How Lynden avoided the border town COVID sales tax hit

(The Center Square) – The Office of the Washington State Auditor has issued a new “bonus” report which showed bad news for sales tax collections in border towns, yet it missed an important outlier in the border town of Lynden.

“Almost all of these towns saw lower sales tax revenue,” said the report, showing sales tax collections for 2020 down in Blaine and Sumas in Whatcom County, as well as Oroville, Northport and Metaline in eastern Washington.

Sales tax collections in Blaine and Sumas were down by 19% and 18%, respectively, according to the report. In Oroville, Northport, and Metaline, collections were down by 6%, 11%, and 5%, respectively.

But sales tax collections in Lynden, between Blaine and Sumas in north Whatcom County were up slightly, by 2.2% or a little over $88,000 according to the auditor’s office’s previous report on the subject.

Lynden mayor Scott Korthuis has two explanations for why his city dodged the larger downward trend. The first is something that Lynden did not do: build up its package holding industry.

“Blaine and Sumas are way off as a good portion of their sales tax was associated with Canadian business,” Korthuis told The Center Square in an email. “Many Canadians order items that are delivered to warehouse distribution centers in these towns. The towns get the sales tax. The Canadians save on the [Provincial Sales Tax] and [Goods and Services Tax.] As the border was shut down, most, if not all, this business was lost.”

Since Lynden did “not have these warehouse distribution centers,” it did not miss out on those sales tax collections, he said.

The second thing Korthuis credits for the sales tax surplus is internet commerce.

“Destination sales tax is contributing to the increase,” Korthuis said. “As residents stay home, they tend to order more on line. On line sales tax goes to the delivery locations. This is benefitting most smaller cities.”

Korthuis named fellow Whatcom County city Ferndale as another example of a smaller city benefiting from increased online commerce.

Ferndale saw sales tax revenue for 2020 boosted by $338,299, up 9.5%.

“This unexpected revenue has allowed us to maintain services during this difficult time without some of the painful decisions facing our neighboring communities,” Ferndale Mayor Greg Hansen said of the tax windfall.

Higher sales tax collections generally “are a good indication of economic growth,” University of Central Arkansas economist Jeremy Horpedahl said.

There are some important exceptions to that, including the federal government’s large “injection of cash to consumers outside of economic growth,” Horpedahl cautioned.

Overall sales tax collection in Washington was down 4.5% last year, for a $76.7 million decline.

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