British Columbia, Canada, has a new tax system that's going to impact Seattle.

B.C. is switching from a provincial sales tax to a value-added tax, which is similar to a sales tax except that it's levied on the estimated value added to a product at each stage in its manufacture and distribution. That means folks from B.C. will no longer pay Washington's sales tax, just like Oregonians—a fact that could put a significant dent in the state's future revenue.



The Washington State Department of Revenue (DOR) made the announcement on Tuesday that B.C. residents will be sales-tax exempt in Washington beginning July 1.

According to a 1965 Washington law, residents of states or provinces that do not have a sales tax, or have one less than 3 percent, are exempt from Washington's sales tax.

The DOR is conducting a study to guage the potential impact, said Mike Gowrylow, spokesman for that department. It should have some conclusions next week.

Gowrylow said it's unclear at this point how much the loss of revenue from the sales tax will be offset by the additional business near the Canada-U.S. border, which in turn will create more jobs. Residents of B.C. will still pay food, hotel and service taxes, too, so additional business along the border might bolster revenues in some aspects.

"It probably won't be a huge hit (to the state's revenue)," he said.

Rep. Kelli Linville (D-42, Bellingham) lamented the change, however.

“I’m distressed at both the sudden, short notice of this announcement and at the negative implications this exemption will have for local governments, which are already hobbled by the recession,” she said. “I’m glad that local businesses may see more Canadian activity because of this, but a downside is that the exemption will hurt the level and quality of local services that citizens expect of their government. Elected officials, business leaders and citizens deserve more notice and consultation so that we can plan properly for the future.”

Washington State House Democrats initially tried to remove the out-of-state sales tax exemption last session as a way to patch up the state's revenue, but the idea was eventually dropped because legislators in Southwest Washington, the area that would be most affected by the change, viewed it as a detractor to border commerce.