When Blaine learned last fall about the closure of the Semiahmoo hotel, city officials were concerned about what impact that would have on the city's budget.
A surprising savior has emerged to help offset some of the loss: Canadians shopping on Amazon.com.
The Washington Department of Revenue recently released its annual report on 2012 retail sales in Whatcom County and local communities. Nearly all of the local cities posted growth in retail trade, but the border towns posted the most significant gains - Sumas jumped 41.2 percent ($13.4 million) in the past year, while Blaine rose 22.4 percent.
In Blaine the most significant growth was in e-commerce and mail order sales. Last year, Blaine tallied $12.3 million in taxable retail sales in that category, a 57.8 percent increase over 2011 and a 515 percent increase compared to 2007.
Online giant Amazon.com must collect sales tax for products it ships to Washington addresses. Canadians who have a Blaine mailbox are ordering products online so often that Amazon.com is now the largest contributor of sales tax to the Blaine community, said Gary Tomsic, city manager.
It's on a smaller scale, but Sumas has posted similar growth in the online sales category. Last year, Sumas generated $4.2 million in taxable retail sales in that category, a 50 percent increase compared to 2011 and an 813 percent increase compared to 2007, when the city totaled less than half a million dollars in annual sales.
The e-commerce category generated more sales in Blaine than any of the brick-and-mortar retail segments, including building materials and grocery stores. E-commerce sales in Blaine are catching up to restaurants, which tallied $18.4 million in taxable sales last year.
In 2012, e-commerce represented 4.7 percent of all of Blaine's taxable retail sales; the state average was 1.3 percent.
"What we have seen over the last couple of years is e-commerce becoming a significant part of our retail tax revenue," Tomsic said.
The jump can be seen in the Blaine community's business makeup. A variety of mailbox stores has popped up recently, and existing mailbox stores on Peace Portal Drive typically have lines.
Christina Hannon, who has owned Blaine Mailboxes Plus for eight years, said every day has been busy lately, but particularly so on Mondays, Thursdays and Saturdays.
"We want to do more retail, but we don't have the time right now," said Hannon, noting they don't focus on selling boxes or tape. They focus on making sure customers receive their packages and also serve as a drop-off for things that need to be shipped.
Most of Hannon's customers are Canadians, and there are several reasons for that. Canadians can save money on shipping costs; and some online companies don't ship into Canada. Some of Hannon's customers have told her that they can get packages quicker at a U.S. address and that they save hundreds of dollars a year by having a Blaine mailbox.
Even with the recent growth, customer service is the key to make such business a success, Hannon said. Like many mailbox businesses, Blaine Mailboxes Plus uses a software program that alerts customers by email when a package has arrived, making pickups more convenient.
Hannon said they also accept a variety of payments, including Canadian currency at par with the U.S. dollar.
She estimates about half of her customers are home-based business owners, many of whom would rather have a mailbox address on their business cards than their home address.
Paul Dudley agrees that customer service is key when it comes to mailbox businesses, both in boom and bust periods. He and his family have operated Blaine Enterprises for more than 20 years. The Peace Portal Drive business might look like a house from the outside, but in back it has a 2,400-square-foot warehouse.
Dudley is concerned about the growth in the number of mailbox businesses recently; it reminds him of the early 1990s, when the Canadian dollar was strong and a plethora of gas stations popped up to meet demand. Many of those gas stations closed in Blaine when the Canadian dollar weakened later in the decade.
"It only takes one thing to go wrong, and this disappears," he said.
PROPOSED LAW COULD BE TAX BOON
Blaine's economy depends on several factors that are out of its control, such as the strength of the Canadian dollar and the ease of travelers crossing the border.
Tomsic said one factor they are watching is legislation working its way through Congress that could mean more online sales taxes collected for places like Blaine.
One bill, called the Marketplace Fairness Act, would require all businesses with annual sales exceeding $1 million to collect sales tax based on the place where products are sent.
Currently in Washington, only online companies that have a physical presence in the state are required to collect sales tax, said Mike Gowrylow of the state Department of Revenue.
The Department of Revenue estimates that if the Marketplace Fairness Act passes, Whatcom County would collect nearly $1 million in additional sales taxes in 2014, increasing to $5.4 million in 2017.
"It would have a positive impact on Blaine tax receipts," Tomsic said.
The mail-order boom is also having indirect benefits to the Blaine economy, he said. When Canadians comes into town to pick up packages, they also fill up the gas tank and get something to eat.
"They view Blaine as a second home and shop here like they would in their neighborhood," Tomsic said.
RETAIL SALES RISE ACROSS WHATCOM COUNTY
Last year, taxable retail sales totaled nearly $3.3 billion in Whatcom County, a 7.8 percent increase compared to 2011, according to a new report from the Washington Department of Revenue.
Retail trade, a subcategory that focuses on products sold at stores, totaled slightly more than $1.6 billion last year, up 7.2 percent over 2011.
Whatcom's increases were higher than the state average. Last year, state taxable retail sales rose 5.1 percent to $109.1 billion, while retail trade rose 5.3 percent to $50.5 billion.
In terms of what people bought in Whatcom County last year, the biggest yearly increases came in e-commerce/mail orders (up 33 percent), RV, boat and motorcycle sales (up 20.8 percent) and clothing/accessories (up 10.5 percent).
Big box stores continued to dominate retail trade in Whatcom County, generating $437.4 million last year, a 7.7 percent increase. Sales at restaurants rose 6.4 percent to $306.3 million.
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