Lawmakers changed the sales tax exemption. Will Oregon residents still want to shop Tri-Cities?

Daffodils bloom with the Capitol in the background in Olympia, Wash.
Daffodils bloom with the Capitol in the background in Olympia, Wash. Associated Press

Of all the new, last-minute tax measures approved by the Legislature two weeks ago, one in particular likely will cause headaches for Mid-Columbia retailers in coming months.

Oregon residents will no longer get a sales tax exemption right away at a Tri-Cities checkout counter.

Thanks to ESSB 5997, out-of-state shoppers will have to pay the sales tax upfront, save their receipts and file for a one-time, yearly reimbursement from the state of Washington.

They will qualify only if the amount they are requesting exceeds $25.

The change launches in July, and does not affect car sales. However, it appears to apply to everything else.

The bill was approved as part of the two-year state budget and is on Gov. Jay Inslee’s desk. If he signs it or does nothing, it becomes law. He could veto it, but that’s not expected.

The measure made its way quietly through the Democrat-controlled Legislature this year, and was approved in the Senate, 25-22, and in the House, 55-43, during the night, just before the session ended. No Tri-City area lawmaker supported it.

Too bad the measure was not properly vetted. In the past, similar proposals have been stopped.

In 2016, voters overwhelmingly opposed Initiative 1464, which would have rescinded the out-of-state sales tax exemption in order to raise money for a campaign finance reform program.

At the time, those in favor said getting rid of the exemption closed a tax loophole. Those opposed called it an unfair way to raise taxes. That’s because retail stores in Washington border towns end up taking the hardest hit.

Oregon has an income tax, but no sales tax. The idea behind the long-standing tax exemption for Oregon residents has been to encourage out-of-state shoppers to buy goods in Washington.

Otherwise, if they have to pay sales tax they might not bother to cross state lines.

It is a system that has helped bring business to Washington’s border communities for decades.

Barbara Johnson, manager of Columbia Center, estimates that 20 to 25 percent of cars parked in the mall parking lot on any given weekend are from Oregon.

Johnson said she thinks the Tri-Cities will still be an attractive shopping destination to our southern neighbors, but that Washington towns near Portland likely will be hurt the most.

We expect a frustrating backlash by Oregon residents, and unfortunately it will be up to Tri-City business managers to explain the situation state lawmakers put them in.

We also think the new system will give Oregon residents another reason to shop online instead of making purchases in stores.

Colin Hastings, executive director of the Pasco Chamber of Commerce, said the negative effects may not be felt instantaneously.

But over time, as people come to understand the complexity of the new reimbursement system, he thinks the trend will be fewer Oregon shoppers making the drive to the Tri-Cities.

Clay Hill, government affairs director for the Association of Washington Business, said approval of ESSB 5997 was “especially disheartening” because there was a unified voice of opposition by business and retail organizations.

One lawmaker, Rep. Ed Orcutt, R-Kalama, fought for mitigation money to help offset the negative impacts on border communities, but his suggestion didn’t get enough support.

Democratic lawmakers are betting they will raise $53 million for a two-year budget from out-of-state shoppers who don’t turn in their paperwork or who don’t meet the $25 minimum threshold.

But it is the border communities that will pay the biggest price for the tax grab, and it isn’t right to put the burden primarily on the edges of the state.