Bill to Provide Tax Exemption for City Purchases of Road Maintenance Vehicles

The current town motor vehicle sales tax exemption would be extended to all cities and other local units of government.
(Published Feb 11, 2019)

The House Taxes Committee will hear a League-supported bill on Feb. 12 that would exempt city and county purchases of road maintenance vehicles from the 6.5 percent state motor vehicle sales tax (MVST).

The bill, HF 702, is authored by Rep. Chris Swedzinski (R-Ghent).

Purchases of licensed motor vehicles are taxed under the MVST statute (Minnesota Statutes, section 297B). The general sales tax exemption granted to cities and counties in 2013 only covers the general sales and use taxes (Minnesota Statutes, section 297A) and, therefore, does not extend to motor vehicles that must be licensed.

Current law

Under current law (Minnesota Statutes, section 297B.03), the state’s roughly 1,800 towns are exempt from paying the 6.5 percent state MVST on vehicles used exclusively for road maintenance, including snow plows and dump trucks. The town exemption has been in place since 1998. However, an identical vehicle purchased by any of the state’s 853 cities or 87 counties is subject to the MVST, increasing the cost of vehicles used to maintain our roads by 6.5 percent.

For a typical $180,000 snow plow, the MVST paid by a city or county would total $11,700.

Bill mirrors town MVST exemption

This bill would only mirror the current law exemption for certain town road maintenance vehicle purchases and would attempt to extend the MVST exemption to all city, county, and town vehicles. Similar to the existing town exemption, cities and counties would continue to pay the MVST on purchases of most automobiles, vans, or pickup trucks.

Although most other vehicles purchased by local units of government, including towns, are subject to the state MVST, the purchase of certain types of vehicles, which do not have to be licensed, are currently exempt from the MVST, including marked squad cars, fire trucks, fire support vehicles, and ambulances.

Under this bill, the existing MVST exemption for town purchases of road maintenance vehicles would be extended to purchases of these vehicles by other local governments, including all statutory and home rule charter cities; counties; and instrumentalities of cities, counties, and townships, including a special district organized under a joint power agreement.

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