HomeMy WebLinkAboutUntitled (2) 02-02-98 11 : 47: 42 AM FROM: LEAGUE of MN CITIES TO: 4394439 PAGE 8
APR 18 '97 04:01PM LEAGUE OF MN CITIES P.1
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145 University Avenue West, St. Paul, MN 55103-2044
Leagua of Minnesota Cities Phone: (612) 281-1200 • (800) 925-1122
Caulpromoting a ellenoe Fax: (612) 281-1299 • TDD (612) 281-1290
Repeal of the Sales Tax on Local Government Purchases
Briefing Paper
Issue synopsis/League position:
In 1992,the Legislature balanced its budget,in part,by extending the state's sales tax to the
purchases of cities,counties,townships and special taxing authorities. This action has increased
the operating costs for affected local units of government by an estimated$75 to$80 million per
year. Minnesota is one of only eight states that tax the purchases of its local units of
'government.
Since the sales tax was extended to local units,many cities and counties have experienced
compliance problems. For example,despite good faith efforts to comply with the state's sales
tax law,several border cities have been caught in the complex web of taxable interstate
purchases. Other communities have experienced difficulties with the interpretation of the tax
status of purchases of items that are ultimately used in the production of a commodity to be sold
at retail. In fact,the law is so complex that the state department of Revenue has just released five
detailed instruction booklets to assist local officials in understanding the application of the law.
The League initiated legislation in 1996 to repeal the sales tax. This year, the Minnesota
Association of Counties has joined our effort to enact the repeal.
Messages for Legislators:
With the dramatic turnaround in the state's budget situation,city officials believe that the sales
tax on local government purchases must be repealed. The sales tax increases local property taxes
at a time when property taxpayers are demanding relief. The administrative complexity for local
units of government also add indirect local costs above and beyond the estimated$80 million
annual local sales tax liability.
Pending Major Bills/Status:
Six identical bills have been introduced to date. None of the bills has yet received a hearing in
either the House or the Senate.
'louse Bills
H. F.No. 545 (Haas,Van Dellen,McElroy and Mares)
H. F.No. 1042 (Mulder)
AN EQUALOPPORTUNITY/AFFIRMATIVE ACTION EMPLOYER
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H. F. No. 1256 (Goodno and Rest)
Senate Bills
S.F. No. 655 (Mr. Price, Mrs. Scheid, Mr. Hottinger, Mses. Pappas and Runbeck)
S.F. No. 1039 (Mr. Limner, Mrs. Fischbach, Mr. Ourada, Mrs. Robling and Ms. Runbeck)
S.P. No. 1256 (Mr. Hottinger and Ms. Runbeck)
prepared by: Gary Carlson