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Focus on New Laws: Local Sales Taxes
A moratorium on new local sales tax proposals has been imposed through the 2025 legislative session.
Along with approving the local sales tax proposals within the omnibus tax bill during the 2023 legislative session, the Legislature put a moratorium in place on local sales tax proposals for the next two years. It also established a task force to examine the use of local taxes moving forward.
Local sales tax moratorium
The new moratorium states that cities (and other political subdivisions) may not engage in any of the following activities in connection with imposing a new local sales and use tax or modifying an existing local sales and use tax:
- Advertise or expend funds for the promotion of a referendum to support imposing a local sales tax.
- Conduct a referendum.
- Hold public forums or provide facts and data on any local sales tax, the impact it would have, or the impact of the projects it would fund.
- Adopt a resolution supporting a local sales tax.
- Seek voter approval for a local sales tax.
This moratorium does not apply to local sales tax authorizations or modifications that were included in the 2023 omnibus tax bill.
The practical effect of this moratorium is that the Legislature will not consider any local sales tax proposals during the 2024 or 2025 legislative sessions.
Local taxes advisory task force
In addition to the moratorium on local sales taxes, the Legislature also created a task force to examine the use of local taxes as a funding mechanism for cities and counties to fund capital projects and other improvement projects. This task force will cover not only local sales taxes, but also local lodging taxes and food and beverage taxes.
The task force has been asked to determine objective evaluation criteria for these local tax proposals and the appropriate entity and process for authorizing local tax proposals. The task force will also weigh the current requirements for regional significance, the role of state aids that jurisdictions receive that propose local taxes, a jurisdiction’s net tax capacity rate compared to statewide and county averages, and anything else it deems necessary.
The task force will issue a report with recommendations for legislators by Jan. 15, 2024, and is comprised of seven members. They are:
- Paul Marquart, commissioner of Revenue.
- Mike Williams, Association of Minnesota Counties appointee.
- Jenny Max, League of Minnesota Cities appointee.
- Commissioner appointee, to be determined.
- Commissioner appointee, to be determined.
- Commissioner appointee, to be determined.
- Commissioner appointee, to be determined.
The task force is scheduled to hold its first meeting on Aug. 16. You can find more information about dates and times of meetings, as well as register for the meetings on the Minnesota Department of Revenue’s website. The League will be following all task force meetings; for more information contact LMC Intergovernmental Relations Representative Nathan Jesson at njesson@lmc.org.