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The League has developed a model resolution in support of the recent sales tax exemption bills.
(Published Feb 22, 2013)
Last week, the House Tax Committee considered several bills that would exempt purchases of cities and counties from the state sales tax. The bills before the legislature include HF 295, a bill introduced by freshman Representative and former Elk River councilmember Nick Zerwas, (R-Elk River), HF 469, introduced by Representative Peter Fischer (DFL-Maplewood) and HF 466 introduced by Representative Paul Anderson (R-Starbuck).
Several cities have contacted the League asking if there is a model resolution in support of these exemption bills. The League has now drafted a model resolution that cities can access below.
Impact on Cities
The Department of Revenue estimates that the savings to cities and counties would be $115.9 million in state Fiscal Year 2014. The first year figure only reflects 11 months of exemption. In Fiscal Year 2015, the first full year of the exemption, the savings to cities and counties is estimated to be $129.2 million.
The sales tax has been applied to city and county purchases since the state budget crisis of 1992. That year, the legislature was confronted with a $569 million state budget deficit and during the session, the legislature debated a recommendation by then-governor Arne Carlson that would have cut city LGA by $66 million. During the debate, the House and Senate developed an alternative proposal address the state deficit by extending the sales tax to local government purchases. In the end, the sales tax was extended to city, county and township purchases, which at that time was estimated to yield roughly $67 million in state revenues. School districts remained exempt under the 1992 law change.
These bills does not exempt purchases by local governments of goods and services used as inputs to goods and services generally provided by a private business. Examples are liquor stores, gas and electric utilities, golf courses, marinas, health and fitness centers, campgrounds, cafes, and laundromats. These exclusions from the exemption mirror the provisions included in the 2011 township sales tax exemption and are intended to maintain a level tax structure for private businesses that compete with government-owned enterprises.
Questions? Contact Gary Carlson at (651) 281-1255 or firstname.lastname@example.org
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