OLYMPIA - Washington residents could find a little surprise with their online purchases next year - a sales tax.
A new law signed Thursday presses online and out-of-state sellers to voluntarily collect the tax and send those dollars back to the state to be spread among cities, counties and special districts.
Gov. Chris Gregoire said the law, the product of several years of negotiations, helps "brick and mortar" retailers compete with those operating online.
"This will help level the playing field for businesses in Washington," she said. "This is absolutely about tax fairness."
Federal law prohibits states from requiring online sellers to impose a sales tax unless a company has a physical presence in that state. That's why online shoppers may already be paying sales tax on purchases through Amazon.com and major retailers with stores in Washington.
States have worked for years to find a way to stem the loss of tax revenue.
The effort led to a national compact in 2005 that is getting more sales tax rung up in cyberspace in the same manner as it is charged at a cash register. Part of the reason online sellers are voluntarily agreeing to participate is because states are following uniform rules.
Another reason is the states are granting them amnesty in places where they should have been collecting taxes and weren't.
Washington will become the 22nd state to join the Streamlined Sales and Use Tax Agreement when its law takes effect July 1, 2008.
At that point, Gregoire said, the state will begin receiving as much as $50 million in new revenue each year, with a quarter getting sent into cities, counties and special districts.
This could mean a boost of $100 to Index and up to $75,000 to Everett, according to the Department of Revenue.
The new state law also fundamentally restructures how sales tax collected within Washington is distributed among cities, counties and special districts.
Today, when a customer makes a purchase, the local portion of the sales tax may not necessarily come back to the community where the sale was made.
For example, if a person shopping in Mill Creek buys a bed shipped from a warehouse in Tukwila, the local sales tax will end up in Tukwila because that is where the product is located. The new law ensures the tax stays in Mill Creek.
The result is millions of dollars will be shuffled around between local governments. Some will lose money in the deal, but the state set up a mitigation fund to fully cover the shortfalls, said Cindi Holmstrom, director of the state Department of Revenue.
Figures from the department show Snohomish County gaining $4.1 million from the shift. Among cities, Lynnwood would see a loss of $2 million and Everett $1.5 million - money that would be made up by the state.
Mill Creek stands to receive an additional $548,000 and Mukilteo $479,000, according to Department of Revenue estimates.
Future legislatures could end the subsidies, but Gregoire said too many people spent too many years negotiating this new system to let that happen.
"I think there is an absolute commitment to make this work," she said.
Reporter Jerry Cornfield: 360-352-8623 or jcornfield@heraldnet.com.