Retailers get direction regarding B.C. sales tax exemption

By Ryan Wynne

On July 16 another Skagit County Superior Court judge helped local governments breathe a sigh of relief when he granted a preliminary injunction requiring the state Department of Revenue (DOR) to instruct all Washington retailers to collect retail sales taxes from residents of all Canadian provinces while legal steps are in progress.

“We are very pleased that our work together has resulted in clarity for our retail businesses and moves us closer to a court ruling on the merits of the case,” Bellingham Mayor Dan Pike said in a press release.

Judge Michael Rickert’s decision is the latest in a case between the DOR and local governments. Whatcom County and the city of Bellingham filed suit against the DOR challenging its interpretation that the harmonized sales tax (HST) British Columbia put into effect on July 1 is not a sales tax.

The DOR had initially informed retailers that on July 1, they would no longer have to charge B.C. shoppers sales tax. The move to an HST qualified B.C. shoppers for a sales tax exemption, the DOR determined.

But, the day before the exemption was scheduled to go into effect, Judge Susan Cook issued a temporary restraining order, which led retailers to question whether they should collect sales tax from B.C. shoppers. Cook’s order indicated that retailers might have to pay back taxes they had chosen not to collect if the courts ultimately found in favor of local governments.

Ken Oplinger, Bellingham/Whatcom Chamber of Commerce president and CEO, said he is pleased the judge decided to move forward expeditiously to give clear direction to retailers.

Uncertainty has been especially hard on smaller businesses, Oplinger said. Smaller businesses seemed less inclined to offer the exemption because of concern they would have to pay taxes back, he said. At the same time, he said, their larger counterparts decided to offer it anyway because paying it back wasn’t as much of a concern to them.

“It was but a blip on their radar,” Oplinger said.

Despite the two court decisions, Mike Gowrylow, communications director for the DOR, said as the case progresses, the department would continue to stand by its original interpretation, which is the same one it has had since 2003, when it first started recognizing the HST as a value added tax, not a sales tax.

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