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GOP legislators call for special session to repeal warehousing tax

Posted by: Jim Ragsdale Updated: June 27, 2013 - 4:03 PM

GOP legislators called on Gov. Mark Dayton Thursday to summon legislators back into special session to repeal a warehousing tax that does not take effect until next spring.

"The warehousing tax, already, has halted business," said Rep. Tim Kelly, R-Red Wing, who was joined by Rep. Pat Garofalo, R-Farmington, and other legislators, including Rep.Kurt Zellers, R-Maple Grove, a candidate for governor next year.

At issue is a new 6.5 percent tax on general product warehousing and storage at bulk shipping terminals, generally paid by manufacturers or producers to the companies that are storing and shipping the goods.

Legislators from both parties have expressed concerns about the provision, which was part of a series of tax law changes, and said it could be addressed next year. The provision does not take effect until next April, giving the 2014 Legislature time to amend or repeal it before it takes effect.

Kelly said businesses are already changing decisions about building warehousing facilities in the state due to the possibility of the tax falling on the businesses. He said Red Wing Shoes recently delayed a new distribution center in Red Wing, and other such facilities could be imperiled.

John Sachen of Red Wing Shoes appeared at the legislators' news conference and said the warehouse facility "is on hold until we find out what happens here." He said while other factors figured into the decision about the facility, the possibility of the tax "doesn't help."

"There is bipartisan agreement this was a mistake," said Garofalo. "Let's fix it now." He added: "This isn't about bigger government or smaller government. This is about dumb government."

Kelly said the expected revenue from the new tax, estimated at $100 million, could be recouped in other ways.

Dayton's office rejected the idea that a special session is needed for a tax that has not gone into effect.

"This is a stunt, not a solution," said a statement from Bob Hume, Dayton's Deputy Chief of Staff. "The Legislature is coming back more than a month before this tax would take effect, which is more than enough time, if revenues permit, to review and possibly revise this tax."

House Speaker Paul Thissen, DFL-Minneapolis, echoed that position.

"Rather than rush to judgment without more facts and feedback, it is important we listen to the public and business community so we are prepared to make any needed changes next session," Thissen said in a statement.

Myron Frans, state revenue commissioner, said Dayton has asked him to study the issue, and he has spoken with Red Wing officials about their concerns. He said the tax only applies when the producer or manufacturer purchases warehouse or storage services from another firm.

If a company like Red Wing were to build its own warehouse, the tax would not apply, Frans said.

The tax bill was passed shortly before legislators adjourned on May 20. Only the governor can call a special session, but once legislators return, there are no restrictions on what issues they can take up.

Stephen Lawrence, president of Lawrence Transportation Services of Red Wing, appeared at the news conference to support an immediate fix in a special session.

"We're just concerned this is going to get lost in the shuffle," he said.

He explained that his firm transports flour from a milling company to the warehouse, where loads are shrink-wrapped, labeled and shipped out. "We're the only state in the whole country that has a sales tax charge on these kinds of services," he said. "That means that flour is going to go up 6.5 percent to somebody."

"Are they going to want us to have it warehoused in Minnesota, or are they going to want to warehouse across the border?" he said.

 

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