Minnesota Internet Sales Tax Bills Rolled Into Omnibus Tax Bills

Booksellers in Minnesota urged to write legislators now

This week, companion Internet Sales Tax bills that were introduced in the Minnesota House of Representatives and the Senate were both included in their respective branch's omnibus tax bills. This means that the legislation, which would require out-of-state companies that have affiliates in Minnesota to collect and remit sales tax on sales made over the Internet to in-state customers, will be included for a vote with other state tax bills.

The Minnesota Senate omnibus tax bill, SF2074, came out of committee on April 22, and is expected to be heard on the Senate floor on Friday, April 24. The House omnibus tax bill, HF2323, is expected to be heard in the next few days.

Sue Zumberge of Common Good Books before the Minnesota State Senate Taxes Committee hearing. Photo: Zachary S. Teicher

The move comes just a few days after Sue Zumberge of Common Good Books in St. Paul, Minnesota, and Kati Gallagher of the Midwest Booksellers Association (MBA) testified in support of Internet Sales Tax legislation at a Minnesota State Senate Taxes Committee hearing. In addition, a statement from Sally Wizik Wills of Sister Wolf Books in Park Rapids, Minnesota, was read at the hearing, while a joint statement from MBA and the American Booksellers Association was entered into the hearing record.

"I felt we made some really good points at the hearing," said Zumberge, who added that she was galvanized by the hearing to further her e-fairness efforts. "If you're doing business in the state, at present you are being punished." In the end, she said, she believed the Committee "was on our side."

The Senate Taxes Committee focused on SF0282, legislation introduced in late January that would require out-of-state companies that have affiliates in Minnesota to collect and remit sales tax on sales made over the Internet to in-state customers. The legislation was introduced by State Sen. Thomas M. Bakk, the Taxes Committee chair. In assessing the proposed legislation, the Minnesota Department of Revenue, reported that SF0282 would recoup $22.3 million in lost sales taxes in Minnesota in FY 2010 and $28 million in FY 2011.

In a statement read at the hearing, Wills stressed, "The failure of [out-of-state online retailers] to collect sales tax gives them an unfair advantage over those of us who do collect sales tax. In addition, the tax base is being eroded.... I believe [SF0282] would provide a level playing field for retailers in our state in relationship to sales tax." She added: "The proposed legislation would not raise taxes. It would, however, result in equitable enforcement of existing tax laws."

At the hearing, Gallagher stated: "Untaxed Internet shopping is causing locally owned Main Street businesses to close in both small towns and large cities.... Internet competition is often cited as the cause. Business, sales, and income taxes from these closed businesses are then not paid to their communities and states. Public services, education, road repair, etc. go unfunded. Unemployment rises.... It's a vicious circle. I think we cannot yet imagine the long-range effects of allowing Internet retailers with nexus in Minnesota to bleed our local businesses dry through the unfair competitive advantage of not having to charge tax."

Appearing at the hearing to oppose the bill were representatives from Amazon.com, the Minnesota Chamber of Commerce, and General Mills. Also submitting testimony in opposition to the bill was the State Privacy and Security Coalition, Inc., which includes Amazon.com, AOL, the Association for Competitive Technology, Hewlett-Packard Company, Interactive Advertising Bureau, Google, NetChoice, Performance Marketing Institute, State Privacy and Security Coalition, TechAmerica, and Yahoo.

Once the Senate and House agree on their respective omnibus tax bills, the two branches will meet to reconcile the bills. Then the final bill will go to Minnesota Governor Tim Pawlenty for a vote.

"We are grateful to Sue, Sally, and Kati for their testimony on behalf of the state's independent booksellers," said ABA COO Oren Teicher. "As the Internet Sales Tax legislation moves forward, it is more important than ever for Minnesota booksellers to let legislators know just much how the inequitable enforcement of existing sales tax laws is adversely impacting local businesses, which are the lifeblood of their communities. We must keep the pressure on -- I would urge Minnesota booksellers to contact their legislators now."

To help Minnesota booksellers in this important advocacy outreach, MBA and ABA have prepared template letters that can be adapted and sent to a bookseller's state senator and representative. Here's contact information for state senators and for representatives.

ABA also asks that booksellers notify MBA and David Grogan, ABA public policy liaison, when letters have been sent. This will help both MBA and ABA compile information to support their sales tax lobbying efforts. --David Grogan