Canadian law exempts some from paying Washington sales tax

Beginning July 1, residents of British Columbia and Ontario become eligible for a non-resident sales tax exemption on purchases of goods in Washington for use outside the state.

State law allows a sales tax exemption to residents of jurisdictions that impose a sales tax of 3.0% or less. Washington sellers are not required to make tax-exempt sales to qualifying nonresidents, but most do. The exemption applies only to tangible personal property and does not apply to lodging, meals, or other retail services that are provided in the state.

In order to receive the exemption, qualifying residents must show proof of residency, such as a driver’s license, to the Washington seller. The seller must retain the information to support the exemption in the event of a tax audit.

Residents of British Columbia and Ontario previously did not qualify for the exemption but both provinces are adopting a harmonized sales tax (HST) in tandem with the Canadian federal government beginning July 1. The HST technically is a value-added tax (VAT) and not a sales tax. Residents of other Canadian provinces that impose the harmonized VAT have been eligible for the exemption for years.

Six states, including Alaska, Colorado, Oregon, Montana, Delaware and New Hampshire, eight Canadian provinces, and four U.S. possessions already qualify for this exemption. More information can be found here.

Business impacts – Businesses, particularly those in border counties, will be able to make tax-exempt sales to BC residents. As a result, some businesses may see an increase in sales to BC residents.

Local government impacts – Sales tax revenues will decrease. In particular, local governments in border communities are likely to see a substantial reduction in local sales tax revenues. The Department of Revenue is working on an estimated revenue impact for state and local government. When it becomes available, we will highlight the estimate in future Legislative Bulletins, in our CityVoice newsletter, and on our website.

Economic and revenue forecast released

The Washington State Economic and Revenue Forecast Council has released its June forecasts. Highlights of the forecasts include:

The economic recovery lost some steam in May, but remains on track for the moderate growth we have been predicting. Recoveries are not smooth events, and this one is no exception.
For the current biennium, General Fund-State (GF-S) revenues are expected to decline by $206.8 million. For next biennium, forecasted GF-S revenues will increase by $197.4 million.
As expected, the State of Washington finally began to see positive overall employment growth in the first quarter of 2010.
New housing construction continued to improve through the first quarter according to the housing permit data, but a pause in growth is expected in the second and third quarters of this year as federal support is withdrawn.
Washington job growth is expected to remain slow through most of this year, picking up steam in the fourth quarter and throughout 2011.

The entire forecasts can be found here.

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