Governor Dayton Drops Business to Business Sales Tax Proposal

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With Governor Dayton scheduled to release his supplemental budget proposal next week, he announced today at a meeting of the Twin West Chamber of Commerce that he will drop the proposed expansion of the state sales tax to business to business services like legal, advertising and accounting services. The sales tax on business services had been heavily criticized by members of the business community who said it threatened Minnesota jobs.

In announcing his decision, Dayton noted that some businesses had threatened to move their operations to low-tax states and "that's exactly the opposite of what I want to achieve, which is more jobs and better jobs for Minnesota."

The Administration's supplemental budget will also likely drop the Governor's proposed $500 per family property tax rebate which was partially funded by the sales tax on services. The supplemental budget will also benefit from a reduction in the proposed budget deficit for the next biennium from $1.1 billion to $627 million, which was announced last week.

The Dayton proposal to expand the sales tax for services had received lukewarm support in the Legislature and outright opposition from a few DFL legislators. Dayton is expected to maintain his proposal for a new fourth income tax tier on families earning more than $250,000 a year.