Opponents say time is now to speak out against B2B taxes

MARSHALL – It’s getting down to the wire for opponents of a state warehousing tax set to take effect in April. For Marshall area businesses and organizations like the Minnesota Chamber of Commerce, the message to send to state legislators is “repeal, and repeal early.”

“This is the wrong time to put additional costs on businesses,” said Jim Pumarlo.

Pumarlo, director of communications for the Minnesota Chamber of Commerce, visited Marshall on Monday afternoon and spoke about efforts to repeal a trio of business-to-business sales taxes passed in Minnesota’s 2013 omnibus tax bill. That group not only includes the tax on storage and warehousing services, but sales taxes on labor for repair and maintenance of business equipment, and sales taxes on telecommunications equipment.

All three business-to-business taxes were passed very late in the last legislative session. The telecommunications and repair and maintenance taxes went into effect last July, while the warehousing tax doesn’t kick in until April 1.

Pumarlo said the business-to-business taxes will have wide-reaching negative effects for Minnesota businesses, and the state as a whole. For instance, the telecommunications equipment sales tax “runs cross-purpose” to the state’s commitment to increasing broadband Internet service, he said. The cost of the equipment repair and maintenance tax has the potential to harm small businesses, especially high-tech ones. And the warehousing tax could drive some businesses from the state.

“(Warehousing and storage) is a very mobile industry,” Pumarlo said. If businesses can’t afford to rent warehouse or storage space in Minnesota, it will be easy go elsewhere, he said.

Brian Knochenmus, vice president of Ralco, said the warehousing tax was troubling for the company. Ralco is committed to the Marshall area, he said, but the additional sales tax could possibly make it difficult to keep growing here.

“It really impacts our appetite for investment,” Knochenmus said, and makes it harder to make investment decisions.

The proliferation of taxes targeting businesses is a bad deal for Minnesota, Knochenmus said.

“As businesses, what puts us in such a complete disadvantage is when there’s tax after tax,” he said. “Minnesota is a strong industry state, and a strong agriculture state. We need to let these businesses grow.”

Pumarlo said businesses and organizations from around Minnesota are voicing opposition to the business-to-business sales taxes. Both the Minnesota Chamber and the Marshall Area Chamber of Commerce are part of the United For Jobs Coalition, a group of business associations and chambers of commerce calling for the taxes to be repealed.

Marshall Area Chamber Director Cal Brink said there’s been a strong local opposition to the taxes. One of the problems with the business-to-business taxes has been that it’s difficult to predict how they could affect local businesses.

“I think there are still people today who don’t know,” Brink said. He said the biggest risk is that businesses will have to absorb the cost of the additional taxes through higher prices, reduced growth or job layoffs. And in the Marshall area, competition from South Dakota is another real factor.

Pumarlo said there is some hope to repeal the business-to-business taxes. In December, Minnesota was projected to have a $1.08 billion budget surplus. Minnesota Gov. Mark Dayton said if the surplus held, he would make it a priority to repeal the taxes, Pumarlo said. He said lawmakers in the Minnesota House of Representatives have similar priorities, and there are legislative committee hearings on the subject scheduled this week.

“We need to repeal these taxes, and repeal them early in the session,” Pumarlo said. He said advocacy groups like the United For Jobs Coalition are taking the opportunity to spread the word. “A lot of people will also be looking closely” at the state’s February budget forecast when it’s released on Friday, he said.