Washington Governor Ends Canadian Sales Tax Exemption

Washington Governor Ends Canadian Sales Tax Exemption

Washington State Governor Chris Gregoire has signed a bill to end a sales tax exemption for Canadian shoppers visiting Washington. 

This bill is sponsored by Democrat Senator. Kevin Ranker (San Juan Island) whose goal was to generate additional Tax Revenue from stores in Washington, where visiting Canadian shoppers could contribute as much as 10 percent (depending on local taxing jurisdiction)  to the sales tax collected by retailers.

Up until today, Washington granted an exemption to visitors from states or provinces with no comparable sales tax. Canada adopted a new Value-Added Tax this past year, and since Washington State has no comparable sales tax, by default, it made all Canadians eligible for an exemption to Washington State Sales Tax.

This bill SB 5763/HB 1936 was signed into law on March 14, 2011, and is scheduled to into effect on July 1st, 2011.

Supporters say that the new law will:

  • Ensure that Canadian visitors pay their fair share of taxes for products and services that they use.

  • It will help make up for budget shortfalls, by dramatically increasing the taxes paid to both locally taxing  jurisdictions and to Washington state. 

Detractors say that the new law will:

  • It will drive a lot of the revenue back over to the Canadian side of the border.  This could be especially true if the exchange rate goes swings back the other way when the US Dollar strengthens.

  • Many tax opponents believe that a tax on any segment of population is a tax on all segments of the population. If sales are reduced because  increased taxes, retailers and service organizations may be forced to lay-off staff, or cut corners elsewhere.  This means that it could actually backfire, and hurt the local economy in the long run.

  • Rather than trying to find more proactive ways to save money, our legislators will just spend any gain that they might have. 

Regardless of the outcome, what exactly does this mean for Washington State Retailers?

  • It is likely that you will need to retrain your Point of Sale staff to no longer give sales tax overrides for Canadian customers.

  • If you have existing Tax Codes/Tax Authority Rules for Canadian customers, these codes  will need to be updated so that the correct taxes rates are charged.  If you have stored Canadian customers on file, this may involve a combination of changing the existing Tax Codes/Tax Authority Rules or assigning the standard Store default Code to all of them. 

  • Essentially, this should eliminate the need for separate tax reporting for Canadian customers, however, you may want to wait for confirmation from the WA State Department of Revenue on this specific issue before  making changes. 

If you are unsure of the ramifications of these changes, please contact the CCS Retail Systems Support Department.

Leave a Reply