House Democrats used their superior numbers to push through a tax measure this evening that ends the sales-tax exemption for out-of-state shoppers, turning the tax break into a refund program. House Bill 2036 raises about $47.3 million in the next biennium, if the Republican-controlled Senate agrees to pass the measure as part of ongoing budget negotiations at the Capitol.
As crafted by Rep. Reuven Carlyle, the Democrats’ Finance Committee chairman, the measure does not actually end the ability of out-of-state shoppers to get a tax break. But it does make them fill out paperwork and apply for the refund.
The measure passed on a 52-to-35 vote with no Republicans in favor and two Democrats – Rep. Monica Stonier of Vancouver and Rep. Chris Hurst of Enumclaw – crossing over in opposition.
The measure had been part of a package of tax-exemptions that Carlyle and the Democratic majority had hoped to repeal to generate $255 million in new revenue for K-12 schools and higher education. But Carlyle broke the tax-refund measure out as a separate measure to put the money into the $33.6 billion base budget House Democrats have proposed for 2013-15.
Carlyle said the money was needed in the base budget replace the $50 million he had hoped to secure in a telecommunications tax-reform bill that passed earlier in the evening and would equalize tax rates on all kinds of phone services in the telecommunications industry – except those via satellite technology.
In a compromise with the Senate, Carlyle dropped the satellite industry from the tax, which blew a hole in Democrats’ budget that otherwise balances.
Our story on the telecom bill is here.
Businesses in border counties and the Washington Retail Association have fought against ending the sales-tax exemption on out-of-state purchases from states that have no or low sales tax rates. Some have argued the tax helps businesses that rely on consumers coming over the border from Oregon, which does not have a sales tax.
But critics of the tax break say half of the tax exemption is claimed on purchases by visitors to the Puget Sound area.
“It’s a refund. If you buy a refrigerator you are going to fill out the form and get a refund. If you buy a pack of gum on your way home at the gas station you[‘re probably not,” Carlyle said. “It’s the way the Canadians do it with a great deal of success.”
The measure goes to the Senate where a Republican-led majority coalition has taken a firm no-new-tax position in public.
The GOP-led Senate and Democrat-led House are scheduled to end their 30-day special session on Tuesday, but few think that is a realistic.