Bill Would Accelerate LGA Distribution

The bill also repeals the June accelerated sales tax remittance requirement for larger vendors, including larger municipal liquor store operations.
(Published Mar 10, 2014)

A bill authored by Senate Taxes Committee Chair Sen. Rod Skoe (DFL-Clearbrook) would modify several sections of Minnesota’s tax code, including a modification of the payment schedule for the distribution of city local government aid (LGA) and county program aid (CPA). The bill would also repeal the requirement that larger vendors remit most of their June sales tax collections before the end of June, a provision known as the June accelerated sales tax payment.

Under the bill, LGA and CPA payments would be split into four installments and paid to cities and counties on March 15, July 15, Sept. 15, and Nov. 15. Under current law, LGA and CPA must be paid to cities and counties in two installments on or before July 20 and Dec. 26 each year. The accelerated payment schedule would be effective in calendar year 2015.

By moving the first payment of LGA and CPA to March 15, the state will have to book the distribution in the earlier fiscal year, which will effectively be a one-time accelerated payment of roughly $180 million. In other words, the early distribution will cost the state roughly $180 million in the FY 2014-2015 biennium.

In addition, the bill repeals the June accelerated sales tax remittance requirement for larger vendors. Under current law, sales taxes collected by vendors must be remitted by the 20th of the month following collection. However, for the month of June, which is the last month of the state’s fiscal year, larger vendors with an annual sales tax liability of more than $120,000 are required to remit 90 percent of their estimated June sales tax collections before the end of the month. Although we do not yet have an official estimate of the impact on biennial revenues, the same change was proposed in 2011 and at that time, the estimated impact to the general fund was roughly $260 million.

Both of these actions would reduce the state’s projected budget surplus, which in the February forecast was estimated to be $1.233 billion for the balance of the current FY 2014-2015 biennium.

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