A supplemental budget plan unveiled by House Democrats on Wednesday would close the up-front sales tax exemption for out-of-state residents, reviving a proposal that business leaders say would have far-reaching effects in Clark County.
The plan would require Oregon residents to pay sales tax at the register if they make a purchase in Washington. They could, however, still apply for a tax refund after the fact.
The same idea was floated in the Legislature last year, only to be left out of the final budget agreement. But at least the Greater Vancouver Chamber of Commerce, an opponent of the change, doesn’t appear to be fretting the possibility this time around.
Chamber President Kelly Parker said she believes the proposal doesn’t have the political support to survive budget negotiations, particularly with only two weeks left in this year’s legislative session.
“We’re not going to spend a lot of time on this, because it’s not a productive use of our time,” Parker said. Still, she reiterated her organization’s opposition to closing or narrowing Washington’s sales tax exemption for nonresidents.
Under current 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. And no county sees a larger percentage of its retail sales come from out-of-state residents than Clark County, according to state data included in the budget plan.
The exemption gives Southwest Washington retailers an economic boost, Parker said, particularly niche businesses such as furniture stores, jewelers and others. Those retailers get 15 to 20 percent of their business from Oregon shoppers, Parker said. Taking away an incentive for those people would deliver a hit to local businesses, she said.
“To close the sales tax exemption would dissuade Oregonians from coming over to buy high-dollar items,” Parker said.
And the option to apply for a refund?
“On paper, that looks like a good-faith effort,” she said. “But in reality, it will not work.”
The House Democrats’ overall budget plan largely focuses on education, investing an extra $60 million in books, technology and basic supplies. The proposal would also restore cost-of-living pay raises for teachers, fund early learning programs and boost money for mental health services and child care providers.
To pay for part of the $200 million package, Democrats proposed repealing or narrowing four tax breaks, including the out-of state sales tax exemption. Leaders expect that alone could raise $29 million in new revenue.
The proposal follows of a separate budget plan announced by Senate leaders this week. Both chambers are offering budget tweaks as lawmakers try to satisfy a state Supreme Court mandate to invest more in education. But they likely don’t want a repeat of 2013, when legislators squabbled through two overtime sessions before finally reaching a budget deal.
“I don’t think there’s anyone here saying we’re intending to stay until June again,” said Rep. Ross Hunter, D-Medina, during an announcement broadcast by TVW on Wednesday.
Hunter and other House leaders repeatedly called their budget “normal” and “modest” — as supplemental budgets are supposed to be, they said. But closing the nonresident sales tax exemption would make waves in Southwest Washington and other border communities.
Rep. Jim Moeller, D-Vancouver, is among those who supports the idea of closing the sales tax exemption for out-of-state residents. The goal in that and other proposals is to get closer to the state’s “paramount duty, which is funding education,” Moeller said.
Whether the exemption will survive final budget negotiations is unclear. Senate and House leaders have laid out different visions in their proposals so far. Moeller noted that the plans represent a relatively small piece of the state’s overall budget.
Larger budget discussions will happen next year. The 2014 regular session is scheduled to end March 13.
“That’s plenty of time to reconcile a supplemental budget, in my opinion” Moeller said.
