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Small-businesses exemption

Published (3/9/2012)
By Lee Ann Schutz
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The idea for allowing small-business owners to get an upfront exemption on the sales tax they would otherwise pay on capital equipment purchases is not a new one. The problem legislators have run into over the years is how to pay for it.

Businesses currently have three-and-a-half years from the date of purchase or lease to file a claim to be reimbursed for the sales tax they paid.

“A lot don’t apply for the refund, because they don’t know about it, or they are just busy keeping their doors open,” Rep. Dan Fabian (R-Roseau) told the House Taxes Committee March 1. 

He sponsors HF1842, which would provide the upfront exemption beginning July 1, 2012. The bill was held over for possible inclusion in a committee omnibus bill.

Rep. Ann Lenczewski (DFL-Bloomington) said the concept has had bipartisan support over the years, but it has never made it to law, largely because of the upfront cost to the state.

Since this is an allowed exemption already, this could be considered a “shift of revenue,” said Rep. Pat Garofalo (R-Farmington). “It’s a matter of timing.”

According to a Department of Revenue analysis, the bill would have an $8.6 million impact on the General Fund in 2013 and slowly decrease for the three years needed to accommodate reimbursements on business equipment purchases made in 2012.

The companion,  SF1670, sponsored by Sen. Amy Koch (R-Buffalo), awaits action by the Senate Taxes Committee.

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