Minnesota Sales Tax Proposal Draws Fire from GOP, Mall of America

The battle over the budget got an early start this past week when Sen. Ann Rest (DFL) introduced bills that would lift the sale tax exemption on clothing and expand it into online retailing—specifically media downloads like music, movies and TV shows.

With DFL majorities in both houses of the legislature and the governor's mansion, the bills are likely to pass, though that hasn't precluded some grumbling from the greatly diminished Republican contingent. 

"With the current state of the economy, it's disappointing to see tax increases proposed and anticipated," Burnsville Sen. Dan Hall (R) wrote in his weekly legislative update. "This is not the right direction to take our state. The truth is: the state does not have a revenue problem, it has a spending problem."

At present, Minnesota is one of only a handful of states that does not have a sales tax on most clothing, though there are some exceptions for non-essential items. Brian Bakst of the Associated Press reported that Minnesota forfeits $300 million in revenue due to the sales tax exemption on clothing.

Rest's proposal would hold the first $200 of a purchase harmless from the tax, which should shield the poor from bearing the brunt of the burden, she said. If the legislation passes, the sales tax on clothing would apply to purchases made after June 30, 2013. Rest's proposals can be found in a cluster of bills: S.F. No. 11, S.F. No. 9, and S.F. No. 35.

Small businesses and bricks-and-mortar retailers welcomed the tax on digital purchases (which they have argued is long overdue) but were far less enthusiastic about repealing the exemption on clothing. The proposal was especially troubling to Maureen Bausch, an executive from the temple of capitalism, the Mall of America.

"If we add this tax on apparel, it will absolutely affect our tourism trade," Bausch said in a report from the Associated Press. The MOA attracts 17 million tourists each year. "The ability to market Minnesota's lack of sales tax is absolutely our clear competitive edge."