Minnesota Warehouse Tax May be Reconsidered

Published On: 30th August 2013

From the internet

Many individuals believe that flaws can be corrected and some legislators along with Governor Mark Dayton feel that flawed state tax policy can also be corrected. This has led to the possibility of the September 9 special session agenda being expanded. The session was originally called to address storm recovery, but now the session may be used to reverse two new business taxes that were enacted in May.

Dayton and legislative leaders signaled last week that they are in agreement to a point on the taxation issues. At Farmfest, an agribusiness fair that occur every year in Minnesota, Dayton said that he favors taking up a repeal of the new sales tax on farm equipment repairs. Legislative leaders were in agreement. The state government would pay around $28.6 million if the tax is repealed. The state sees this as an affordable amount given that the forecast for 2012 is a $46 million balance.

Dayton says he will not go any further than this. He says he would rather wait for the regular session in 2013, which begins on February 25 so that eliminating the new Minnesota sales tax on warehouse services can be considered. This tax is scheduled to go into effect on April 1. The breach in the budget that would be created would also have to be repaired. The governor has shown little interest in changing two other applications of this sales tax, which are telecommunications equipment purchases and business equipment repairs.

The consensus has been that this is poor tax policy because of the hidden taxes that are built into the prices that consumers already pay for goods and it takes a hidden toll on employee compensation in the industries affected by it.

While this is a fact that is true for any tax that is put on business inputs, the warehouse services tax taking effect in April is a bit different. Minnesota companies in the business of inventory and storage services for other companies compete with similar providers in surrounding states. Adding the sales tax to their prices puts them at a disadvantage over the competition. Within days of the enactment of the tax, the CEO of one of the largest warehousing companies in Minnesota said that his 109-year-old business is considering moving to Wisconsin.

The Legislature did seem to signal some hesitation when they passed the tax, opting to delay the effective date to the April 1 date. No legislators have defended the move except saying that the state needs just over $95 million in 2014-2015.

The same justification is used for the other business service taxes that have been enacted. They are projected to raise $314 million. That money pays for a number of tax relief measures that have been sought after for quite some time, including ones that would slightly reduce the property taxes of businesses and allow businesses purchasers of capital equipment to be spared sales tax on those purchases without having to give a refund, which is what is done now. The latter is scheduled to begin on July 1, 2014.

The issue, however, is that for other businesses to receive relief, others have to experience damage. Keeping the owners of warehouse firms worrying for another six months about the impending tax is something that has been deemed bad business. What is known is that it will not be on the agenda during the September 9 special session.

 

Resource: http://www.startribune.com/opinion/editorials/219480621.html