Would sales tax exemption removal hurt businesses in southwest Washington?

Clark County business leaders say a bipartisan initiative to get big money out of Washington’s elections could have some negative consequences for small businesses near the Oregon border.

 

That’s because Initiative 1464, which would ban lobbyists and public contractors from making huge donations to influence state elections, require political ad makers to reveal their financial backers and provide online public reporting on lobbyist spending, would also do away with a sales tax exemption for non-Washington residents who pay little to no sales tax in their home states.

 

Chandra Chase, communications director for the Greater Vancouver Chamber of Commerce, says the local Chamber believes doing away with the sales tax exemption will negatively impact local businesses, particularly those in Vancouver, which shares two bridges with Oregon, a state that has no sales tax.

 

“It would absolutely impact everyday business sales in southwest Washington,” Chase says. “Vancouver is unique in our population size and proximity to Oregon. We will be the largest city negatively impacted if Oregon shoppers do not receive the exemption.”

Sho, who says everyone knows him by just one name, is the general manager of Lutz Hardware in historic downtown Camas. He says the hardware store doesn’t have too many customers who take advantage of the current sales tax exemption for residents in states like Oregon that have little to no sales tax. Out of maybe 200 shoppers each week, Sho says perhaps three or four are from Oregon and fill out paperwork to get the sales tax exemption. Photo by Kelly Moyer
Sho, who says everyone knows him by just one name, is the general manager of Lutz Hardware in historic downtown Camas. He says the hardware store doesn’t have too many customers who take advantage of the current sales tax exemption for residents in states like Oregon that have little to no sales tax. Out of maybe 200 shoppers each week, Sho says perhaps three or four are from Oregon and fill out paperwork to get the sales tax exemption. Photo by Kelly Moyer

As it stands now, Oregon shoppers who come across the Columbia River to visit Washington are not required to pay the Washington’s sales tax on retail goods. Local businesses fear that, if Oregonians were required to pay the 6.5-percent tax, particularly on higher-cost purchases like furniture and jewelry — the sales tax exemption would still be on place for car and boat purchases — those out-of-state shoppers would rather stay in Portland than come to Vancouver.

 

“The sales tax exemption is good for business,” Chase says. “We’ve had a number of long-standing community leaders and business owners share information regarding this issue.”

 

In 2013, the last time Washington voters had a chance to do away with the sales tax exemption for out-of-state residents who live in states like Oregon with little to no sales tax, several Clark County business owners rushed to defend the exemption.

 

“Shorty’s Nursery opened its books to prove over 25 percent of their business comes from Oregon shoppers,” Chase said. “If Oregon shoppers were forced to pay the sales tax, they simply would not shop here. Almost every business would be negatively impacted by the removal of the sales tax exemption.”

 

Other Vancouver leaders, including Kathy Gillespie, the director of the Vancouver Public Schools School Board and Democratic candidate for the state House of Representatives, Legislative District 18, said at a candidates forum held Oct. 12, in Camas, that she does not support Initiative 1464 because the funding would come from the removal of the sales tax exemption.

 

Gillespie said she believed that many of the Initiative’s backers in the Seattle area don’t realize how unique southwest Washington is because of its proximity to Oregon, noting that not only do Clark County area businesses have to worry about Oregon shoppers staying on their side of the river if a sales tax exemption went away but that they also have to contend with local Washington shoppers leaving the state to cross into Oregon and avoid paying sales taxes on retail goods and services.

 

The sentiment is slightly different when you travel away from the Vancouver core, however. Several small business managers and owners in Camas’ historic downtown said the removal of the sales tax exemption would not be a huge hit for them.

“I don’t think it would stop people from shopping here,” said Sho, the general manager of Lutz Hardware, a 68-year-old business in the heart of downtown Camas. “We have people who use the exemption, on bigger purchases and on smaller purchases, too. But it’s a small number: Maybe three or four customers a week out of 200.”

Ann Matthews, owner of Arktana, a boutique shoe store in downtown Camas, says she isn’t too fazed by the idea that a sales tax exemption allowing Oregon shoppers to avoid paying Washington sales tax might go away. Most of her out-of-state shoppers who qualify for the exemption either don’t bother filling out the required paperwork or they would still shop at Arktana even if they had to pay sales tax, Matthews says. Photo by Kelly Moyer
Ann Matthews, owner of Arktana, a boutique shoe store in downtown Camas, says she isn’t too fazed by the idea that a sales tax exemption allowing Oregon shoppers to avoid paying Washington sales tax might go away. Most of her out-of-state shoppers who qualify for the exemption either don’t bother filling out the required paperwork or they would still shop at Arktana even if they had to pay sales tax, Matthews says. Photo by Kelly Moyer

Down the street, at Arktana, a boutique shoe and accessories store, owner Ann Matthews voiced similar thoughts.

 

“No, I don’t think it would have an effect on our business,” Matthews said. “Half the time, people who come here from Oregon don’t even use it (the exemption). Some of them don’t want to get out their driver’s license and share that information.”

 

Matthews said she’s confident that even her customers who do take advantage of the sales tax exemption would still come shop at her store if Initiative 1464 passes in November.

 

“We have clients who come here exclusively and many of them come from Oregon,” Matthews said, adding that her out-of-state shoppers are looking for products they can’t easily find in their own home states.

 

That’s what backers of the Initiative have been trying to tell worried business owners, particularly those in Southwest Washington: that Oregon shoppers won’t be put off by the end of the sales tax exemption because they are coming to Washington businesses for other reasons  such as finding a unique pair of imported leather boots at Arktana that they maybe can’t find in Portland.

 

“The evidence indicates that this will not have a big, dangerous impact on businesses,” said Peter McCollum, spokesman for the Initiative 1464 campaign.

 

He points to a 2011 study by the state of Washington’s Joint Legislative Audit and Review Committee that found “past studies by independent sources and the Department of Revenue noted that merchandise is a key factor in determining where people shop.”

 

McCollum also notes that the state’s high sales tax is, in part, the result of special interest groups that have fought against other revenue streams. Initiative 1464, he argues, would help the state get those types of special interests out of the political process and would be a “better path toward a long-term solution” for economic stability.

 

Repealing the sales tax exemption for out-of-state shoppers in Oregon and other states like Montana, Colorado, Delaware, New Hampshire and Alaska, would fund the oversight and enforcement of Initiative 1464’s finance and ethics laws. Backers say such enforcement will cost around $30 million each year. Closing the sales tax exemption loophole would raise more than $285 million over the next 10 years.

 

McCollum says that he understands the concerns about the removal of the tax exemptions, but adds that much of the concern is not based on actual statistics. He points to other studies, such as the Washington Budget and Policy Center’s report that found “no evidence that the sales tax break creates jobs or stimulates business activity in  Washington state.”

 

Instead, McCollum says he hopes Southwest Washington voters will concentrate on the benefits of Initiative 1464, which has supporters from all sides of the political spectrum, including the progressive-leaning League of Women Voters of Washington and Greg Moon, co-chair of the far-right-leaning Seattle Tea Party Patriots group.

 

“In Washington state this year alone, there will be $100 million spent on candidate campaigns and the overwhelming majority of that — 80 percent — is coming from lobbyists, unions, PACS, special interest groups … many are coming from outside the state,” McCollum says. “These big spenders don’t represent the best interests of Washington residents. They don’t represent the best interests of the people in Clark County.”

By getting the big money from special interest groups out of Washington’s elections, McCollum says, Initiative 1464 would make Washington’s government more transparent, would help average citizens be able to run for political office and would make the state a more liveable place for everyone.
“The benefits are significantly greater” than any negative effects that could be felt by small businesses if the sales tax exemption goes away, McCollum says.

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About The Author

Kelly Moyer has been reporting for community newspapers since the mid-1990s, including the Newport News-Times on the Oregon Coast; the Lewistown Sentinel, a daily newspaper in central Pennsylvania; the Gresham Outlook, Wilsonville Spokesman, Sherwood Gazette and South County Spotlight newspapers in the Portland metro area; and The Reflector newspaper in Battle Ground, Wash. She also is the former managing editor of Midwifery Today, an international magazine for birth professionals. Kelly, a University of Oregon alumnus and Pennsylvania native, lives with her family in Northeast Portland.

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