Monday, February 21, 2005

Sales Tax Loopholes

Hopefully this is the start of a trend (but probably not). Sales tax should be based on where the sale takes place, not where a customer lives (or claims to). (Observant Ovation to Orbusmax)

Oregon Shoppers Could Soon Pay Wash. Sales Tax

Oregonians who shop in Washington could soon find themselves paying more.

A proposal by Washington Rep. Deb Wallace would close the loophole that exempts Oregonians from paying the 7.7 percent sales tax that Washingtonians pay.

Oregon shoppers would still be exempt from taxes on purchases over $50.

Wallace says if her plan passes, it would raise more than $40 million for her cash-strapped state. Critics say the plan would mean lost customers for Washington businesses. Proponents say it creates fairness.

Oregonians have been shopping tax-free in Washington since 1965.

Wallace is a Democrat from Vancouver.

The EU has a similar system in place for tourists. You pay taxes on all purchases, but can get a tax refund on larger purchases. For the most part, my purchases weren't significant enough to qualify for rebates, but it also seemed entirely appropriate to be paying the taxes. I was, after all, in Europe, and using services and infrastructure that were almost certainly government-funded.

In an even more absurd arrangement, the Puget Sound Regional Transit Authority raised the sales tax within its boundaries a few years back - but only for people residing within those boundaries. That meant that people traveling into the area, even commuters, would be exempt from a tax designed to alleviate the problems created by having too many people on the roads. They also get to enjoy whatever subsidized transit is constructed without the tax burden of their neighbors across the boundary.

A few more suggestions for a more workable sales tax system:
  • Include taxes in purchase prices. I rarely see this in the U.S., but it's common with European VATs - the purchase price includes taxes which then show up on your receipt. It makes it easier to estimate costs and often reduces the complexity of change involved.
  • Get rid of the "use tax" - it's unconstitutional and I've never even heard of anyone who paid it.


April said...

When do you propose VAT tax be added on? That can lead to extensive overtaxing if not calculated right and I don't really like to be over taxed.

Nick said...

The tax could be calculated by the business/retailer. I think they were doing that at Spokane's "Pig Out in the Park" so they wouldn't have to deal with change. My order form for graduation announcements and cap & gown had tax included in the price of the cap & gown but not for anything else. As long as it's done uniformly, you can compare prices just like now, except you'll see the actual final cost (e.g, it's really $107, not $99).

It lets you know exactly what you'll have to pay before you have to pay it.

Nick said...

For the purpose of analogy, I'm also ignoring any technical distinctions between sales taxes and VATs.