Reminder: Local Sales Tax Requests Due Jan. 31

January 4, 2020

With the beginning of the new biennium, even cities that sought authority in 2020 must submit new requests for legislative authorization.

The 2021 legislative session begins Jan. 5, and cities seeking local sales tax authority must file requests with the chairs of the House and Senate Taxes committees by Jan. 31.

In a presession call with League of Minnesota Cities staff, House Taxes Committee chair, Rep. Paul Marquart (DFL-Dilworth), said his committee will likely enforce that deadline to provide ample time to consider proposals.

Cities may request legislative authority to impose a local sales tax only to fund capital projects. A revised process for granting local sales tax authority, which includes a finding of “regional significance,” was enacted in 2019. Last year, 20 cities sought sales tax authority under the new process but none of the requests were granted.

In his interpretation, Rep. Marquart said, a regionally significant project is one that is “above the ground” (not streets, water, or sewer) that provides benefits to the broader regional population. He said that is only his opinion, and the committee could decide otherwise.

Rep. Marquart also stressed that he understands the need for additional local financing tools. He said he is not opposed to local sales taxes to fund regionally significant capital projects.

Steps of the statutory process

To impose a general local sales tax under Minnesota Statutes, section 297A.99, a city must take the following steps:

  1. Adopt a resolution. The city council must first adopt a resolution proposing the tax. The resolution must include the proposed tax rate, documentation of the “regional significance” of each project to be funded, the amount to be raised with the tax, and the estimated length of time the tax will be needed.
  2. Submit resolution and supporting materials to state tax committees. The city is required to submit the adopted resolution, details on the projects, and documentation on regional significance to the chairs and ranking minority members of the House and Senate Taxes committees by Jan. 31 of the year that it is seeking the special law.
  3. Get legislative authorization. The city must secure the passage of a special law authorizing the enactment of the local sales tax. The city would typically work with its local legislators to introduce special legislation.
  4. Adopt a resolution. After approval, the city must adopt a resolution accepting the new law. The city must also file the resolution and a local approval certificate with the Office of the Secretary of State before the next legislative biennium begins.
  5. Hold a referendum. The city must conduct a referendum during a general election within two years of receiving legislative authority for the local sales tax. The referendum must include separate questions for each project, and only the ballot questions approved by voters may be funded by the sales tax.
  6. Pass an ordinance. The city council must pass an ordinance imposing the tax. It must also notify the commissioner of Revenue at least 90 days before the first day of the calendar quarter that the tax will be imposed.

Spending restrictions

The statute continues to restrict the expenditure of funds to promote passage of a local sales tax referendum. Cities may spend money to:

  • Give residents the information that is contained in the local sales tax resolution, including information on specific projects and costs of those projects.
  • Conduct public forums on the sales tax and projects to be funded, provided that proponents and opponents are given equal time to express their opinions.
  • Provide facts on the proposed projects and the impact of the proposed tax on consumers.
  • Conduct the required referendum.

Resources available

The League worked with legislative staff and the Minnesota Department of Revenue to develop a model resolution that fulfills the requirements of the law. Your city may want to use the model if it is considering a local sales tax during the 2021 legislative session.

Download the model resolution (doc)

If you have questions about the statutory process outlined above, contact one of these League staff members:

For more information and assistance with the local sales tax process, you may also contact the Department of Revenue’s Local Government Services Unit at localgovernmentservices.mdor@state.mn.us or (651) 556-6117.

Learn more about the required local sales tax process from the Department of Revenue website

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