Bill would repeal sales tax exemption

All-day kindergarten would be paid for by out-of-state shoppers

By Stevie Mathieu, Columbian assistant metro editor

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State lawmakers are considering another bill this session that would make Oregonians pay retail sales tax when they cross the Columbia River to shop.

The proposal would repeal the retail sales tax exemption for out-of-state visitors shopping in Washington, and use this new tax revenue to help pay for the state’s all-day kindergarten program.

Repealing the tax exemption would raise an estimated $26 million each year and would help the state meet its goal of offering all-day kindergarten to all kindergartners by 2018, supporters of the bill say.

Those opposing the bill say they believe it would hurt businesses in border towns, such as Vancouver, that compete with neighboring states for customers.

“One Vancouver business that sells signs attributes 40 percent of their sales to Oregon,” Washington Retail Association lobbyist Mark Johnson said Friday during a public hearing before the House Ways and Means Committee. “A downtown Vancouver antique store says 50 percent of her business comes from Oregon customers.”

The legislation, House Bill 2791, was introduced Feb. 22 and is scheduled at 10 a.m. Thursday for a vote of the House Ways and Means Committee.

Representatives from the state’s Office of Superintendent of Public Instruction and the state’s Board of Education expressed strong support for the bill because it identifies a new funding source for all-day kindergarten. The state needs an additional $176 million to fully fund all-day kindergarten, according to House staff.

About 17,000 of the state’s 78,000 kindergartners participate in the state-sponsored all-day program, and the state lags behind when it comes to meeting its 2018 goal.

Ben Rick of the state Board of

Education started his public testimony on Friday by reading six sentences from the recent state Supreme Court’s McCleary decision, which ordered the Legislature to make progress toward fully paying for basic education by 2018.

“I’m not going to pretend to be an expert on sales tax exemptions,” Rick said. But passing this bill would allow lawmakers to tell the state’s high court that “we do understand this decision and we did respond,” he said.

State Rep. Kristine Lytton, D-Anacortes, is the primary sponsor of the bill, which also is co-sponsored by Rep. Jim Moeller, D-Vancouver, and Rep. Sharon Wylie, D-Vancouver.

“We’ve made our promises to our schools and now we must honor those promises,” Lytton said. “Full-day kindergarten is probably the best investment we can make for our students to ensure that they’re successful in school and life.”

According to bill documents, the measure could cause a slight drop in sales for businesses, and it would impact border counties more than other parts of the state. Specific dollar amounts weren’t included in the bill’s preliminary fiscal document.

By the end of the bill’s public hearing last week, two people had shown up to support the legislation and two had testified in opposition.

“Should critical services like kindergarten funding be tied to a volatile funding source such as this?” Association of Washington Businesses lobbyist Amber Carter said during the hearing. “Should out-of-staters be responsible for our core constitutional mission? We think not.”

Earlier in the 60-day legislative session, state Sen. Cheryl Pflug, R-Maple Valley, introduced a bill that would make out-of-state shoppers pay retail sales tax, with the option to have some of it refunded to them later. Senate Bill 6061 stalled in the Senate Ways and Means Committee following a public hearing in late January.

That bill would have raised about $18 million in state revenue. It would have required out-of-state shoppers to pay retail sales upon their purchase. Later, they could apply for a refund of the state’s portion of the tax, which is 6.5 percent, but they couldn’t get a refund for the retail sales tax they paid to local governments. Vancouver’s retail sales tax is 1.7 percent.

So, an Oregonian buying a $1,000 item in Washington would pay $82 up front. They could apply for a refund of $65, but Vancouver would keep $17.

To get a refund, shoppers would apply online through a process that proves their out-of-state residency. They would only apply once a year for their refunds, and the refunds would have to total at least $25.

Under Washington law, shoppers from other states or Canadian provinces are exempt from paying retail sales tax if they live somewhere with a sales tax of 3 percent or less. Qualifying states include Oregon, Montana and Alaska.

The 2012 Legislature is scheduled to adjourn March 8.

Stevie Mathieu: 360-735-4523 or stevie.mathieu@columbian.com or www.facebook.com/reportermathieu or www.twitter.com/col_politics