A number of laws impacting cities that were passed by the 2013 Legislature went into effect on Jan. 1, 2014.
(Published Jan 6, 2014)
While most bills passed by the 2013 Legislature became effective last year, some laws of significance to cities just became effective on Jan. 1.
Local government sales tax exemption
The local government sales tax exemption went into effect on Jan. 1, and most, but not all, city purchases will be exempt from the general sales tax. The League has worked extensively with the Department of Revenue (DOR) to provide information to cities about how the new law will be implemented. The League strongly encourages all cities to review the Local Government Sales Tax FAQ.
The most notable exception to the exemption is that the purchase of goods and services used as inputs to goods and services generally provided by a private business are still subject to the sales tax. The law specifically states that goods or services provided by liquor stores, gas and electric utilities, golf courses, marinas, health and fitness centers, campgrounds, cafes, and laundromats are taxable. Goods and services generally provided by a private business do not include housing services, sewer and water services, wastewater treatment, ambulance and other public safety services, correctional services, core or homemaking services provided to elderly or disabled individuals, or road and street maintenance or lighting. Any other service is subject to interpretation by DOR.
If a city purchases goods that will be used for taxable and nontaxable services (e.g., office supplies used by the city clerk’s office and the community center), then the city must allocate a portion of the sale to the taxable use and pay the sales and use tax on that portion.
Another significant sticking point with the new law is that purchases by most joint powers agencies will not be exempt from the sales tax. The League has spent considerable time attempting to resolve this issue with the Department of Revenue, but it appears that a legislative fix will be necessary. Exempting purchases made by joint powers entities will be one of the League’s top priorities in the 2014 legislative session.
Police and fire pension contributions increase
The 2013 Legislature passed a solvency package to shore up funding for the Public Employees Retirement Association (PERA) Police & Fire pension fund. The package includes contribution rate increases for employers and employees. The solvency package also includes numerous benefit savings provisions.
Beginning on Jan. 1, the employer contribution rate increased by 0.9 percent of salary to 15.3 percent, and the employee contribution rate increased by 0.6 percent of salary to 10.2 percent. An identical increase will go into effect on Jan. 1, 2015. The new contributions must be deducted from the first paychecks issued in 2014 and apply to the total salary paid, even if all or part was earned in 2013.
Changes to absentee voting
Beginning with the 2014 elections, Minnesotans are no longer required to provide a reason or “excuse” for voting by absentee ballot. Prior to this change, if a voter was unable to be in his or her precinct on Election Day, the voter could vote absentee but had to provide an excuse for doing so. Though an excuse was required, there was no enforcement to verify the reasons given by voters.
Minnesota now joins 27 other states that allow no-excuse absentee voting. The omnibus elections bill also extends the time elections administrators have for processing absentee ballots. Now administrators can begin processing ballots seven days prior to Election Day instead of four.
Coal tar sealant ban
A statewide ban on the sale and use of coal tar sealant products for asphalt surfaces went into effect on Jan. 1. (See Minnesota Statutes, section 116.202.) Cities may adopt and enforce the ban, but are not required to do so.
The League worked closely with the Minnesota Pollution Control Agency to develop informational materials and a model ordinance for cities to use. The agency has done extensive work with applicators to prepare them for this change.
County wheelage tax authority expanded
The broadened authority for counties to impose an annual wheelage tax on motor vehicles went into effect on Jan. 1. Specifically, the new law expands the previous seven-county metropolitan area authority to all counties statewide. It also adjusts the tax rate to $10 per vehicle, up from a $5 limit.
The $10 per vehicle rate will remain in effect until Jan. 1, 2018, after which time a tax of up to $20 can be imposed. In the counties that have enacted a wheelage tax, it applies to vehicles subject to annual registration and taxation under Minnesota Statutes, chapter 168. City vehicles are not subject to the wheelage tax because they are exempt from the registration taxes and fees under Minnesota Statutes, section 168.012.
Modification to surety deposit law
The omnibus tax bill contained a small but important change to the surety deposit requirements for hiring non-Minnesota contractors. Effective Jan. 1, if you hire a non-Minnesota contractor and the value of any contract is over $50,000, you must withhold 8 percent of the total compensation as a surety deposit and send it to the Department of Revenue. The previous withholding requirement only applied if the total value of all contracts during the year with the vendor exceeded $50,000.
A summary of all 2013 legislation that impacts cities can be found in the 2013 Law Summaries.
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