Student groups would avoid sales taxes under bills’ proposed changes

Here’s how state tax law could change because of a pasty bake.

Rep. Julie Sandstede (DFL-Hibbing) was talking to a constituent who is an advisor for her high school’s participants in the regional one-act play competition. She learned the group had made an annual tradition of baking pasties – those meat- and vegetable-filled pastries particularly popular on the Iron Range – and selling them to raise money for t-shirts, an annual banquet and educational trips like workshops at Minneapolis’ Guthrie Theater.

But something changed over the past year.

Because of a provision in the 2019 omnibus education law, the group was required to collect sales taxes when selling pasties, then remit the money to the state. It was an unintended consequence of the law’s directive that funds raised had to be deposited with school districts. Since small student activity groups aren’t typically 501(c)(3) nonprofits, that meant they had to charge sales tax.

Two identical bills are designed to remedy that. Sandstede is the sponsor of HF3362, while Rep. John Huot (DFL-Rosemount) sponsors HF3320. Each would exempt from sales taxes the funds raised by school-associated student groups for extra-curricular activities.

Speaking in support of the bills, Tracey Fiereck, executive director of the Central Minnesota Educational Research and Development Council, said some student groups were changing over from selling wrapping paper (taxable) to holiday candy (non-taxable).

Huot added, “Lines are long at the concession stand, and we try to teach our student helpers to count change back. To teach them how to do a sales tax on top of that would be terrible.”

Both bills were laid over for possible inclusion into an omnibus tax bill. Each has a Senate companion in SF3233, sponsored by Sen. Greg Clausen (DFL-Apple Valley), which awaits action in the Senate Taxes Committee.