Shoppers with Oregon ID will lose their Washington sales tax exemption as they’ve known it under a bill approved over the weekend in Olympia.
Starting in July, the sales tax exemption for Oregon residents and some others, such as British Columbia residents, will no longer be in effect, according to the provisions of the bill, which was passed as part of the two-year state budget.
Starting in January, Oregon residents will need to submit an annual application to the Washington Department of Revenue to receive a reimbursement of paid state sales taxes totaling $25 or more. Only one application per calendar year will be allowed.
The Washington sales tax is 6.5 percent. There will be no reimbursement for local sales taxes. A state revenue department spokeswoman said further details have yet to be worked out.
The state anticipates the change will generate nearly $53 million in fiscal years 2020-21.
The change comes after at least five years of off-and-on attempts to alter or eliminate the sales tax exemption. The previous proposals often featured Washington retailers along the Columbia River saying the exemption was necessary to keep them competitive with sales tax-free Oregon. Proponents said the exemption was unfair and a drain on potential money for Washington.
On Monday, at least two Clark County retailers fretted what the change would do to their business. And both retailers said that unlike proposals in previous years, they were not aware of this one until contacted by The Columbian.
“It’s going to be devastating for many or the majority of businesses here locally in Southwest Washington,” said Debbie Runyan-Parker, owner and president of Runyan’s Jewelers, 327 N.E. Fourth Ave., in Camas.
“We’re just coming out of the recession and now they’re hitting us with this. It will definitely make a mark on how much business we do,” said Runyan-Parker, who estimated 20 percent of her store’s sales are to Oregon residents.
Ed Fischer, owner of Camas Bike and Sport, said he also anticipates a loss of Oregon customers.
“This could be the straw that breaks the camel’s back in my retail business here,” said Fischer, who said the exemption was sometimes a motivation for an Oregon resident to choose to come to his shop rather than the 60 bike shops in the Portland area.
“Now, why would they do that?” he said, noting that many bicycles in his shop sell for $1,000 or more. “I have people who will buy a high-level bike due to the fact they know they can buy and not have to pay the sales tax.”
ESSB 5997 was approved in the Democrat-controlled House on Saturday, 55-43, along party lines. It was approved in the Democrat-controlled Senate on Thursday, 25-22. The Senate president and House speaker signed the bill on Sunday.
Here is how legislators from the 17th, 18th, 20th and 49th legislative districts voted:
House – Yes: Monica Stonier, Sharon Wylie. No: Richard DeBolt, Paul Harris, Larry Hoff, Vicki Kraft, Ed Orcutt, Brandon Vick.
Senate – Yes: None. No: John Braun, Annette Cleveland, Lynda Wilson. Excused: Ann Rivers.
The local votes were along party lines, with the exception of Cleveland, D-Vancouver.
Stonier, in a phone interview Monday evening, said she voted in favor in part because of her belief that some Washington residents who’d moved from Oregon were keeping the Oregon driver’s license and unfairly — and illegally — reaping the benefit of the sales tax exemption.
“I think that continues to be unfair and it was time to make a change,” Stonier said.
There was little to no public testimony about the bill, Stonier said, adding, “The bill moved pretty quietly through the system.”
Rep. Larry Hoff, R-Vancouver, said that changes to the state’s nonresident sales tax would end up hurting multiple businesses in Clark County.
“That’s certainly not going to help our local retailers at all,” said Rep. Paul Harris, R-Vancouver.
Rep. Sharon Wylie, D-Vancouver, voted for the change to the sales tax.
“It’s complicated because I’ve been listening to the business community as long as I’ve been in office and I talk to some businesses who said they won’t lose customers,” she said.
She said that removal of the exemption was “inevitable” and there just wasn’t enough votes from Southwest Washington to keep it. She said that creating a refund mechanism was the best that could be hoped for.
During the Clark County Council’s Monday morning legislative conference call, Josh Weiss, the county’s lobbyist, said that it would increase the county’s sales tax revenue. But he added, “The businesses in your area are not going to like it.”
The Greater Vancouver Chamber of Commerce and the Association of Washington Business opposed the change in the sales tax exemption.
“I think it could be detrimental to a lot of the businesses in Clark County,” said John McDonagh, Vancouver chamber president and CEO. “We’ve heard from members whose annual sales are 15 to 25 percent from people in Oregon. That will create a disincentive for them to continue to shop over here.”
The Legislature pushed through the change toward the end of the session because of a desire for added public money, said Gary Chandler, vice president of government affairs for the Association of Washington Business.
Chandler said proponents of the bill are betting on enough Oregon residents not bothering to follow through on the necessary annual paperwork.
Gov. Jay Inslee has not taken a position on the bill, deputy communications director Tara Lee said in an email. Inslee, Lee said, could sign, veto in full or partially, or take no action. She said the bill would be reviewed as part of the governor’s overall state budget review.