5.4. ERMUSR 02-10-2015 - Laserfiche WebLink

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ADMDMIL(l riffiririvjg Position Statement Refundable City Sales Tax Exemption Background ! In 2013, the Minnesota Legislature enacted an exemption of the sales tax on some purchases made by local governments.The administration of this sales tax exemption proved difficult for both the Department of Revenue and local governments alike, so in 2014, the Legislature provided additional clarification as to the i tix airlu hi&Mari purchases and political subdivisions eligible for the to T' sales tax exemption. However, there remains in effect s gg a Department of Revenue rule that makes it extremely p _.,.. difficult for local governments to receive the sales tax exemption for materials related to a construction project by not allowing purchases made by the local «...- government's contractor to be eligible. Municipal projects,like public libraries,benefit the common good. In practice, this is difficult to manage, as traditional MMUA Position bidding for construction projects include all labor, MMUA supports efforts to simplify the process to materials, and equipment needed. The Department of Revenue rule does allow the sales tax exemption for receive the local government sales tax exemption for construction material purchased by local governments, construction materials. Statute should be amended provided the construction contract is for labor only and to allow cities to report sales taxes paid and then to the local government bears all ownership and liability for receive a refund from the Department of Revenue. This the materials. The rule also permits a local government would permit cities to use the traditional contracting to designate a contractor as a"purchasing agent" in process and avoid the added expense and inconvenience a contract, and thus receive the sales tax exemption of breaking apart construction contracts and assuming on the condition that all vendors are notified of this liability for materials. MMUA would also support arrangement, the title of all materials is transferred to making all goods and services purchased by local the local government, and the local government assumes governments eligible for the sales tax exemption. all liability for the materials.Along with being time consuming and difficult to understand, the separate k purchase of materials or use of a purchasing agent ends 4 up being costly to cities(storage, insurance, etc.).As MMUA member cities consider upgrades to wastewater treatment facilities or water utilities—projects with ` significant capital costs—receiving the sales tax r , exemption for materials would help defray the cost to municipal property taxpayers and rate payers. M . . ...." - -_ .- A a r Street projects often include replacement of underground sewer and water facilities. Water supply goes hand-in-hand with municipal electric service. 2015 State Position Statements/11