December 18, 2015, prepared by the Washington State Department of Revenue Page 1

Washington Action Plan – FAA Policy Concerning Airport Revenue

Taxes applicable to aircraft fuel

In some circumstances, the sale, use, purchase, or storage of aircraft fuel may be subject to one 

or more of the following Washington state and local taxes:

 Aircraft fuel tax

 State sales/use tax

 Local sales/use tax

 Hazardous substance tax

 Petroleum products tax

State taxes

Several of Washington’s taxes on aircraft fuel are already compliant with, or have grandfathered 

status under, the FAA’s Policy and Procedures Concerning the use of Airport Revenue; 

Proceeds From Taxes on Aircraft fuel (FAA Policy). Revenue from the aircraft fuel tax is 

already dedicated to aviation, and therefore compliant with the FAA policy. The current state 

sales/use tax rate was imposed before 1987 and is therefore grandfathered from the FAA Policy’s

revenue use restrictions. 

The state also imposes a hazardous substance tax (HST) and petroleum products tax (PPT) on 

aircraft fuel. Both of these taxes were imposed after 1987. Under the terms of the FAA Policy, 

they are subject to its revenue use restrictions. 

Local taxes

Local governments in Washington may only impose a tax if authorized by the Legislature. 

Currently, the only local tax on aircraft fuel is local sales/use tax, which is administered by the 

state. Therefore, there is no variation in how local sales/use tax is administered. Hundreds of

local taxing jurisdictions have either imposed or raised the rate on their respective local sales/use 

taxes after 1987. Aircraft fuel sales are estimated to occur in approximately 107 of these 

jurisdictions. Under the terms of the FAA Policy, the revenues from these jurisdictions’ local 

taxes are subject to its use restrictions. Because the state administers all local sales/use taxes, 

affected local governments will not be submitting a separate action plan. 

Action plan

Washington possesses no data on the actual amount of local sales/use tax, HST, and PPT

collected specifically on aircraft fuel. Obtaining this information would be expensive and 

administratively burdensome. Therefore, Washington plans to estimate the amount of local 

sales/use tax collected on aircraft fuel by each local jurisdiction subject to the FAA Policy’s 

restrictions and the amount of HST and PPT collected on aircraft fuel by the state. The state will 

use this data to determine whether amounts the state spends on aviation programs at least equal 

the amount of HST and PPT revenues collected on aircraft fuel, which are dedicated by 

Washington law to non-aviation purposes.
December 18, 2015, prepared by the Washington State Department of Revenue Page 2

The state will inform local jurisdictions of the FAA Policy’s revenue use requirements, and 

advise those jurisdictions to offset their use of tax revenue on aircraft fuel put towards nonaviation purposes with an equal amount of spending on aviation. The state will provide 

information about what types of aviation spending qualify for the offset amount and will respond 

to complaints from airports. The state will also track state spending on state aviation programs to 

ensure it is sufficient to offset the HST and PPT collections on aircraft fuel. 

Overview of Taxes

1. Aircraft Fuel Tax (chapter 82.42 RCW) 

The aircraft fuel tax is levied on each gallon of aircraft fuel sold, delivered, or used in 

Washington (RCW 82.42.020). The tax was established in 1967. On December 30, 1987, the 

tax rate was $0.05 per gallon. The current tax rate is $0.11 per gallon (RCW 82.42.020). For 

more information on the aircraft fuel tax, see the tax reference manual.

Distributors of aircraft fuel are required to collect the tax. The tax is somewhat limited in scope 

because it does not apply to many uses of aircraft fuel, including fuel used in interstate 

commerce. All of the collected revenue is deposited into Washington’s aeronautics account 

(RCW 82.42.090), a state aviation program. Thus, the aircraft fuel tax revenues already comply 

with the FAA Policy’s use restrictions. 

2. State Sales and Use Taxes (chapters 82.08 and 82.12 RCW)

The state portion of the Washington retail sales/use tax rate has remained at 6.5 percent since 

1983. See 1983 Wash. Laws ch. 7 § 6 (1983 session law establishing the current tax rate).

The tax base is the selling price of tangible personal property and certain services purchased at 

retail, i.e. by consumers. The basic definition of items and transactions subject to sales tax 

appears in RCW 82.04.050. (NOTE: Use tax applies to taxable items used within the state if 

retail sales tax was not paid)

Aircraft fuel purchased in the state is generally subject to sales tax, except for such fuel 

purchased by a farmer for agricultural purposes (RCW 82.08.865). With respect to air carriers 

engaged in interstate travel, the sales/use tax on aircraft fuel is currently imposed only on fuel 

placed on board and consumed in this state (WAC 458-20-175). Sellers of aircraft fuel to air 

carriers are not required to collect the tax. Instead, an air carrier registered with the state pays 

the use tax directly to the state.

State sales/use tax is generally deposited in the state general fund. For more information on state 

sales and use tax, see the tax reference manual. 

3. Local Sales and Use Taxes (chapter 82.14 RCW)

The revenue sources of cities, counties, and junior taxing districts are strictly controlled by the 

Legislature and only specifically authorized taxes can be imposed at the local level. There are 

currently 25 different types of local sales taxes. The maximum local sales tax rate currently 
December 18, 2015, prepared by the Washington State Department of Revenue Page 3

levied totals 3 percent in portions of southwestern Snohomish County and in all of the 

metropolitan areas of King County. Combined with the state rate of 6.5 percent, Washington's 

maximum sales tax rate that applies to most taxable items is now 9.5 percent. For more 

information on local sales and use tax, see the tax reference manual.

4. Hazardous Substance Tax (Chapter 82.21 RCW) 

The hazardous substance tax (HST) is imposed on the first possession of a hazardous substance 

in the state. The tax is equal to 0.7 percent of the wholesale value of the substance and was first 

imposed in 1989. Aircraft fuel is considered a taxable hazardous substance. The revenue from 

the HST is deposited into toxic control accounts (RCW 82.21.030). For more information on the 

HST, see the tax reference manual. 

5. Petroleum Products Tax (chapter 82.23A RCW)

The petroleum products tax (PPT) is imposed on the first possession of a petroleum product in 

the state. The tax is equal to 0.3 percent of the wholesale value of the petroleum product and 

was first imposed in 1989. Aircraft fuel is considered a taxable petroleum product. The revenue 

from the PPT is deposited in the pollution liability insurance program trust account (RCW 

82.23A.020).

The PPT was suspended from April 1, 2010, to June 30, 2015. The tax was re-imposed effective 

July 1, 2015. For more information on the PPT, see the tax reference manual and special notice. 

Methodology

When businesses report taxes to the state they are not required to itemize the individual items 

they sell, but report the gross amount for an entire category of sales (retailing, wholesaling, 

services, etc.) Therefore, the actual amount of local sales/use tax, HST, and PPT collected on 

aircraft fuel is unknown. This information would be difficult to obtain and collecting it would 

place a significant burden on taxpayers and government entities. 

Washington proposes the following methodology to estimate the amount of local sales/use tax, 

HST, and PPT collected on aircraft fuel:

Local sale tax

To calculate the local sales tax collected on aircraft fuel by distributors, the state will perform the 

following calculation each year (beginning 2018):

 Determine the airport operators selling aircraft fuel within the boundaries of a local 

jurisdiction that imposed or raised its local sales and use tax after 1987.

 Determine the amount of aircraft fuel tax collected in the previous year by each affected 

airport operator. 

 Divide the aircraft fuel tax collections by the aircraft fuel tax rate (11 cents per gallon) to 

obtain the gallons sold by each affected airport operator. Multiply this amount by the 

average retail price per gallon of aircraft fuel, which is obtained from the FAA Aerospace 
December 18, 2015, prepared by the Washington State Department of Revenue Page 4

Forecasts – Table 18. This provides the dollar value of aircraft fuel sold by each affected 

airport operator.

 Multiply the appropriate local sales tax rate by the dollar value of aircraft fuel sold by 

each affected airport operator. This provides the estimated local sales tax collected by the 

airport operator for the local jurisdiction.

 Sum the estimated local sales tax collected by airport operators within each affected local 

jurisdiction. This amount is the local jurisdiction’s local sales tax offset amount for the 

year. 

Local use tax

To calculate the local use tax paid directly by passenger airlines on aircraft fuel, the state will 

perform the following calculation each year:

 The state will query the local use tax reported by each passenger airline that reports taxes 

to the state.

 Based on multiple passenger airline audits, approximately 91 percent of the local use tax 

reported by passenger airlines is for aircraft fuel. 

 For each passenger airline, the state will multiply the airline’s annual use tax payments to 

each local jurisdiction by 91 percent. This amount is the local jurisdiction’s local use tax 

offset amount for the year.

For each affected local jurisdiction, the local sales tax offset amount and local use tax offset 

amount will be added together to determine the local jurisdiction’s total offset amount for the 

year.

Hazardous substance tax (HST) – reported by distributors

To calculate the HST on aircraft fuel reported by distributors, the state will perform the 

following calculation each year:

 Determine the total aircraft fuel tax collections in the previous year.

 Divide the aircraft fuel tax collections by the aircraft fuel tax rate (11 cents per gallon) to 

obtain the total gallons sold. Obtain average price per barrel from US Energy Information 

Administration and convert to average price per gallon. Multiply the average price per 

gallon by the total gallons sold. This provides an estimated wholesale dollar value of 

aircraft fuel possessed in the state by distributors.

 Multiply the hazardous substance tax rate by the estimated wholesale value to determine 

the state’s offset amount for HST reported by distributors.

Hazardous substance tax – reported by airlines

To calculate the HST paid directly by passenger airlines on aircraft fuel, the state will perform 

the following calculation each year:

 Query the total HST reported by all passenger airlines that report taxes to the state.

 Based on multiple commercial airline audits, approximately 91 percent of the HST 

reported by passenger airlines is for aircraft fuel. 
December 18, 2015, prepared by the Washington State Department of Revenue Page 5

 Multiply the total HST reported by all passenger airlines by 91 percent. This provides the 

state’s offset amount for HST reported by airlines.

The estimated HST reported by distributors and airlines will be added together to determine the 

state’s total HST offset amount for the year.

Petroleum products tax (PPT)

The PPT offset amount will be calculated in the same manner as the HST. 

Conclusion

Beginning in 2018, the state will begin calculating the offset amounts as described above. The 

state will also notify each local jurisdiction that imposed or raised its local sales and use tax after 

1987 of the revenue use requirements detailed in the FAA Policy. 

The state will provide guidance about what types of airport spending will satisfy the FAA 

requirements for the offsets. The state will also track the state spending on aviation to ensure it is 

sufficient to offset the HST and PPT collections on aircraft fuel.