More Construction Material Sales Tax Exemption Bills Introduced

February 16, 2021

General sales tax streamlining bill and 10 local government-specific bills were introduced and discussed.

Once again this year, an array of cities and other local governments are requesting that local construction projects be eligible for a streamlined sales tax exemption refund on materials.

Under current law, when construction materials for a local government project are purchased by a contractor, the local government must follow a challenging process to secure a tax exemption.

Simplification for all

One of the proposals would generally extend the construction sales tax refund process to all local government construction projects. HF 768 (Rep. Chris Swedzinski, R-Ghent) and SF 216 (Sen. Jason Rarick, R-Pine City) propose a solution the League developed with the Minnesota Department of Revenue to simplify the exemption process.

Under the bill, a contractor would continue to initially pay the sales tax on the materials but, after the project completion, a city could submit documentation of the materials used in the project and receive a refund from the state.

SF 216 was heard last week in the Senate Taxes Committee and laid over for possible inclusion in the Senate omnibus tax bill. The House companion will be considered on Feb. 16 in the House Taxes Committee.

Many of the specific exemption bills have also been considered and held for possible inclusion in the House and Senate tax bills.

The Department of Revenue now estimates that the general refund exemption is costing cities, counties, towns, school districts, and other exempt entities more than $70 million per year. This means the refund bill will reduce state revenues by that amount.

See the DOR analysis (pdf)

City-specific bills

Below is a list of the current city-specific bills. The League will continue to advocate for the general streamlined refund exemption contained in the Rarick/Swedzinski bills.

  • HF 65 (Klevorn)/SF 536 (Johnson Stewart): Plymouth; fire station refundable construction exemption provided.
  • HF 181 (Fischer)/SF 124 (Wiger): Maplewood; public safety facility construction material exemption provided.
  • HF 216 (Heinrich)/ SF 98 (Abeler): City of Ramsey; public works facility construction refundable exemption provided.
  • HF 438 (Swedzinski)/SF 262 (Dahms): Marshall; school building construction material exemption provided.
  • HF 495 (Akland)/SF 541 (Frentz): St. Peter; fire station construction materials exemption provided.
  • HF 525 (Lislegard)/SF 477 (Tomassoni): Virginia; public facility construction materials exemption provided.
  • HF 574 (Howard)/SF 88 (Wiklund): Bloomington; fire station construction material exemption provided.
  • HF 650 (O’Neill)/SF0764 (Anderson): Buffalo; fire station construction materials exempted.
  • HF 654 (Acomb)/SF0855 (Johnson Stewart): Minnetonka; public safety facility purchase exemption extended.
  • HF 975 (Igo)/SF 926 (Eichorn): Grand Rapids; civic center construction refundable exemption provided.

For more background information about this bill, read a previous article.

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