No more 'crazy' red tape: MN small businesses get sales tax exemption

Author:
Updated:
Original:

Minnesota businesses are cheering a change in state tax laws that will make it much easier for them to claim a sales tax break when they buy new equipment.

The law, called the Up-Front Capital Equipment Exemption, went into effect on July 1.

It replaces a two-decade old law that required businesses to pay sales tax upfront on those purchases, then file paperwork with the state to get a rebate check sent back to them months later.

Now, businesses can claim the sales tax exemption when they make their purchase, after filling out a one-time form with the state Department of Revenue. The idea is to streamline the process and make it easier for businesses to take advantage of the exemption.

Business owners told the White Bear Press the paperwork under the old rebate system was so complicated they often had to hire accountants to fill out the forms, or they decided not to apply for the rebates at all.

Another business person told the Star Tribune that "reams of documents" were required to apply for the tax rebate.

The bill's sponsor, Sen. Chuck Wiger, DFL-Maplewood, told the Press it's a significant issue for small businesses.

"The red tape was crazy," Wiger said. "We knew we had to change it for both job growth and fairness. This was not fair."

The law was passed in 2013, but didn't go into effect until July 1 of this year so the state could prepare for any lost revenue that would result from the change, according to the Press.

A case in point

The Star Tribune talked to a business owner who illustrates how this change will make the process easier.

His parts manufacturing company bought a $150,000 machine in January and had to pay $10,000 in sales tax at the time of purchase.

In order to get that amount back in a rebate, he hired an accountant who charges more than $1,000 to do the paperwork for him. And then he had to wait several months for the rebate check to arrive.

He's buying another new machine that arrives later this month, according to the Star Tribune And because of the law change he can claim the sales tax break right up front. That means no tax owed, no paperwork to be done, and no waiting months for a check from the state.

What's better is that businesses like his will often reinvest those tax savings into their operation or perhaps hire more employees.

The Minnesota Department of Revenue says the sales tax exemption saves Minnesota businesses about $360 million a year, according to the White Bear Press.

Companies need to apply for the exemption by filling out a form with the Revenue Department, and then show that form to the vendors when they make a purchase.

The form, and a fact sheet that explains what purchases are eligible for the exemption, is available on the department's website.

Next Up

Antoine Winfield Jr.

Watch: Gopher alums Antoine Winfield Jr., Tyler Johnson make key plays in Bucs' playoff win

The Minnesota greats had a pair of highlights as Tampa Bay advanced to the NFC Championship.

Er-hgw7XYAQup5n

Crews respond to fire at Gertens in Inver Grove Heights

It's reported that a greenhouse on the grounds was on fire.

Marcus Carr

Why the Gophers could be in line for a high seed in the NCAA Tournament

The Gophers are done with a brutal stretch and are poised to make a run.

police tape

Authorities ID man fatally struck by 'errant bullet' in Willmar

The man was working in his garage when he was fatally shot.

ambulance

1 dead, 1 critically injured in head-on crash on Highway 169

The State Patrol says driving impaired may have been a factor in the crash.

Richard Pitino

Gophers game against Nebraska postponed due to COVID outbreak

The Cornhuskers have had 12 members of its team test positive for COVID-19.

Bob Kroll

What Minneapolis Police Lt. Bob Kroll said in Sunday radio interview

Kroll said that once he's retired he'll go "radio silent."

coronavirus, SARS-CoV-2, covid-19

Here is Minnesota's COVID update for Sunday, January 17

The health department provides updates daily at 11 a.m.

Sen. Julia Coleman

'No one's business': State senator calls out attack on her pregnancy

Sen. Julia Coleman represents Minnesota's District 47.

Willmar Police Department

'Errant bullet' goes through garage wall, kills Willmar man

The man was working in his garage when he was shot, witnesses said.

Related