Bill in Minn. Senate would exempt local governments from sales tax

Some Republicans in the Minnesota Senate say cities, counties and townships should no longer have to pay state sales taxes on purchases.

They've introduced legislation exempting local units of government from the tax.

During a State Capitol news conference Thursday, Republican Sen. Al DeKruif of Madison Lake said the exemption would cost the state about $125 million a year. But DeKruif said most of that money is sent back to cities and counties in the form of state aid.

"What I'm proposing is that we leave this money with the folks. I think the people at the local level can use this money," DeKruif said. "They can make their projects go farther. Or, the second thing that this could do for them is it could help them reduce local property taxes."

DFL Senate Minority Leader Tom Bakk of Cook said he supports the proposed change. But with a projected $6.2 billion state budget deficit, Bakk said Republicans need to figure out a way to pay for the exemption.