State Revenue Commissioner Myron Frans said Friday he is unsurprised by business community resistance to Gov. Mark Dayton's proposal to expand the state sales tax to services and cut the tax rate. But he says the move makes sense.
Businesses object to the extension of the sales tax to accounting, legal and other services. But at a press briefing, Frans said about two-thirds of transactions these days involve services, not goods, and the sales tax should be expanded to reflect that.
"A lot of states are now taxing some aspect of the service economy," Myron said. "And I predict in the next ten years, you're just going to see a gradual continuation of this because that is simply the nature of the economy we have in the United States."
Frans stressed that the sales tax on business-to-business services would hinge on whether the buyer is in Minnesota. He said Minnesota law, architecture and other service firms would not have to collect the sales tax on work done for out-of-state clients.
Businesses would pay about $1 billion more a year in sales taxes under the governor's proposal to expand the tax to many services, Frans said. The department is still clarifying what would and would not be taxed. YMCA memberships, music lessons, and auto and appliance repairs would be among the services taxed.