Dayton backs off sales tax plan on business services

Gov. Mark Dayton said Friday the revised budget plan he will release next week will not include a sales tax on business or consumer services.

Speaking to an early morning meeting of the Twin West Chamber of Commerce Dayton said he’s responding to criticism from the business community and dropping the service sales tax.

“My proposal obviously lacks public support even though most Minnesotans would see a reduction in their overall state and local tax burdens and thus probably lacks legislative support. And now it lacks mine,” Dayton said.

Dayton had planned to raise more than $2 billion by taxing services, including numerous business services such as legal, advertising and accounting work. Expanding the sales tax base was part of a sweeping plan to lower the tax rate by 20 percent and provide property tax refunds to every household in the state.

Dayton told MPR News other elements of his original plan will definitely be affected by his decision to drop the services sales tax. He said he plans to hold a meeting with his finance team Saturday to work out the details of his new budget and announce the plan next week.

Dayton still supports raising income taxes on the state’s top earners and still plans to raise cigarette taxes.