Don't Mess With Taxes

Washington and Oregon have been good neighbors. But a change in sales tax collection could put a strain on that friendly relationship.

Washington has no income tax. The Evergreen State's 6.5 percent tax on retail sales is its principal tax source.

Shoppers who come up from Oregon, however, don't have to pay Washington's sales taxes. To get tax-free treatment, Oregonians simply show their state IDs and Washington businesses don't charge them sales tax on their purchases.

This courtesy is extended to Beaver State shoppers because their home state doesn't collect a sales tax. Actually, the same tax-free treatment is given to others from locales with no sales tax.

But in these tough economic times, a couple of Washington State Senators think the state should be collecting as much revenue as possible from everyone.

Sens. Cheryl Pflug and Ed Murray, both members of the state Senate's Ways and Means Committee, introduced a bill that to change Washington's nonresident sales tax exemption into a tax refund program.

Under S.B. 6061, all shoppers regardless of where they live would pay Washington's and local sales taxes on their purchases in the state. 

If they spend at least $384 within Washington's borders in one year,they then could go online to apply for a refund the state's portion of the tax. The municipalities would get to keep their tax collections.

Car purchases would be exempt from the change, but the move to refund instead of no tax collection would apply to all other sales transactions.

Pflug acknowledges that it would cost Oregon shoppers who visit Washington and that it would be a bit of a hassle to apply for a sales tax refund.

But Washington is facing a $1.5 billion budget shortfall and estimates are that the sales tax bill could bring in $18 million.

On big purchases it would be worth it, notes KVAL/CBS in Vancouver, but some Oregonians probably wouldn't bother to get their tax money back.

And some Washington retailers along the states' borders worry that it might cost them some customers.

You also might find these items of interest:

• Deducting your state and local sales taxes
• Sales tax, use tax and Internet purchases
• State use taxes tend to be useless