The legislature is probably going to have a long conversation about sales taxes in the near future. And a lot of people including myself, are convinced that we need to include services as taxable items in the future. Here’s a chart that explains why:
If the idea is to gain state revenue to pay for what the state does, then our sales tax needs to reflect the type of economy that makes up the bulk of the state domestic product. And in keeping with that, let’s make it fair and across the board — let’s include internet sales transactions as well.
But there is another piece to this puzzle that needs to be addressed. The complexity of the sales tax. Let me give you a few examples:
- Delivery charges are taxable in Minnesota.
- Horses are NOT taxable in Minnesota. Supplies for horses, feed, and medications are all exempt.
- Fur clothing is taxable in Minnesota….including any shipping, transportation or finance charges.
- Feminine hygiene products are NOT taxable. However, this exemption only applies to tampons, sanitary napkins, and panty liners. Apparently douches and such are still taxable.
- Detective and security services are taxable in Minnesota…also pet grooming, pet boarding and pet care services.
- Mill liners, grinding rods and grinding balls sold to taconite companies are NOT taxable in Minnesota. (Bet that hasn’t come up much for most of you…)
There are pages of this stuff at the Minnesota Department of Revenue. And what are the odds that businesses across this state are 100% compliant with this smorgasbord of tax regulation?
Can’t we fix this? Forget the exemptions. I mean forget all of them except food, clothing, and prescription drugs. End this maze of dos and don’ts and I feel pretty confident that Minnesotans would never know that changes had occurred. They have assumed these items were taxed anyway.
And even though we do tax a small portion of Minnesota services, expand it to all of it. End the confusion and the guessing.
If we can just do that much, ending the exemption smorgasbord, I am confident that we can lower the states overall sales tax rate and still gain revenue in the process.
More than likely there will be major pushback as each segment of the Minnesota economy wants their own part of it to have an exemption. Which means we need to resist granting exemption requests altogether.
Keep it fair, keep it simple, and in the end keep it low.
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