Not everything would be subject to sales tax under Gov. Mark Dayton’s proposal, which would lower the overall sales tax rate from 6.875 percent to 5.5 percent, but then broaden the tax by adding to the mix clothing over $100 and many business-to-business services.

Here are some examples from the governor’s office of the proposed exempt list:

Not Taxed

  • Food
  • Clothing items and apparel costing less than $100
  • Medical services, including:
    • Prescription eyeglasses
    • Prescription drugs
    • Hospitals and outpatient surgical centers
    • Chairlifts, ramps, and elevators in homesteads
    • Parts and accessories to make motor vehicles handicapped accessible
  • Nonprofit organizations, including:
  • Fundraising sales
  • Public safety items, including:
    • Firefighters personal protective equipment
    • Public safety radio systems
    • Ambulances leased to private ambulance services
  • Textbooks and personal computers required for school use
  • Residential heating fuels and water services
  • Agricultural items, including:
    • Farm machinery and repair and replacement parts
    • Farm conservation programs
    • Agricultural processing facility
  • Renewable energy systems
    • Wind energy conservation systems
    • Solar energy systems
    • Biosolids processing equipment
  • Veterans organizations
  • Building materials for residences of disabled veterans
  • Construction materials for low-income housing
  • Mining production materials
  • Capital equipment

    • And here’s the governor’s proposed list of new items to be subject to the 5.5 percent tax:

    Newly Taxed

    • Affiliate Nexus
    • Digital Products
    • Parallel Taxation of Direct Satellite Services  
    • Parallel Taxation of Remote Access Software  
    • Admission to stadium box seats and suites, exhibitions, and selling events  
    • Repeal exemption for ready to eat meat and seafood
    • Clothing on items over $100
    • Admissions/Memberships
    • Over-the-counter drugs  
    • Personal services — e.g. barber shops, beauty salons, tattoo and body piercing, nail salons
    • Other personal services — e.g. wedding planning, dating services, shoe shining, personal shopping
    • Veterinary Services
    • Personal instruction — e.g. dance, golf, tennis, etc.
    • Brokerage & investment counseling — e.g. portfolio management, investment advice
    • Bank charges & safe deposit box rental
    • Legal services purchased by consumers
    • Accounting services purchased by consumers
    • Auto repair services
    • Household goods repair & maintenance
    • Warehousing & storage services (not storage of farm products or refrigerated storage)
    • Taxicabs and Other Ground Transport Services (does not include public transportation or school transportation
    • Travel agent services
    • Legal services purchased by businesses
    • Accounting and bookkeeping services purchased by businesses
    • Architectural and engineering services
    • Specialized design services — e.g. interior decorating, industrial design services, graphic design services
    • Computer services — e.g. custom computer programming, computer systems design services, computer facilities management services, data processing, hosting and related services
    • Management consulting services — e.g. administrative management consulting services, human resources consulting services, marketing consulting services, environmental consulting services, scientific and technical consulting services, scientific research and development services
    • Other consulting and development services — e.g. environmental, sanitation, site remediation, safety, economic, security, and other consulting services
    • Advertising and related services — e.g. advertising agencies, public relations agencies, media buying agencies, media representatives, display advertising, advertising material distribution services
    • Office administrative services
    • Facilities support services — e.g. snow plowing, cleaning
    • Employment services— e.g. temp help agencies, employment placement agencies, executive search agencies, professional employer organizations
    • Business support services — e.g. telephone answering services, collection agencies, telemarketing services on contract, secretarial and court reporting services, document preparation services, private mail centers, collection agencies, credit bureaus, repossession services
    • Other support services — e.g. packaging and labeling services, convention and trade show organizing
    • Other misc. professional and technical services — e.g. marketing research and public opinion polling, photographic services, commercial photography, translation and interpretation services
    • Electronic and commercial equipment repair & maintenance
    • Personal services purchased by businesses
    • Telecommunications equipment
    • Court reporter documents 
    • Advertising materials
    • Publications — e.g. newspapers, magazines, commercial printing.

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    1 Comment

    1. To Those Claiming

      the proposed changes (if passed 100%) to the sales tax code would be “devastating” to the middle class.. Here’s a few assumptions I made:

      – Consumer Spending breakdown, which cites the US BLS http://www.statisticbrain.com/what-consumers-spend-each-month/
      – MN has a higher median family income over the US average by 12% and per capita by 10% http://en.wikipedia.org/wiki/List_of_U.S._states_by_income I assume this shifts the average spend per person by 10% over the US total average.
      – Had to make a few assumptions based on the new tax code.. 20% of meat and 20% of seafood purchases are “ready to eat (ex lunch meat or frozen shrimp), 30% of pharmaceutical purchases are over the counter (OTC), 40% of motor vehicle accessory/part/tire purchases is labor, 5% of clothing items purchased are over $100 in price (suits, prom dresses, etc), and 20% of shoes bought cost more than $100 (I think these estimates may be a bit high for an average US family, but what do I know…)

      With all that said, an average consumer in MN spends roughly $3,018 per year on services counted in the proposed tax/budget plan, and $7,597 on items (and some services like cable/utilities that are already counted in our current sales tax code, no I did not include tobacco). By extending the sales tax to said services and reducing the rate on them and everything else, a consumer in MN would spend $182.59 extra per year on service sales taxes, but SAVE $114.91 by reducing the overall rate. This is a net increase of sales tax of $67.68, per year. Hardly call that devastating, especially in light of the $500 property tax rebate that would hit 68% of MN households.

      For people below the median/average income and spending (who, most likely own homes at a lower rate and therefore won’t claim the rebate), I would argue that the increase in taxes will hit them far less, as many don’t employ legal, personal care, accounting, or other business services at the same rate as upper income brackets.

      Just don’t see how this is a “devastating” blow to the middle class the way the GOP is painting it…

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