Agenda Packets - 1997/03/24 - Laserfiche WebLink

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r: Pi. It j a 0 P'+1i fiTi n !N Na i9 di : V / i iia 9 0 N i y 4 L 145 University Avenue West, St. Pa , IN 55103-2044 . League of Minnesota Cities Phone: (612) 281-1200 • (800) 925-1122 Cities promoting excellence 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in the state's budget situation, city officials believe that the sales tax on local government purchases must be repealed.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. House Bills H. F. No. 545 (Haas, Van Dellen, McElroy and Mares) • H. F. No. 1042 (Mulder) -over- AN EQUAL OPPORTUNITY/AFFIRMATIVE ACTION EMPLOYER