Lori Sturdevant: Sales tax bill becomes a litmus test

  • Article by: LORI STURDEVANT , Star Tribune
  • Updated: May 26, 2012 - 10:23 PM
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I grew up in a place where a kid could count Main Street merchants as friends.

K.T. Faris always seemed glad to see me, even if I was "just looking" at his jewelry store. Courtly John Hermanson (befitting the undertaker he also was) let me sit on the new sofas in his small showroom as we chatted. Nick Schwebach indulged my visits for a year before I'd finally saved enough to buy a portable stereo at his appliance store.

Maybe that's why I latched on to the so-called "e-fairness" sales tax issue during the last few legislative sessions. I take offense at sales tax policies that put today's Main Streeters -- as well as the Minnesota Bigs: Best Buy and Target -- at a disadvantage to online sellers with no stores or warehouses in Minnesota.

Which sellers are they? Here's a clue: The other name for this issue is "the Amazon tax."

Amazon.com and a few others of its ilk aren't required to collect sales taxes from Minnesota consumers at the time of purchase, despite having sales affiliates in the state. Minnesota-based online sellers are. That puts the locals at a 6.85 percent disadvantage on every purchase.

It isn't that Amazon customers don't owe the tax. They do. But they are politely requested to self-report their purchases and pay up when they file their state income tax returns.

State tax auditors cannot verify the accuracy of those reports. Taxpayers, being no dummies, have figured that out. It's amazing how often shoppers who easily recite their account passwords and credit card numbers can't recall making any untaxed online purchases at year's end.

Requiring Amazon and other sellers with Minnesota affiliates to collect sales taxes at the time of purchase, as Minnesota-based retailers must, is thus a matter of tax law compliance as well as fairness.

The bill to make it so also served nicely as a litmus test of the loyalties of the Legislature's Republican majorities. Would they side with the business community that paid for their tickets to the statehouse dance? Or were GOP legislators so enthralled by Tea Party/Ron Paul notions about shrinking government that they would deprive the state of even the small amount of new revenue that e-fairness would bring?

We're talking state-budget peanuts: $3.7 million more in fiscal 2013, $10 million more in the 2014-15 biennium.

All of that gain could have been turned around as business tax relief. Including it in the second, smaller version of this year's business tax-cut bill might have been sufficient inducement for Gov. Mark Dayton to sign the bill, rather than vetoing it, as he did on May 14.

That veto closed the books for the two-year lawmaking cycle. E-fairness went unaddressed. It was omitted from both the House and Senate omnibus tax bills, both years.

It wasn't for lack of friends in high places. E-fairness was the top priority of the Minnesota Retailers Association, and backed by both the state Chamber of Commerce and the Business Partnership. Gov. Mark Dayton supported it. By 2012, so did House Taxes chair Greg Davids, R-Preston.

And in February 2011, an e-fairness bill was introduced by Senate Taxes chair Julianne Ortman, R-Chanhassen.

She says she aimed to give the idea a hearing, nothing more. Before the 2011 session ended, Ortman announced her opposition to her own bill. She said such tax policies ought to be settled in Congress, not the states, and that a state move risked running afoul of the courts. (Nine states have passed similar legislation. It has been upheld in several court tests but rejected in Illinois.)

"The real issue was that they didn't want any Republicans to vote against the tax bill," said Brian Steinhoff, a former aide to GOP Gov. Tim Pawlenty who heads the state Retailers Association.

Too many Republicans saw e-fairness as a tax increase. That made it a toxic addition to the political Tea that Republicans are brewing.

Ortman's change of heart was so complete that when, in a clever last-ditch ploy, the retailers landed an e-fairness provision in the Vikings stadium bill, she led an unsuccessful effort to strip it from the bill on the Senate floor.

Presumably she helped wield the invisible club in the stadium conference committee that finally killed e-fairness for the biennium. (I say "presumably" because that committee dodged open meeting rules so outrageously that who-did-what will never be clear.)

But just putting her name on the e-fairness bill 15 months ago -- alongside that of a DFL cosponsor, Sen. Ann Rest -- added to party folks' suspicions that Ortman's Tea is a little weak. She was denied GOP endorsement on May 15, and will need to win a primary to contend for a fourth term in the Nov. 6 election.

My litmus test results are in: Small-government ideology trumped a chance to help Minnesota businesses -- not just the big corporations, but also the progeny of my old Main Street friends.

"We need this change to level the playing field," Steinhoff said. "When I talk to our members, the little guys, they tell me, 'This is huge for us. It's killing us.'"

The retailers will be back to plead for e-fairness again in 2013. Whether the Ron Paul-dominated 2012 Republican Party will send any legislators to their aid is less clear.

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Lori Sturdevant is a Star Tribune editorial writer and columnist.

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