Taxes could be big target at special session

MARSHALL – While it’s a foregone conclusion a special session will take place next month, no one is sure what exactly will be on the table.

Gov. Mark Dayton has called for a special session Sept. 9 to address disaster relief for Minnesotans who suffered damage in June storms. However, there is also likely to be critical discussion taking place on other highly publicized and much scrutinized tax law changes, known as business-to-business taxes – in Minnesota.

“If we’re going to be back in session we just as well take up as many tax issues as we can,” said District 16A Rep. Chris Swedzinski, R-Ghent. “It’s my hope we can undo as many of these taxes as possible.”

Among the new costs facing businesses in Minnesota is the expanded sales tax on those business-to-business services. Minnesota companies will now pay the 6.875 percent state sales tax, plus any local sales tax, on three categories of business-to-business services.

Groups including United for Job Coalition, which defeated Dayton’s broad-based sales tax on B2B transactions, and the Minnesota Chamber of Commerce have called for a repeal of new sales taxes in three categories: labor service charges for repair and maintenance of business equipment and machines, effective July 1 2014; purchases of telecommunications equipment by telecommunications providers, effective July 1, 2014; and storage and warehousing services of business-related goods that kicks in in April.

“I think we need to repeal these sales tax provisions in the bill – not just in agriculture, but on all the businesses that come under that provision,” said District 16 Sen. Gary Dahms, R-Redwood Falls. “We also have to look at a repeal of the warehouse tax.”

Dahms is OK with an early, if not brief, return to St. Paul for a special session for disaster relief and said now is a good time to take on the tax situation, rather than wait until next year’s session which begins in February and is considerably shorter than the 2013 session was.

“If we wait until we get into the regular session, by then a lot of folks have filed (their taxes) or are starting to file,” he said. “This way, if we repeal these taxes it will be a lot easier to repeal back to the July 1 date.”

Dahms said there is momentum on both sides for a repeal in the business-to-business taxes, including the warehouse and storage tax, which Dayton has already said he will call for a repeal in February.

“There is an appetite now by the DFL since Governor Dayton has agreed to take it out,” said Dahms, who criticized Dayton for back-tracking on the tax issue. Dahms said Republicans had asked Dayton to remove the business-to-business tax provision from the final tax bill during the 2013 session.

“We told Governor Dayton this was not a good provision and asked him to take it out; we asked on the floor to take it out, but it fell on Governor Dayton’s deaf ears,” said Dahms. “A couple days before Farmfest, he makes this speech about how he hopes Republicans don’t try to grandstand on these taxes instead of sticking to what the special session should be about, then he comes to Farmfest and wants to bring taxes into the special session.”

“Governor Dayton initially said he’s not interested in doing any more on tax issues, but obviously the farm groups were able to put pressure on the governor and he relented on a lot of the ag-related taxes,” Swedzinski said.

Republicans say these kinds of taxes will put Minnesota businesses at a competitive disadvantage.

“It puts you at a competitive disadvantage, not only with production in the marketplace but also when you talk about bringing business here,” said Dahms. “Any time you add taxes, you become a less desirable state for people to come to and do business with.”