Clark County merchants and auto dealers statewide are mobilizing to save a couple of tax exemptions that are on the chopping block in Olympia.
Both the House and the Senate have proposed doing away with the automatic sales tax exemption enjoyed by nonresidents. The Senate bill would provide a rebate for those willing to deal with some cumbersome red tape; the House bill, which has not yet passed the House, would kill the exemption outright.
Meanwhile, car dealers are burning up the phone lines urging their senators to preserve a sales tax exemption on the value of vehicle trade-ins that saves Washington residents hundreds of dollars on the purchase of new cars and trucks.
The Senate measure would eliminate the sales tax exemption on trade-ins, which was passed by voter initiative in 1984.
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The fate of those and a long list of other proposals to plug state tax breaks won’t be known until legislative leaders reconcile the two budgets over the next week.
Local businesses made it clear that they want the sales tax exemption for Oregon residents to remain on the books back in January, after Rep. Deb Wallace, D-Vancouver, introduced a bill to do away with it. Several merchants contacted her to say they depend on customers across the river and need the sales tax waiver to compete on an even playing field.
Wallace withdrew her bill. But in the face of a $2.8 billion budget deficit, the concept has been revived in both chambers.
The Senate revenue bill, SB 6873, would require out-of-state residents to pay the sales tax but would allow them to claim a refund once they had accrued at least $25 worth of sales tax payments. They could apply for the refund electronically once a year for taxes paid on purchases made within the preceding calendar year.
The measure would yield an estimated $30.9 million in revenue to the state in 2010-2011 and $57.7 million in 2011-13.
The House revenue package, HB 3176, would do away with the exemption altogether. It would add an estimated $41.5 million to state coffers in 2010-11 and $76.1 million in 2011-13
The Legislature enacted the exemption in 1965 primarily to help Washington retailers in border counties compete with those in sales tax-free Oregon.
Don Russo, president of the Greater Vancouver Chamber of Commerce, said the potential loss of the exemption is a huge concern to local businesses.
“It’s a real deterrent to coming across the river if (Oregon residents) cannot avoid the sales tax,” he said. “For some members, it could make the difference between success and failure.”
Mark Brown, Olympia lobbyist for the city of Vancouver, said local governments have a stake in keeping the exemption as well. Lifting it would bring a little more local sales tax revenue into city coffers, he said, but it might deter more Oregon residents from shopping in Clark County.
“It could end up costing us more than the gain from eliminating the exemption,” he said. “It could be a net sum loss.”
Practice defended
John Creedon, the owner of Vancouver Ford, is warily watching the outcome of a Senate proposal to eliminate the sales tax exemption on vehicle trade-ins.
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Depending on the value of the trade-in, he said, the exemption can be worth $800 to $1,200 to Washington residents on the purchase of a new car.
“It would discourage customers from trading. They would keep their old cars,” he said. “It would undermine Washington state’s effort to modernize the fleet with more fuel-efficient, less-polluting vehicles.”
The measure also would transfer the burden of financing some of the state’s budget shortfall to consumers, Creedon said.
“They’re essentially asking Washington citizens to finance the state’s deficit at their local credit unions.”
Creedon noted that the state favored the exemption back in 1984 because it encouraged people to trade in their vehicles at dealerships rather than sell them on the street, thereby increasing sales tax and car license revenue.
Vicki Giles Fabre, executive vice president of Washington State Auto Dealers, said the proposal to end the exemption has ignited her members.
“I can just tell you that franchise dealers from all over the state have called their senators,” she said. “There isn’t a senator that hasn’t gotten numerous calls. This is an industry that has been severely crippled over the last couple of years. We’ve had a number of dealership closures and reductions in employment, and we can only see this as another blow to the industry.”
