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Destination sales tax triggers little change for North Kitsap businesses
KINGSTON — The destination sales tax law — Senate Subsitute Bill 5089 — took effect on July 1. Yet distributing companies in the North End are already saying they don’t expect to feel that big of a change.
The SSB 5089 only affects retailers who ship and distribute products inside the state, including Internet companies. Instead of collecting the amount of sales tax for the location where the product is made, businesses now collect it for where the product is delivered.
“It’s applied at the point of destination,” said Bob Jungst, volunteer for Kingston Chamber of Commerce. “I’d imagine everyone who does business by selling merchandise by mail is affected by it.”
However, for North End businesses Hood Canal Brewery, Northstar Sportswear and Poulsbo’s Internet Auction Company, it’s not too big of a deal. Yet.
“I don’t think it’s going to affect me much,” said Don Wyatt, owner of Hood Canal Brewery in Kingston. “The farthest east I go is the Harbor [Public] House (on Bainbridge Island) and the farthest west I go is Port Angeles.”
But for David Jefferys, accounting manager for NorthStar Sportswear in Kingston, their shipping realm is a bit larger.
“The tricky bit is when I actually have to do the sales report and figure out the list of everyone’s sales tax juristiction,” he said.
With SSB 5089, companies are required to collect the tax charge according to the zip code of the product’s destination. With hundreds of jurisdictions, Jefferys said company files could get a bit larger.
“Any extra record keeping is a cost but it’s not going to terribly affect us,” he said. “Almost 80 percent of our business goes to the Navy and Coast Guard, which are non-taxable anyway.”
Jefferys said only half of the sales not contracted by military are delivered throughout the state.
“It won’t be a huge pain for us but we don’t want to get tripped up on it,” he said, adding he will use the list from the Department of Revenue (DOR) Web site to find out the particulars of each zip code to which Northstar delivers. “It’s just another piece of bureaucracy to make our lives more interesting.”
According to DOR, “if you do not ship or deliver, nothing will change about the way you handle sales tax.”
The law also doesn’t affect wholesale purchases, services, towing companies or sales of boats, cars, airplanes, trailers or homes.
Deliveries made outside the state are not yet affected. However, according to DOR, SSB 5089 is a step toward it.
The law was a bridge to petitioning the state for full membership in the Streamlined Sales and Use Tax Agreement (SSUTA), which Washington joined as of July 1. Currently there are 16 full-member states and six associate member states involved.
As a part of SSUTA, sellers based in other states would collect a Washington sales tax that would, in a sense, level the playing field and encourage people to shop locally.
According to DOR, local stores get often get the short end of the stick serving as showrooms for Internet sellers. “Prospective customers check out the merchandise locally but buy the product online to avoid paying sales tax,” according to DOR.
Both Jefferys and Russell Pickering, owner of the Internet Auction Company, located on Front Street, in Poulsbo said they were surprised about the lack of information on the law change.
“I mostly heard about it in the press and because we file online we saw a little notice,” Jefferys said. “I’m surprised at the computer people and surprised no one has come out her door to door offering ‘here’s a quick fix to sales tax programs.’ I remember the Y2K stuff, everyone was offering something. Business opportunists were all over it.”
Pickering doesn’t think his internet auction business is affected at this point; however, he said he was never properly informed about the law change.
“I guess you can say I am officially waiting for information,” he said, adding he’s never received any notice other than the media. “Without understanding it, how exactly are we supposed to change our business? My belief is that you should be properly informed and I haven’t been properly informed.”
Although the change might not be an easy transition, Jungst said he saw it coming.
“I figured it was inevitable — the pressure of economics,” he said. “If money was coming in easy they wouldn’t be scurrying to collect any extra.”