Irrigation Districts Operating on US Government Property

It is common in Washington for irrigation districts to operate facilities owned by the Bureau of Reclamation (BOR), an agency of the US government. Does this relationship mean irrigation districts are exempt from sales and use tax on their purchases?

The department has determined that irrigation districts are not an instrumentality of the US government. Therefore, they do not qualify for a broad sales and use tax exemption for purchases made by the US government.

However, irrigation districts may qualify for US government contracting treatment when construction, improvements, or repairs are made to real property owned by BOR.

Constructing, improving, and repairing irrigation facilities

Irrigation districts are not required to pay sales tax to contractors on projects considered government contracting for the US government. Generally, a project is considered government contracting for the US government when it is to construct, improve, or repair new or existing buildings or other structures located under or upon real property owned by BOR.

Hired contractors are considered the consumers of any materials they install under a US government contract. This includes materials provided by the irrigation district or BOR. This means contractors owe sales or use tax on the installed materials, unless sales tax has already been paid by the irrigation district.

If the project is not US government contracting, it is treated as retail construction and the prime contractor should charge the irrigation district retail sales tax on the gross contract price.

Purchases for maintaining or operating irrigation facilities

When irrigation districts purchase materials to construct, improve, or repair buildings or other structures under or upon real property owned by the BOR without hiring a contractor, they must pay sales or use tax on the purchases. In this situation, the irrigation district is acting as a US government contractor and is the consumer of the materials installed.

Examples of materials include, but are not limited to:

• Pipe
• Fittings
• Valves
• Vents
• Lumber
• Concrete
• Paint

Irrigation districts must also pay retail sales or use tax on purchases/rentals of equipment or supplies needed to maintain or operate irrigation facilities. It is immaterial whether the use of these items is related to BOR property.

Examples of equipment and supplies include, but are not limited to:

• Crew trucks
• Excavators
• Backhoes
• Tools
• Laser levels
• GPS equipment
• Herbicides

More information

• The Government Contracting Section of the Construction Guide
• RCW 82.04.050(12) “Sale at retail,” “retail sale.”
• WAC 458-20-17001 – Government contracting