Magazine article Nation's Cities Weekly

Minnesota Localities Must Soon Pay State Sales Tax

Magazine article Nation's Cities Weekly

Minnesota Localities Must Soon Pay State Sales Tax

Article excerpt

Local governments in Minnesota will soon have to pay state sales taxes on most of their purchases. The state legislature imposed the sales tax in the closing days of this year's session in order to reach agreement on next year's state budget.

The 6.5 percent sales tax will apply to virtually all purchases made by cities and towns, counties, townships, special districts and other units of local government. Only a few exemptions are allowed for schools, public library acquisitions and purchases by publicly supported hospitals, clinics and nursing homes. The tax becomes effective June 1.

The League of Minnesota Cities opposed the tax, calling it "regressive tax policy" because it imposes ultimate cost on the revenue systems of local governments, which are the most regressive.

"The real impact of the sales tax will be to increase local property taxes in Minnesota," said Donald L. Slater, executive director of the Minnesota league. "This will be the fourth consecutive year cities have contributed to resolving the state's budget difficulties through cuts in state aids or new taxes."

The state league faced a virtual "no win" situation because Gov. Arne Carlson adamantly refused to consider any change in the state income tax and called for slashing budgeted state aid to cities by $66 million if the sales tax failed. The amount is about what the new sales tax is expected to generate.

Slater branded the threat as "extremely unfair" for cities because they would be "the only local government institutions to contribute to solving the state's budget problem. …

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