In another sign of the struggling economy, the number of Minnesota businesses that lost their permit to collect sales tax rose sharply in the past six months.
On Oct. 1, 2010, 181 businesses were on a list maintained by the Minnesota Department of Revenue. All had failed to pay the state for sales tax they collected or should have collected and as a result lost their right to do business.
By the end of March the list has grown to 250, a 38 percent increase. The total debt owed increased 43 percent, to $11.6 million.
"A variety of businesses are feeling the effect of reduced sales and increased costs. Many don't have the option of getting a bank loan," said Robyn Dwyer, director of the department's collections division.
Dwyer said that some businesses use sales tax revenue to pay operating expenses.
"We try to get to businesses before [their debts] get too big and too out of control," Dwyer said, and "hopefully get them into compliance early on."
Only two businesses on the earlier list disappeared from the roll when their debt was paid or discharged.
Those companies may be able to get a new sales tax permit by providing a security deposit or bond that can be used against future delinquency. The deposit covers two filing periods' worth of payments, up to $10,000.
Dwyer noted that "a lot of the businesses that do things right really like the list because they can see that businesses are held accountable and they're not competing with someone that has an advantage because they're utilizing the sales tax. We have gotten a lot of feedback on that."
The following are the 10 businesses on the sales tax permit revocation list added between Oct. 1, 2010, and March 31 and ranked by how much they owed in taxes, penalties and interest at the time of revocation.
1 E-Street Makers, Inc., Anoka, a custom furniture and cabinet maker, owed $648,929 at revocation Feb. 17, 2011.
2 Mi Famiglia Restaurant Group, Inc., doing business as Mi Famiglia, St. Cloud, an Italian restaurant, owed $343,935 at revocation Oct. 28, 2010.
3 Kevin J. Stiller, doing business as Spruce Hill Tree Service, Rice, owed $214,100 at revocation Oct. 20, 2010.
4 LT Pizza Company, Inc., Kenosha, Wis., a restaurant, owed $154,506 at revocation Oct. 21, 2010.
5 JLS Management, White Bear Lake, a Dairy Queen business, owed $152,195 at revocation Feb. 3, 2011.
6 Michael Lien, doing business as Lien's Auto Body, Princeton, owed $135,560 at revocation Dec. 2, 2010.
7 JBA, Inc., doing business as Paradise Grill And Games, New Brighton, owed $117,177 at revocation Dec. 29, 2010.
8 Team Stranger, Inc., doing business as Quiznos Subs, Eden Prairie, owed $93,548 at revocation Oct. 14, 2010.
9 Derosier Companies & Associates, doing business as Team Lawn & Landscape, Brooklyn Park, owed $93,470 at revocation Nov. 4, 2010.
10 Jennifer M. Hintz, Brooklyn Park, a janitorial business, owed $92,556 at revocation Jan. 21, 2011.
Programs funded by sales tax
Minnesota's general sales tax rate is 6.875 percent. A portion of that, 0.375 percent, is set aside for environmental and arts programs. The remainder, 6.5 percent goes to the state's general fund.
Counties and cities can also levy sales tax. As an example, most businesses in Minneapolis collect 7.775 percent in sales tax, which is higher than the state figure because it includes a metro area 0.25 percent tax for transit improvement projects, Hennepin County's 0.15 percent tax for the Minnesota Twins' Target Field and the city's 0.5 percent tax for the Minneapolis Convention Center and other projects.
Additional taxes apply to many downtown Minneapolis businesses.
Hard Data digs into public records and puts a spotlight on rule breakers in the Twin Cities and Minnesota. Contact me at email@example.com.