Alright, I think the whole state vs federal income tax thing is a little shady but here goes.
If you live in WA, AMF will only take out Federal and WA state income taxes and since WA is income tax free, they only take out the federal stuff.
As for the legality, since AMF has bases all over the country, we can use this little lapse in communication between states to our advantage.
WA State Taxes:
Since AMF does fly in WA, when the WA state income tax people look at your taxes, they only see you as a WA resident who is working for a company that does in fact fly in WA therefore, WA believes you are 100% WA and nothing else (tax free =
OR State Taxes:
Since you technically are based in OR, OR is your "Tax Home" state therefore you should be paying OR income taxes because more than 50% of you income is being made in OR (because of your base of operations being in OR). Now, as long as you don't report anything to the state of OR, there is no way for them to find out that your base of operations is in OR short of calling AMF in Burbank and asking them which base you are part of. Since they have no reason to suspect that you are flying in OR (because neither federal or WA will tell them otherwise), they will never find out about you actually being based in OR. This is how the WA living pilots at PDX get away with not paying OR state income tax (to my knowledge).