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Home My WebLink About05-01-2024 - Appeal Formal RequestLANE POWELL Scorn M.EnwARns 206.223.7010 edwardss(a ]anepowell.com May 1, 2024 CONFIDENTIAL VIA BAND DELIVERY City Clerk City of Renton Renton City Hall 1055 S. Grady Way Renton, WA 98057 Re: Spirit AeroSystems, Inc. Appeal of B&O Tax Determination & Assessments Dear City Hearing Examiner: Pursuant to Renton Municipal Code ("RMC") 5-26-18.13, Spirit AeroSystems, Inc. ("Spirit") submits the following appeal of the City of Renton's ("City") Final Tax Determination and Assessment for the Tax Year 2019 dated April 12, 2024. This appeal petition is presented to the City Clerk as required by RMC 5-26-183_ The appeal is for the tax period January 1, 2019 through December 31, 2019 (the "Tax Period"). A check for the $150 filing fee is enclosed herewith. All "Personal Information," as defined in RCW 42.56.230, relating to the tax assessment referenced in the April 12, 2024 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 (316) 523-1747 STREETADDRESS: 1420 FIFTH AVENUE SUITE 4200 1 SEATTLE. WA 98101-2375 P 206 223 7000 F 206 223 7107 LANEPOWELL.COM MAILING ADDRESS: PO BOX 91302 1 SEATTLE WA 98111-9402 A. PROFESSIONAL CORFOR:,i"ON City Clerk May 1, 2024 Page 2 CONFIDENTIAL 2. Determination Under Appeal: Spirit hereby appeals the April 12, 2024, Final Determination and Assessment for the Tax Year 2019 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 Backeround 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 calendar year 2019 tax year and issued an assessment of approximately $4.8 million, inclusive of interest and penalties. Following a request for correction under RMC 5- 26-18, the City issued its final Tax Determination for the 2019 tax year on April 12, 2024. This Notice of Appeal follows. B. Leeal 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 Pad 1032, (2008). Cities' authority to impose business and occupation (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 beyond its territorial limits." Lone Star Cement Corp. v. Ciry of Seattle, 71 Wn.2d 564, 572, 429 P.2d 909 (1967)_ City Clerk May 1, 2024 Page 3 CONFIDENTL4L 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 Sprit'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 City's taxing authority_ The City's assessment of B&O tax on such extraterritorial sales was unlawful. 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 M(!�� Scott M. Edwards Enclosure: Proof of Payment $150 Filing Fee 135598.0001 /9740772.1 EXHIBIT A CITY OF RENTON i055 S GRADY WAY RENTON, WA 98057 425-430-6850 ;g;FiRcpt# 00037930 L AH ] Accourting Date: Fri, Apr 25, 2024 Date/Time: Frl, Apr 26, 2024 3:42 Pll PRAXIS REF #: 602493084 TC:9000 FEE AMOUNT $ 4,812,269.07 -------------- RECEIPT TOTAL $ 4,812,269.07 Payment Data Pmt# :1 Payer :SPIRIT AEROSYSTEMS$ 4,812,269.07 METHOD :CHECK Ref# : 5173283 cl RECEIPT SUMMARY TOTAL TENDERED $ 4,812,269.07 RECEIPT TOTAL $ 4,812,269.07 C4NGE DUE $ 0 , 00 HAVE A NICE DAY! u:1.0.523P SEATTLE LEGAL • 4201 Aurora Ave N #200 Seattle, WA 98103 Phone 206-443-0885 Fax 206-728-2833 • 1417 116,h Ave NE #202 Bellevue, WA 98004 Phone 425-256-2225 DATE: May 1, 2024 FIRM: Lane Powell PC CASE NAME: Spirit AeroSystems, Inc. DOCUMENT(s): Notice of Appeal; Check CLIENT/MATTER/F 5598.0001 For office use only P13 l . F PS CHARGES CONTACT NAME: Angela Craig DIRECT CONTACT NUMBER: 425.239.4303 CAUSE NUMBER: OFFICE SERVICE DEADLINE: RECEIVED BY: �"(-C F'I G _I I _ _ TIME: 1 P S�� Z OFFICE SERVICE F-IDELIVERY 'J RETURN STAMPED 1:1ROUND TRIP OBTAIN SIGNATURE NOTARY PICK-UP COPY RETURN BY (RETURN ORIGINAL) Renton City Clerk 1055 South Grady Way Renton, WA 98057 PLEASE OBTAIN RECEIPT FOR PAYMENT FILINGS FILING DEADLINE: May 1, 2024 USDC BANKRUPTCY APPEALS SEATTLE COUNTY SUPERIOR SEATTLE SEATTLE DISTRICT COURT COUNTY OF TACOMA 0 AUDITOR TACOMA TACOMA ❑ E-FILE COUNTY SUPERIOR LAST DAY TO SERVE: SERVED Residence: PROCESS SERVICE e-file affidavit/dec. ❑ if the court allows a -filing - fee applies POST ❑ Business: MAIL ❑ Approximate Age: Skin Color: Sex: Height: Build: Hair Color: Eye Color: License Plate: