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Seattle bag quandary: Will the sales tax apply to Green Fees?

July 29, 2008

 

Seattle Mayor Greg Nickels

Seattle Mayor Greg Nickels

Seattle Mayor Greg Nickels, who is bucking for coronation as America’s Greenest Mayor, has demonstrated a lack of knowledge of Washington state law in the recent past. For instance, his grandstand attempt to pass a gun ban by executive order has sort of quietly flopped because it is illegal under state law.

Among the infrequently asked questions since the Seattle City Council’s passage of the bag fee, is whether state and local sales tax will apply to the bags.

The short answer is, I don’t know. The thoughtful answer is, it should.

But can you tax a fee? Conceivably, the part of the fee retained by the store to offset the store’s cost of collecting the fee for the bag would be subject to both state and local sales tax.

Why does it make sense to tax a fee?  Because a customer forked over money and got something he has a right to remove from the store. The bag is not a food item or a prescription drug.  If the customer bought any other sort of bag-like object, it would be taxed. 

We’re talking about pennies on pennies here. If the store gets to keep $0.05 of the $0.20 fee, that’s $0.0045 per bag, given a 9% sales tax rate.  It’s de minimis, under a cent.  But if you carry out five bags, that’s $0.02 in state and local coffers. How cost effective is that to administer? Cost effectiveness is not the Department of Revenue’s department.

Is there a remedy for this? Sure, a specific sales tax exemption for the entire fee. But that’s for the DOR and the state legislature to figure out, not for the mayor to proclaim.  Once money changes hands, it’s not nice to fool the taxman.

Previous posts on the Seattle bag grab and the mayor’s failed gun ban:

Seattle’s Green Fleece

Green Fleece II

Seattle Mayor Greg Nickels Issues Executive Order Banning Guns in City Facilities and Parks

 Some more on the gun ban battle in Seattle

 Recent Supreme Court holding will NOT advance Seattle mayor’s proposed gun ban

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