Minnesota Cities Upset Over Sales Tax Law Change

Published On: 3rd July 2015

From the internet

Minnesota cities are upset over an impending state law change that would cost them $20 million in sales tax. They thought this change was going to go away, but it doesn’t appear that that is going to be the case. The hope was that the impending change would not occur because of the millions of dollars lawmakers set aside so that taxes can be cut in 2016.

While the change is not happening, that doesn’t mean it won’t happen at all. The Legislature is actually delaying the tax exemption for local governments by a year. These are not sales tax exemptions that affect all local governments, but those that jointly provide services, such as sharing police or fire services.

The change came about suddenly in May and actually contradicts the state’s demands that local governments more efficiently provide services.

This isn’t the first time that Legislators have either proposed or implemented sales tax exemptions for local governments. In 2013, the Legislature passed a sales tax law that exempted counties and cities from paying sales tax on computers, office supplies, and other types of equipment. However, the law had to be clarified in 2014 to include any transactions that involved joint powers, or joint services.

The Minnesota sales tax exemption was supposed to go into effect in January, but a vote pushed it back to 2017. This is a delay that the Legislature approved on the last day of its last session. Lobbyists hoped that the changed would be eliminated when a new schools plan totaling $17.2 billion had come together.

Nonetheless, many are scratching their heads because the exemption was given bipartisan support. Some joint endeavors between cities have put off large purchases until 2016 so that they could benefit from the sales tax exemption. What is ironic is that the only bill introduced during the last session that was on-topic would have granted a retroactive tax exemption and given the eligible joint powers refunds for purchases made after July 2014.

However, it is not anticipated that the education budget that would affect the sales tax exemption will be addressed in a special session that has not yet been scheduled. It may have to wait until the regular session. What has been said did happen during the last session is that Democrats worked to finalize a budget, but Republicans insisted that $1 billion should be left aside for the 2016 regular session.

The reason why the exemption was placed in the education bill was because another bill containing the exemption had stalled out.