The new state tax on prepared foods isn’t going over well with area meat processors.

Monday, February 11, 2002

The new state tax on prepared foods isn’t going over well with area meat processors. The reality of the tax came as an unpleasant surprise to many.

One local meat market owner isn’t sitting still; he plans on taking his case to legislators. And he will probably find many in the legislature who agree with him.

Dave Larsen, owner of the Conger Meat Market, is upset that he has to charge retail sales tax on items like summer sausage if he makes it himself, but processed meats he sells from Hormel or other companies is not taxed.

&uot;I have to charge seven and a half percent more than the stuff for sale in grocery stores,&uot; Larsen said. He also has to make sure that both his employees and his customers understand the new rules. Larsen is afraid it may become yet another paperwork nightmare for his own business and other businesses like his.

Others share his sentiments. At Nick’s Meats and Grocery in Hayward, co-owner Kelly Anderson says that customers look baffled when she tells them they owe tax on a meat purchases.

&uot;It is unfair,&uot; she said.

Brian Jordahl, owner of Jordahl Meats in Manchester, is uncertain about how the new taxes are being applied and wants more clarification on the products that he’s supposed to collect taxes on.

&uot;I’m not sure how this is going to work out. It’s just too ambiguous,&uot; Jordahl said.

Meat processors were sent a brochure from the Department of Commerce late last year or early this year, but the definitions of ‘prepared foods’ and ‘ready to eat’ were pretty broad, he said.

Larsen is a board member for the Minnesota Association of Meat Processors, which plans on contacting legislators to make the new law more fair. They are working with the Minnesota Grocer’s Association and the organization that represents the state’s bakeries – which are affected by a new tax on fresh-baked goods -&160;to get the new tax changed or repealed.

&uot;I don’t think the people who made the law understand the impact. I don’t think things are working they way they intended,&uot; said Ed Lorentz, executive secretary of the Minnesota Association of Meat Processors. He thinks the main problem with it is its inconsistency and unfairness to small businesses like Larsen’s and his own.

&uot;Right now summer sausage, braunschweiger, meat sticks and jerky are all taxable if it’s made in the store,&uot; said Lorentz. If it’s made elsewhere and then sold, there is no tax. Lorentz said that according to the rules now in place, custom processed meat, including venison, would also be subject to the retail sales tax.

State Rep. Dan Dorman, R-Albert Lea, agrees that local meat processors are having to deal with unintended consequences.

&uot;Whenever you do major reforms, you also have to come back and deal with and fix some things,&uot; said Dorman. He thinks that they will probably find some more, too.

&uot;A couple of bills have already been introduced to remedy the situation,&uot; he said.

&uot;We’ll take care of this eventually, I just don’t know when,&uot; he added. According to Dorman, the needed changes are being held up by political maneuvering in the state senate.

According to Patricia Reinarts, a staff member for the Senate Tax committee, that legislation is included in the current Omnibus Tax Bill.

Representatives of the meat processors plan on meeting with legislators on Feb. 21, and are trying to spread the word about the changes to the retail tax and their impact on small businesses.

&uot;We need to make the public aware of these changes and hope they will contact their own legislators to give their opinion,&uot; said Lorentz.

Larsen plans on contacting Dorman and State Sen. Grace Schwab, R-Albert Lea, to see what they can do.

Extending the state sales tax to prepared foods was proposed by Gov. Jesse Ventura and passed by the legislature last year, as part of the tax reform and reduction package. It is also part of the way Minnesota is trying to cooperate with other states as part of the Streamlined Sales Tax Project.

Despite the unintended consequences caused by the reforms, Dorman said he is still supportive of the effort to create sales tax consistency across state lines, mainly because of so much commerce being carried on via the Internet.