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Pitches to extend sales tax to online purchases and clothing aired

Sen. Ann Rest presented the online sales plan, which has the support of Minnesota’s business community.

Sen. Ann Rest
Sen. Ann Rest

Democrats are beginning to flesh out the tax proposals they listed as a priority heading into this legislative session.

A key Senate committee heard plans Wednesday to tax clothing and extend the sales tax to certain Internet transactions. DFL Sen. Ann Rest, who is heading up tax change efforts in the Senate, brought a few preliminary proposals forward that could eventually be included in a larger tax package.

The online sales plan has surfaced several times in recent years and has the support of retailers and Minnesota’s business community. Rest said the plan would raise about $4.5 million in its first year.

“The Amazon bill,” as it’s often called, is also an issue at the federal level, Rest said. “We’re not trying to cast aspersions on a company I’ve spent many a dollar on.”

The Minnesota Retailers Association, the Minnesota Chamber of Commerce and the League of Minnesota Cities all testified in support of the legislation. Amazon lists two registered lobbyists with the Minnesota Campaign Finance and Public Disclosure Board, but no representative testified on the bill.

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“I’m not whining. I’m not complaining. It’s just fact,” said Roberta Bonoff, CEO of Creative Kidstuff, a Minnetonka company, in supporting the extension. “No matter how you make a sale, you should pay taxes.”

Gov. Mark Dayton has supported the “Amazon bill” in the past. Lawmakers and “bricks-and-mortar” businesses alike said the measure is important in leveling the playing field for Minnesota companies.

Rest also put forward two measures that would extend the state sales tax to clothing.

One would levy a tax on an article of clothing on the cost above $200. The other would repeal the clothing sales tax exemption and offer tax credits based on income. Both proposals are currently revenue neutral.

Retailers who spoke in support of taxing Internet purchases came back to oppose expanding the sales tax to clothing. Maureen Bausch, a VP with Mall of America, told the committee that many tourists come to Minnesota and spend money because of the sales tax exemption.

“If we add this tax on apparel, it will absolutely affect our tourism,” she said.

“We hear a lot of ideas, a lot of proposals, lay them over and eventually we put together an omnibus bill,” Rest said after the hearing.

Senate Taxes Committee Chairman Rod Skoe said he’s not a fan of expanding the sales tax.

Rest said she wanted to keep the proposals revenue neutral – Democrats agree that there will be tax hikes this session – so that discussion didn’t get bogged down in debating how much new funding lawmakers should attempt to raise. The Democrat from New Hope said she’s waiting for Dayton’s budget, which will be released Tuesday.

“Once we have the governor’s bills, the whole thing will explode in terms of what we’re going to be looking at,” Rest said. “It’s clear we’re going to have some revenue raises. What is the governor’s vision for dealing with the structural deficit … and then secondly his vision for this 21st century economy?”

Republicans on the committee offered some support for the online tax bill but pushed back against expanding sales taxes. GOP Sen. Julianne Ortman, formerly the Senate Taxes Committee chairwoman, said Minnesotans should watch out for skyrocketing tax bills while the Legislature is under DFL leadership.

“It seems like the DFL has proposed every new tax conceivable for Minnesotans,” she said after the hearing. “It seems to be indiscriminate from my point of view.”