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Legislative News and Views - Rep. Bud Nornes (R)

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Warehousing tax cause for concern

Friday, May 31, 2013

Dear Neighbor,

 

It has been nice to get back home and spend more time with people in the district since the 2013 legislative session adjourned a week and a half ago.

 

Local citizens have indicated to me they are disappointed in the $2.1 billion raft of tax increases the legislative majorities and Gov. Mark Dayton enacted this session. I have received a number of inquiries on one specific tax that flew somewhat under the radar on its way to passage. It is a provision in this year’s tax bill that includes a sales tax pertaining to warehousing and repair services.

 

The impacts of these new taxes appear to be widespread and could prove costly to farmers and the rest of the agriculture industry. They also would put Minnesota businesses at a competitive disadvantage with our neighboring states, something that could bring serious consequences and damage our economy. Click here for more on that subject.

 

We are still seeking clarification in some areas of these newly passed taxes, but here are some bullet points with what we can determine as of now:

 

Repair of commercial and industrial equipment

  • Repair of the following items are taxable:
    • capital equipment used in manufacturing, mining, and fabricating
    • industrial equipment used in restaurants
    • farm machinery
    • construction machinery
    • mining machinery
  • Repair of the following items are not taxable:
    • home and garden equipment
    • airplane repair
    • ship and boat repair
    • office furniture
    • fixtures ( like racks and shelves in retail and warehouse establishments)
    • motor vehicles

 

Warehousing and storage services

  • Taxable warehousing and storage includes:
    • general warehousing
    • storage at bulk shipping terminals ( i.e. railroads, commercial docks, etc.)
  • Storage and warehousing explicitly excluded:
    • for agricultural products – i.e. grain elevators and silos
    • refrigerated storage – including food storage, fur storage, and meat locker rental
    • electronic data storage – (such as at the data centers we are exempting from construction materials)
    • self-storage services – i.e. mini storage units that individual rent for their extra “stuff” ( small businesses may rent these as well)
    • storage of motor vehicles, boats, RVs and similar items

 

The capital equipment exemption for equipment purchased by the telecommunications industry is repealed. This includes telephones and other communication services, cable and satellite services.

 

Repairs and storage and warehousing services are exempt from sales tax for certain entities based on business relationships or entity specific exemptions.

 

Exemptions based on business relationships:

  • Services provided by an employee are not subject to the tax
  • Services provided by one member of a partnership or association to another member of the partnership or association provided that one entity has at least 80% ownership or voting control over the other
  • Services performed between members of an affiliated group of corporations

 

Exemptions based on specific entity exemptions:

  • governments with a general sales tax exemption; including the federal government, schools, towns, cities, counties, the Met council and public libraries
  • Charitable, religious, and educational nonprofits
  • hospitals, outpatient surgical centers, and critical care dentists
  • Veterans groups
  • nursing homes

 

All sales to these groups are exempt unless the exemption explicitly lists an item as taxable.

 

I opposed these taxes from Day 1. Please continue providing me with input on this issue so we can work to rectify the situation before these taxes take effect in April of 2014.

 

Sincerely,

Bud

 

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