“Department of Revenue spokesman Mike Gowrylow said the existing exemption for Albertans, Oregonians, Montanans, Alaskans and those from other, more distant places is estimated to cost the state more than $78 million per year.”

And the ruling has been met with shock and fear from officials of border communities.

For Washington state vendors on the Oregon border, the compliance requirements to perform an exempt sale are likely well-known.  To our vendor-friends on the northern edge of Washington, the requirements present a whole new world of sales tax compliance hurdles to cross.  (Of course, vendors could choose to ignore the exemption, but only at the risk of losing sales to competitors who are embracing the tax break for their Canadian customers.)

The exemption only applies to tangible personal property that is not consumed inside Washington. Taxable services are still taxable to BC residents.

For vendors, here are some instructions provided by WA DOR:

1. Examine one piece of identification that establishes proof of nonresidency. The identification must be a valid driver’s license issued by the jurisdiction in which the out-of-state residency is claimed or a valid identification card issued by the out-of-state jurisdiction. The identification must A) bear the photograph of the holder B) show the holder’s residential address, C) identify the holder’s name, and D) be issued for the purpose of establishing residency.
   
2. Maintain a record of the type of documentation accepted as establishing nonresidency in (1) immediately above, including identification numbers, expiration dates, the purchaser’s name, and the purchaser’s state of residency.
   
3. Record the documentation accepted as establishing nonresidency on the invoice or other written evidence of sale and retain the information or maintain a legible photocopy of the documentation establishing nonresidency as part of the seller’s accounting records for the statutory period of five years (refer to RCW 82.32.070). In the case of a seller making cash sales without issuing invoices (for example, retail hardware stores) and maintaining a log, such a log must identify the date and amount of sale, and the information described in (2) immediately above or in the case of corporate nonresidents the corporate nonresident permit number.
   
4. Presume that the item being sold will be used in Washington and is subject to retail sales tax if the purchaser requests the seller to deliver the merchandise to a Washington address. This presumption may be overcome if the purchaser gives the seller a signed written statement explaining the reason for delivery to a Washington residence and a specific statement indicating the item will not be used in Washington

Of course, the requirements to prove an exempt sale do not tell the whole sales tax compliance story: (from the DOR fact page)

RCW 82.08.0273 provides that a seller who makes sales without collecting retail sales tax is personally liable for the tax if the sale was made to a nonqualifying person or the records are not maintained as required.

The take away?  Besides the extra sales tax compliance headaches the ruling represents, the big message is that those butterfly wings of foreign legislation can actually create a storm of compliance challenges back home.