Authorities in Washington State have passed a bill to permanently kill a tax loophole for B.C. residents shopping south of the border.
State officials made B.C. residents eligible for a Washington State sales tax break on tangible goods purchased for use outside of the state once the harmonized sales tax came into effect last year.
The state gave retailers the option to waive its 6.5-per-cent sales tax for residents living in areas with sales taxes below three per cent. Even though the province's HST is 12 per cent, Washington's Department of Revenue considered the levy to be zero because the harmonized tax is "value added," or VAT, instead of a straight sales tax.
But several communities won a court injunction to halt the exemption last July, saying the exemption caused a huge loss of tax revenue in cross-border shopping destinations like Bellingham, where up to 10 per cent of tax collected comes from Canadian visitors.
Today, the Washington Legislature approved a Senate bill to clarify the current exemption, meaning Canadians will have to pay the sales tax.
The bill stipulates that if a province has a sales tax, value-added tax (VAT) or similar tax of three per cent or more, the exemption does not apply.
The exemption law was first enacted in the state in 1965 to attract Oregon residents to shop in Washington.
