Ending sales tax exemption for Oregonians is a ‘revenue killer’

Area business owners, legislators say SB 5997 will have consequences on Clark County communities

Tax graphic
VBJ File

“A sad piece of piece of legislation for the Vancouver business community.” This is how Rep. Larry Hoff, R-Vancouver, described the legislation that was recently passed by the Washington house and senate that will repeal the state’s sales tax exemption for Oregon residents.

Over the last weekend in April, the state house and senate passed Senate Bill 5997, which will not allow people with Oregon ID to avoid the sales tax at retailers in Washington. Instead, Oregon residents will need to submit an annual application to the Washington Department of Revenue to receive a reimbursement of paid state sales taxes in the amount of $25 or more.

If the bill is signed by Gov. Jay Inslee, the sales tax exemption will no longer be in effect starting in July. The bill is still currently being reviewed by the governor’s office, and was passed as part of the two-year state budget. The state claims the change will bring in nearly $53 million in fiscal years 2020-2021.

The passing of this legislation has caused some anger and concern among numerous area business owners and area legislators.

“The estimate that the supporters (of this legislation) made on how much revenue is going to be generated by the state is way overblown,” Hoff said. “Oregonians are simply just going to stop coming to Washington. Why would they come to Washington and pay the tax, and then subscribe to this strange remittance program that they can only apply for once a year? It’s a sad turn of events – one that didn’t need to happen. It was just a ‘revenue solution’ for the state – it’s a revenue killer for some of the businesses.”

Sen. Annette Cleveland, D-Vancouver, said she has always opposed eliminating the non-resident sales tax exemption because too many of the local businesses here rely on Oregon customers.

“I have met with a number of Vancouver merchants who have opened their books to me,” Cleveland said. “Some have an out-of-state-resident customer base of over 50 percent. For this reason, I strongly advocated over the past seven years for the sales tax exemption to remain, as it helps create some equity and fairness for communities and businesses such as ours, bordering a state with no sales tax. I am also concerned that the assumption of new revenue to our state through elimination of this exemption is faulty, as I believe instead, Oregon shoppers will choose to stay home to shop.”

Rep. Brandon Vick, R-Vancouver, and Rep. Vicki Kraft, R-Vancouver, also both echoed the same thoughts as Hoff and Cleveland, regarding the legislation.

“Moving from a sales tax exemption to a one-time-per-year remittance program will result in less Oregon shoppers on our side of the river,” Kraft said. “Why would you spend here, when you can save money and time by shopping in your own state? Ultimately, this could result in some of our local businesses having to close their doors and fewer jobs.”

Vick said he offered an amendment to the bill that would have reimbursed area businesses for the cost of compliance with this new tax, which would have also reimbursed local governments for the inevitable lost sales tax revenue on the corresponding products and services that out-of-state shoppers consume on their visit. He said other ideas included limiting the tax to the Puget Sound area, resulting in a tax on tourists, and holding harmless those who live in a border community.

“At the end of the day, I am concerned why anyone representing Washington state supports a policy discouraging Oregonians from spending money here,” Vick said. “The effect of this legislation will be a reduction in shopping, employment and revenue for both our businesses and local governments. This is a misguided piece of legislation, which will only hurt Washington businesses, families and communities.”

Attempts to reach Rep. Monica Stonier, D-Vancouver, and Rep. Sharon Wylie, D-Vancouver, who both voted in favor of the bill, prior to the Vancouver Business Journal’s deadline were unsuccessful.

What do area business owners think?

Numerous Clark County area business owners are voicing their opinions on the legislation that will do away with the out-of-state tax exemption, and most of those opinions are not positive. Sandy Starks, who owns Vancouver-based Soha Sign Company with her husband Mike, said their location and the nature of their business means that the potential impact on Soha Sign Company could be significant. She said they are heavily involved with property management organizations with facilities sprinkled throughout the Portland Metro area and beyond – sometimes as far south as Salem, Ore.

“These customers depend on us to provide effective marketing products in the form of apartment signage, monuments and promotional signage,” Sandy Starks said. “The products they are seeking are often thousands of dollars, high-end monuments and directional signage. The property management companies and builders come to us because we develop highly effective signs that get facilities noticed and filled. The tricky part is that ultimately, the actual owners of these complexes are price-driven. The interesting part is that many of our management and construction companies are Washington based, so they may lose their choice to support fellow Washington-based vendors. Even though consumers are allowed to make a one-time claim for sales tax paid, at the time of sale, the perception is still going to be that our products are more expensive.”

Rand Schiltz, owner of Rand Jeweler in Vancouver, said that although there will certainly be a percentage of business lost due to the legislation repealing the sales tax exemption, he thinks he will still be able to match up to his Oregon competitors well.

“Currently my business has approximately 8-10% of yearly sales from out of state,” Schiltz said. “With a pretty loyal customer base I am optimistic that I will keep many of my customers from across the river. (This) probably cannot be said for all businesses here. The business that I, along with all other border retailers, will most likely lose if the first-time buyer looking to explore what options might be available across the river in our wonderful community. Knowing they will be charged 8% or more for like items could certainly discourage them.”

Scott Parnell, owner of Samson Sports in Camas, said that one of the things that frustrates him the most about this legislation is how quickly it seemed to be pushed through the process of being passed and ready to be signed. He said he feels like it’s too late now for business owners and community members to be able to voice their opinions on the subject and make a difference.

“I’m also thinking, who is the winner here?” Parnell questioned. “If people from Oregon have to pay sales tax, they won’t come over here. So, how does Washington win? I don’t see a scenario where this makes sense. A good percentage of our (Samson Sports) business comes from Portland, probably at least 20%.”

The bill arrived at Gov. Inslee’s desk on April 30, but he had not taken a stance on it by the Vancouver Business Journal’s deadline.

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Joanna Yorke is the managing editor of the Vancouver Business Journal. She has worked in the journalism field since 2010 after graduating from the Edward R. Murrow College of Communication at Washington State University in Pullman. Yorke worked at The Reflector Newspaper in Battle Ground for six years and then worked at and helped start ClarkCountyToday.com.