What are the forces moving the Minnesota economy? Adam Belz tries to identify the trends and show the connections between Minnesota and the larger U.S. and global economies. You can connect with him on Twitter: @adambelz

Governor's office: B2B tax will not apply to sales outside Minnesota

Posted by: Adam Belz under Business trends, Economics, Budget news Updated: February 15, 2013 - 11:09 AM

Mark Dayton's office said Friday that his budget's business-to-business sales tax will not apply to goods or services sold outside Minnesota.

The governor's proposal would, however, apply to all purchases by Minnesota companies, including those for goods and services bought from other states.

The budget, meant to wipe out a $1.1 billion projected budget deficit and produce $1.1 billion in funding for schools, would raise $2.2 billion in new revenue by taxing sales between companies.

The tax would put Minnesota in a category with only three other states -- Hawaii, South Dakota and New Mexico -- who have broad sales taxes on professional services. It has drawn the criticism of IT professionals, lawyers, accountants and marketing firms. It has also been embraced by some businesses who already have to charge sales tax.

Dayton's office provided more detail on the proposal ahead of a noon conference call with reporters. If sales received outside Minnesota are not taxable, that undercuts the claim that national law firms and marketing firms will have to leave Minnesota to be competitive.

The governor's team also gave a more detailed list of exemptions, and pointed out that under the proposal, Minnesota's sales tax rate would fall from 7th highest in the nation to 27th. 

Here's the document:

2 15 13 Final Sales Tax Booklet by

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