Tax & Accounting Blog

Popular Washington Sales Tax Exemption Threatened by New Initiative

Blog, Indirect Tax, ONESOURCE, Sales and Use Tax April 27, 2016

If a recently introduced initiative passes, southwest Washington’s ability to lure Portland-area consumers may be threatened. Currently, Washington sellers may waive state and local sales taxes for residents of states (including Oregon, Montana, and Alaska) that either don’t levy a sales tax or levy a sales tax of less than 3%. According to a 2012 Tax Exemption Survey by the Washington Department of Revenue, the purpose of this exemption is “To enable Washington sellers, especially along the Oregon border, to compete with merchants in other states that either: (1) do not levy a retail sales tax or (2) levy a sales tax with a low rate.”

Initiative 1464 (also known as the “Washington Government Accountability Act”) would, among other things, repeal the sales tax exemption for residents of no- or low-tax states, in order to help fund campaign finance reform in Washington. This worries retailers in the southwest Washington area, which is just across the Columbia River from Portland. One area merchant believes that, should the initiative pass, he would lose “at least half of his Oregon business.”

However, such concerns may ultimately be premature. The initiative’s supporters must gather 246,372 signatures by July 8 in order to get it placed on the November 2016 ballot, and it must then be approved by a majority of Washington voters.