An effort underway in Olympia would limit the ability of Oregonians to shop tax-free in Washington.
The plan would require out-of-state residents to pay the sales tax at the register, but they could apply for a refund later if the amount spent exceeds $25.
“I think the rebate is a bad idea,” said Rep. Paul Harris, R-Vancouver. “If we’re actually going to give this back, give it to them at the register. Don’t create another bureaucracy.”
The measure is part of a proposal Democrats are pushing that would close current tax exemptions and bring in $356 million in the next two-year budget cycle. Curbing the tax exemption for nonresidents would bring in an estimated $49.3 million.
Lawmakers are in a double overtime special session that ends at midnight on Saturday. If they don’t pass a two-year operating budget by the first of July, the state would temporarily layoff more than 26,000 employees and partially shutdown.
Harris said he believes the tax exemption could be part of the end game.
“Typically, when there’s a lot of chatter, it’s one of the bills that’s (moving) somewhere,” said Harris, a ranking Republican.
Business leaders have long opposed the measure, saying it would negatively impact Clark County businesses.
“I’ve always had the position that eliminating the nonresident sales tax exemption would have a negative impact on Vancouver, on our community,” said Sen. Annette Cleveland, D-Vancouver. “I’ve met with many businesses in Vancouver, particularly on Main Street. They have … demonstrated to me that in some cases 40 percent or more of their business is from Oregon residents.”
Rep. Sharon Wylie, D-Vancouver, said at the risk of sounding like she’s waffling, she could understand both sides of the argument.
“People are polarized on this issue,” she said.
But without closing tax exemptions, the budget would merely “keep the lights on,” Wylie said.
Democrats initially advocated for a capital gains tax on the state’s wealthiest residents. After opposition from Republicans, they proposed closing some current tax exemptions.
“I would prefer that we look for a more comprehensive reform of our tax system,” Wylie said. “But elimination of loopholes and special preferences are where we must go without tax reform. Everyone wants us to tax someone else.”
Current law allows for shoppers from other states with a sales tax of 3 percent or less to be exempt from paying Washington’s sales tax. Oregon, Montana and Alaska all qualify for the exemption.
Among the other tax loopholes Democrats would like to close are the sales tax exemption on bottled water and another tax exemption for oil refineries.
Some Republicans have questioned the need for new dollars.
Sen. Ann Rivers, R-La Center, in a previous interview with the Columbian, questioned why new taxes were necessary. She pointed to the uptick in the state’s economy and a positive revenue forecast that showed more money would be in state coffers.
Legislators have pushed to close the tax exemption for nonresidents for several years.
“It will eventually pass,” said Rep. Jim Moeller, D-Vancouver. “The forces lined up against it will go, and it will eventually be done — but it may not happen this year.”
