RAINIER — Paul Nys used to buy “almost 100%” of his business supplies for his family’s Rainier-area tree farm in Longview, a 17-mile drive across the Columbia River.
“We thought we lived in a very neat place because if we needed anything for the farm … it was available right across the river. It was handy,” Nys said last week.
However, less than a month since a new Washington law changed the sales tax exemption for out-of-state shoppers, Nys is “doing everything I can to find alternatives.” He said he now plans to keep most of his business in his home state.
“We normally don’t shop in the Hillsboro and Beaverton area, but that’s going to increase,” Nys said, adding that Washington legislators have made the state “unfriendly and closed for business.”
Several Kelso-Longview business owners say they’ve already received similar comments from Oregon customers since the law took effect July 1 — a sort of foreshadowing that has them worried about the consequences of the new law.
“Everybody is going to feel it. … (Oregon shoppers) just aren’t coming in, and I don’t blame them,” said Rob Elam, owner of Elam’s Home Furnishings in Longview.
What the law does
The new law eliminates the at-checkout sales tax exemption for “tangible goods” bought by residents from sales tax-free states and countries, such as Oregon, Alaska and British Columbia. That includes products like furniture, electronics, appliances and car parts, though sales of vehicles, farm machinery and boats still qualify for an immediate exemption.
Tax-exempt shoppers will still get a break on the Washington sales tax, but only if they apply for a refund through the Washington State Department of Revenue.
Shoppers can submit one refund application per year, starting January 2020. Those applications must include copies of any receipt shoppers are seeking a sales tax refund for, according to the department of revenue’s website. However, the complete process for requesting refunds has not yet been determined.
Legislators passed the law with the intention of raising nearly $54 million in revenue for fiscal years 2019-21. The idea is that not all shoppers will submit their receipts for the tax refund. But some business owners say the lawmakers’ plan will backfire if tax-exempt shoppers like Nys stop patronizing Washington businesses.
T&T Tires owner Jim Hawkes called the new law “short-sighted on the legislators’ part.” He noted that if Oregonians don’t show up to shop, the state won’t get any additional revenue.
Too early to confirm concerns
Kelso-Longview Chamber of Commerce President Bill Marcum said it’s still too early into the new legislation to accurately predict the effect of changes in the so-called border tax on local businesses. Most businesses won’t have a formal financial report for July until mid-August, he said.
“There’s all kinds of predictions and estimates and fear, but I don’t think anyone really knows what will happen,” Marcum said.
The chamber opposed the law when it was introduced during the legislative session this year, as it did in previous years when similar bills were introduced. Lawmakers have proposed the change several times overs the last five years, but in 2019 was the first time it garnered enough support to pass.
The six local lawmakers who represent Cowlitz and Lewis counties voted “no” on the measure. They even joined in on a letter to Gov. Jay Inslee pleading that he veto the bill. That letter was sent by several legislators who represent counties that border Oregon.
“Businesses are concerned that people from Rainier aren’t going to come across the bridge to Longview because they lost their 8% advantage,” said Sen. Dean Takko, a Longview Democrat. It’s a concern he said he shared.
If the fallout from the new law ends up meeting business owners’ concerns, it could hurt the local economy in those counties.
“If you’re not making sales … I think there is a trickle down effect,” Marcum said. “If people aren’t coming to Longview to buy from Bob’s Merchandise, they won’t stop to buy lunch” or patronize other stores.
Getting creative to retain business
Fear of losing business is pushing some stores to develop creative strategies for retaining their Oregon customers.
L&J Feed owner Ron Perry said his store is offering free delivery for its Oregon customers — a service previously provided by the store with newfound popularity.
“We make deliveries about 20 times a week. It used to only be once,” Perry said.
Like an online purchase delivered to Oregon, L&J purchases that are deliveries to Oregon qualify for immediate sales tax exemption, making the service particularly attractive to these customers, Perry said.
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The deliveries cost L&J more overhead, and they require more time on behalf of employees. Perry said he sometimes deliveries until 9 p.m.
But “we think it’ll cost less than losing all that business,” Perry said.
On a recent morning just before the new law took effect, a longtime Oregon customer who buys supplies for his cattle ranch told an L&J employee that he’d never see her again because he didn’t want to pay the sales tax. He declined to give a reporter his name, but the episode highlighted why the business has to go the extra mile to retain sales to Oregonians.
“We are stuck delivering over there for nothing … but we just have to do it, or we won’t get business,” Perry said.
Instead of deliveries, Elam’s Home Furnishings is using a “tax break coupon” to attract and retain Oregon shoppers. The coupon was released in the latest Great Savings advertisement magazine, a Longview-based publication with discounts for several local stores and restaurants.
Store manager Rob Elam said the store also plans to honor the tax break discount for all its Oregon customers.
Nonetheless, Elam’s is bracing to lose some business. The store usually makes about $30,000 a month from its Oregon-based sales, Elam said, but he expects that to drop to $15,000 under the new law.
“It’s not a huge majority of our business,” Elam said, noting that about 15% of their customers are from Oregon. “It’s not going to kill us, but Washington (legislators aren’t) going to get the revenue they expect they will.”
Though a 50% reduction in Oregon customers won’t put Elam’s under, it could seriously hurt smaller retailers such as Gunnars Auto Supply on Commerce Avenue in Longview. Owner Gene Guttormsen said about 20% of his customers come from across the river, and “I can’t give up even 8%.”
But it’s still too early to know for sure whether Gunnars might face a sharp decline in customers, he said. Guttormsen hopes his staff’s experience, knowledge and customer service will keep his Oregon shoppers loyal.
“People like coming here because … I have more experience than anyone else. They trust us,” Guttormsen said.
‘I really feel the customers we have are loyal’
Other business owners are equally optimistic that their services have a high enough quality to retain Oregon shoppers despite negative comments about the new law.
Hawkes, the tire shop owner, said he expects to keep 90% of his Oregon customer base, thanks to the shop’s reputation as a competitively priced, high-quality auto service center.
“I really feel the customers we have are loyal, and we will do what we can to take care of them,” Hawkes said. That includes printing copies of sales receipts on request or sending customers end-of-the-year reports listing all of their purchases for the year, he said, making their refund filing process easier.
Employees at Country Village Nutrition Shoppe and Cafe on the Longview-Kelso border said their specialty products are rare enough to retain customers. The store’s stock includes vitamins, herbal supplements, health and beauty aids and gluten free foods.
“We are such a specific type of store and there’s so few of us around that we haven’t really lost a lot of business (so far),” said Patti Jones, lead cashier.
Plus, the store offers high-quality customer service with employees on hand to provide expert advice on the products, Jones said. It’s a feature not available over the internet.
Manager Gayle Acker said the store has not seen a drop in customers this month. She said the Oregon customers are “just getting a feel for what it will cost them” to shop with sales tax.
For customers who abandon Country Village for similar stores in Oregon, Acker predicts they’ll discover it’s not worth the extra time and expense to drive farther away just to dodge the sales tax.
“By the time they get on the road, they are filling up their tanks (with gas) and they probably have to get lunch,” which might more than counteract the money saved on sales tax, she said.
Hawkes added that Oregon shoppers who take their business to in-state shops that are farther away for them than Longview are “tripping over dollars to pick up nickels.”
But Nys, the Rainier tree farmer, said he still plans to shop in Hillsboro or Portland, even if its slightly more expensive, because it’s “just the principle of the thing. We are being treated poorly, unnecessarily and punitively,” as shoppers.
“They are holding our money,” Nys said. “The only benefit we get from it is we get to breathe the air over in Cowlitz County.”
“(It’s) just the principle of the thing. We are being treated poorly, unnecessarily and punitively.” — Paul Nys, owner of a Rainier-area tree farm
Oregon shoppers who take their business to in-state shops that are farther away for them than Longview are “tripping over dollars to pick up nickels.” — Jim Hawks, owner of T&T Tires