Archived Story

Locals: MN sales tax expansion would hurt

Published 10:41am Monday, February 18, 2013


Gov. Mark Dayton’s proposal to expand the state’s sales tax to include everything from real estate purchases to YMCA memberships to legal services concerns Fergus Falls-based leaders of businesses and organizations who provide such services.

As the Legislature looks for ways to rid a $1 billion state deficit, Dayton has proposed to lower the current state sales tax from 6.8 percent to 5.5 percent, but add an additional number of businesses that would collect on the tax, like accounting and legal services.

While much of the focus has been on the possible expansion of the sales tax to include clothing items over $100, the proposal would also mean significant changes for other businesses and services in the state.

Just as it has throughout Minnesota, the proposed changes have caught the attention of some businesses and organizations in Fergus Falls.

Jim Worner, owner of Investment Realty and President of the Lakes Area Association of Realtors, is worried the expansion of the tax to real estate services will affect the recovering housing market.

“Realtors are not interested in having a sales tax added on to the sale of a home, particularly new homes, because that could drive the economy to a halt,” said Worner. “We don’t want our clients affected by such a tax on a one-time purchase.”

With real estate already a costly investment, a tax on the sale of a home, or the materials used to build new ones, could mean thousands of dollars to buyers.

Another proposed change would have the tax exemption status of charity health organizations, like the YMCA and YWCA, repealed, which would mean their memberships sales would become taxable.

Executive Director of the Fergus Falls YMCA Tim Olson said he believes this would limit the organization’s ability to provide charitable benefits to area members who cannot afford regular memberships.

“It would have a significant impact on us,” said Olson. “It would be a handcuff on the programs and services we provide.”

With a sales tax on memberships, the amount of money the organization brings annually in would be seriously affected.

“The tax would affect us operationally and mean more money coming out of our budget that we haven’t planned for,” said Olson.

Because the YMCA provides its programs and services to everyone in the community, no matter what their income level is, losing more money to taxes might not be something the organization can easily make up.

Law firms in the state would also see the tax extended to their services if the proposal becomes law. While lawyers have seen attempts to expand sales tax to their legal services in the past, they have been able to avoid the additional cost over the years. Richard Pemberton of Pemberton Law Firm thinks it should stay that way.

“The reasoning for such proposals always seems to be that if you don’t want to pay the tax, don’t buy the service,” said Pemberton. “But that isn’t necessarily true for legal services.”

Pemberton sees the proposal as a “misery tax” that would affect those who are in need of services because of things like personal injury or a family death. Additional costs could keep many individuals from getting the services they need.

“It would hit the little guys,” said Pemberton. “We would shutter at the idea of our law firm having to collect that tax from our customers.”

As more questions are raised over the proposed tax plan, lawyers, accountants, real estate agents and other service providers are coming together with local representatives to make sure these concerns are heard. It will be up to the legislature to move any tax expansion forward, but, for now, these organizations will have to wait for their speculation to be answered.

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