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Vendors seek reimbursement for collecting state sales taxes

Brian Gilbertson of Lino Lakes, and owner of MagicBounce, Inc., relates his experience dealing with sales and use tax issues to the House Taxes Committee Jan. 21. Photo by Paul Battaglia
Brian Gilbertson of Lino Lakes, and owner of MagicBounce, Inc., relates his experience dealing with sales and use tax issues to the House Taxes Committee Jan. 21. Photo by Paul Battaglia

Business owner Brian Gilbertson doesn’t mind collecting sales tax and passing it on to the state; but with so many jurisdictions now charging their own sales taxes, too, it’s a complicated and expensive process.

He thinks that vendors should be given some sort of compensation for “doing the state’s work.”

Two bills heard by the House Taxes Committee Wednesday would provide an allowance to retailers for collecting and remitting sales and use tax.

Rep. Bob Dettmer (R-Forest Lake) took Gilbertson up on the idea and sponsors HF136. This bill and a similar one, HF69, sponsored by Rep. Greg Davids (R-Preston), were held over for possible inclusion in an omnibus tax bill. The companion to Dettmer’s bill, SF 160, sponsored by Sen. Karin Housley (R-St. Marys Point) awaits a hearing in the Senate Taxes Committee. Davids’ bill has no companion.

Gibertson owns MagicBounce, Inc., and he brings his inflatables to events across the Twin Cities metropolitan area. However, a customer in his home city of Lino Lakes may only be obligated to the state’s 6.85 percent sales tax, while a customer in Minneapolis would have to add city and county sales taxes when payment is due. The Department of Revenue provides an online calculator to help compute the numbers, but Gilbertson said it is cumbersome to use. “Back in the day it [computing sales tax] was easy; now I have no idea. … Different cities have different taxes. I can’t figure out what to tax whom.”

Under Dettmer’s bill, vendors would be allowed to retain a portion of the tax collected as compensation equal to 3 percent of the taxes collected and up to a maximum of $90 per reporting period. While Davids’ bill stops at providing only the compensation, Dettmer’s goes further to require the department to make needed changes to the online calculator so taxes owed can be easier for vendors to compute.

According to a department analysis, the compensation provision would have a $36.7 million effect on the state’s General Fund for fiscal year 2016 and about $29.06 million in fiscal year 2017. Approximately 160,000 current sales tax filers would likely to be affected.

A nonpartisan House Research Department report shows that 28 states plus the District of Columbia provide vendor allowances or discounts. The rates range from 0.25 percent to 5 percent.


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