Deja vu: Senate DFL plan expands sales tax, lowers rate

Even though Gov. Mark Dayton has abandoned the idea, Democrats in the Minnesota Senate will push for an expansion of the state sales tax to clothing and many personal services, while lowering the rate from 6.875 percent to 6 percent.

The Tax Reform Division report released today keeps alive some the sales tax proposals that Dayton abandoned last month. Unlike the governor’s original plan the DFL proposal would keep most business-to-business transactions exempt from the sales tax. Low income Minnesotans would be eligible for a tax credit on clothing purchases.

Sen. Ann Rest, DFL-New Hope, said the proposal will help modernize the sales tax system.

“We are more and more a service economy. We deal with that,” Rest said.

The personal services that would be subject to sales tax include:

— haircuts

–spa services



–sports and dance instruction

–cosmetic surgery

–personal shopping services

Electronically-transferred digital books, music and movies would also be taxed. City and county government purchases would be exempt from sales taxes.

Businesses would lose the deduction for foreign operating corporation income. The corporate franchise tax rate would decrease, while the research and development tax credit would increase. There’s also more money for angel investment credits.

The tax rate on cigarettes would increase 94 cents per pack.

In addition, the Senate plan includes the sports memorabilia and suite taxes that recently surfaced as potential financing backup for the new Vikings stadium.

Senate Democrats will release another piece of their tax plan, which is expected to include an income tax increase on top earners, later, this month.

Rep. Sen Dave Thompson, R-Lakville, called the report “just a big tax increase under the guise of reform.”

  • Erin Rowe

    As a salon and spa owner, I advise that this would again hurt our industry. Do to the recession, we have not been able to raise our prices the last 7 years due to potential loss of business. However, as with most industries, our business costs have increased. By taxing our services you pose a threat to my small business, as well as others. A potential price increase that we get zero benefit from is very frustrating after surviving the recession thus far.

  • Keith Kramer

    On another issue. I am a snow bird who still resides in Minnesota and spends 3 to 4 months in Arizona. In a Phoenix news report it was stated that Dayton is looking at taxing Minnesotans who claim residence in Arizona or other states and spend at least 6 months in that state. Anyone who spends more than 60 days and claims residence in another state with less income taxes would be taxed by Minnesota at Minnesota’s rate for the time they lived in the other state. These individuals are paying less income taxes in Arizona, so the amount paid in Arizona income taxes would be deducted from those due Minnesota.

    Maybe Dayton should know what the discussion is in Arizona. Raise taxes on those who claim Arizona as their residence, and spend the other 6 months in Minnesota, to be equal to Minnesota’s tax rare. Any idiot can see that the taxpayer would pay more and Minnesota would get nothing.

    Dayton reminds ne of a deer in headlights. Someone has to snap him back to reality. He is an idiot.

  • Lori Martin

    I think to tax cigarettes another 94 cents is just ridiculous. We have increased this tax more than any other tax out there. We already pay enough per pack and still we have so many guidelines on where and when we can smoke them. Why not tax alcohol, pop, candy, chips and everything else that is also bad for you. You may say that these products don’t effect other people but they do; alcohol hurts the people around them and also we have to pay taxes to keep the offenders in jail or what ever other program that the court system puts them on. Eating pop candy and chips effects people’s health which increases our health care costs. ENOUGH ON TAXING CIGARETTES WE PAY MORE THAN OUR FAIR SHARE ALREADY!!