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Aerospace Manufacturers to See B&O Rate Increase

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New legislation effective April 1, 2020 will repeal tax incentives previously available for the aerospace industry. This legislation seeks to address a World Trade Organization ruling that Washington’s lower aerospace B&O rate violates WTO rules. With the passage of this bill, the Washington legislature seeks to avoid retaliatory tariffs, which could affect Washington industries beyond aerospace.

While Boeing is the main recipient of the lower 0.2904% rate, an estimated 330 companies also report under this preferential rate. This tax increase will impact many Washington businesses involved in Boeing’s supply chain.

The new tax rate of 0.484% is effective beginning April 1, 2020 and applies to revenues from manufacturing, wholesaling, and retailing of commercial airplanes, airplane components, and tooling specifically designed for use in the manufacturing of commercial airplanes or components of such airplanes. This matches the rate paid by other manufacturers in Washington.

However, this bill allows a lower 0.357% rate after March 31, 2021 if the disputes between the U.S. and the European Union within the World Trade Organization (WTO) are resolved. Additional apprenticeship requirements also go into effect with the lower rate.

Persons subject to the higher tax rate aforementioned are not required to file an annual tax performance report with the Department of Revenue after April 1st unless required for other incentives. These report requirements are reinstated if the lower rate does go into effect.

Further information on this legislation can be found here.