Judge Issues Preliminary Injuction Ordering Revenue to Advise Retailers to Charge British Columbia Residents Retail Sales Tax

OLYMPIA – July 19, 2010 -- A Skagit County Superior Court judge has ordered the Department of Revenue to advise retailers that they should charge retail sales tax on goods sold to residents of British Columbia and five other Canadian provinces until the courts decide whether they qualify for a non-resident retail sales tax exemption.

Whatcom County and the City of Bellingham have filed suit against the Department of Revenue to challenge its interpretation that the Harmonized Sales Tax adopted by British Columbia July 1 qualified its residents for a non-resident retail sales tax exemption.

Judge Michael Rickert issued a preliminary injunction that requires the Department to notify retailers that the courts likely will ultimately rule that the Harmonized Sales Tax (HST) adopted by the province does not qualify its residents for an exemption from retail sales tax on goods purchased in Washington.

The injunction also affects five other provinces that have replaced their provincial retail sales tax systems with the combination provincial-federal HST since 1997, including Nova Scotia, New Brunswick, Newfoundland and Labrador, Quebec and most recently Ontario.  The Department advised retailers in May that because the HST is a value-added tax and not a retail sales tax, B.C. residents would qualify for a 1965 law that gives retailers the option of selling tax-free to residents from states or provinces without a retail sales tax of 3 percent or more.

Judge Rickert ruled that the local governments were likely to prevail in their arguments, so retailers should be advised not to provide the tax break.  The Department will be providing more information, including an updated Excise Tax Advisory, at http://dor.wa.gov/nonresidents.

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(360) 534-1602
KimS@dor.wa.gov

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