control of the property. The majority
of sales on which Renton assessed municipal B&O tax were sales to Boeing of 737 fuselages.
Delivery of those fuselages to Boeing occurred at Spirit’s plants in Wichita where Boeing took
physical control of the fuselages when they were loaded onto Boeing railcars. Because delivery
of the fuselages occurred outside Renton, those sales were outside the city and outside the
City’s taxing authority.
Constructive possession occurs when the buyer exercises dominion and control over the
property. Boeing exercised considerable control over all the parts it purchased from Boeing at
Spirit’s plants, including determining whether and when a part could be shipped and where it
was shipped to. The control that Boeing exercised over each part before it was even shipped
constituted transfer of constructive possession, and therefore delivery to, Boeing at Spirit’s
plants in Wichita and Tulsa. As with the fuselages, because delivery of the parts to Boeing
occurred outside Renton, the sales were outside the city and outside the City’s taxing authority.
The City’s assessment of B&O tax on such extraterritorial sales was unlawful.
Additionally, even if B&O tax properly applied to the products Boeing ultimately transferred
to Renton, the Assessment erroneously calculated Spirit’s revenues subject to Renton’s B&O
tax by overstating the revenues associated with products that Boeing ultimately transferred to
Renton.
5. Conclusion:
For the reasons set forth above, Renton’s B&O tax does not apply to Spirit’s wholesale sales
of tangible personal property to Boeing. Accordingly, Spirit submits this appeal seeking the
City Hearing Examiner’s cancellation of the contested Assessment and a refund of the assessed
amounts paid, plus interest.
Very truly yours,
LANE POWELL PC
Scott M. Edwards
Enclosure: Proof of Payment