fbpx

Tax change will hurt business, retailer says

By Doug Clark

Brian Gaines has survived a business failure and a medical crisis that put him in a coma for several days. He learned that “fear has four letters, faith has five. Faith is greater than fear.”

But now the owner of Home Furnishings Association member Wall 2 Wall Furniture & Mattress in Walla Walla, Wash., says one-fourth of his revenue is in jeopardy because of a sudden tax change implemented by the state legislature.

“We didn’t see it coming until the day it happened,” he said this week.

The measure ends a sales-tax exemption granted to residents of other states that have no or low sales tax. In southern Washington state, that means residents of Oregon. Walla Walla is near the state line, and Gaines says customers from Oregon account for 25 percent of his sales. One attraction is that they have not had to pay the 6.5 percent Washington sales tax.

A tax on a fast track

A bill to kill that exemption was introduced in the state Senate March 29 and given its final vote in that chamber less than a month later. It made its first appearance in the state House April 26 and was approved the next day following a suspension of the rules to push it through faster.

Gov. Jay Inslee has not yet signed the legislation.

It was controversial. The Senate vote was 25-22; the House vote was 55-43. Proponents said it would raise necessary revenue for the state; opponents asserted it would hurt businesses near the state line.

Gaines agrees with the latter argument. “We’re not saying to Oregon residents we appreciate you shopping in our state,” he said. And if they stop shopping in Washington, they won’t pay Washington sales tax and the state won’t gain revenue. Many businesses will feel the loss.

Another provision in the bill, however, allows Oregon residents to apply to the state of Washington for a rebate of the Washington sales taxes they pay – but just once a year, and only if the amount is $25 or more.

“Our legislators really believe that Oregon consumers are so stupid that they won’t send in their receipts?” Gaines asked. “They’ll give all the money back anyway.”

Any loss of business hurts

Gaines, who opened Wall 2 Wall in 2015 with his wife, Tracy, and son, Trevor, expects to keep most of his Oregon customers for a while since many shoppers from across the state line are in the habit of driving to Walla Walla, which is the largest city in the area. But that could change over time, Gaines said. For small businesses like his, any loss of trade can have a big impact.

“I know how quickly that can happen,” he said.

Government tax and regulatory policies, especially when implemented with little warning, can trigger negative and sometimes unintended consequences. That’s why the Home Furnishings Association tries to look out for these actions and report on them to keep members informed. And retailers should build relationships with their state and local government representatives and make their concerns known.

“Most of these guys don’t understand Main Street America these days,” said Gaines, whose business sits on East Main Street.

Despite this new challenge, he expressed faith about the future.

“We’re a small family store trying to make a living and trying to do things right,” he said. “We’ll do the best we can, and we’ll get what God will give us.”

Doug Clark is content manager and government relations liaison for the Home Furnishings Association. Contact him at 916-757-1167 or dclark@myhfa.org