New Minn. farm equipment repair tax has few defenders

Published 9:38 am Tuesday, August 20, 2013

ST. CLOUD — Craig Will has dealt with plenty of unhappy customers since a new state tax on farm equipment repairs took effect July 1.

Will works at Midwest Machinery in Sauk Rapids, which repairs farm implements. He said many farmers who bring their machines in for repairs aren’t aware of the new sales tax.

“They don’t like it, and I don’t blame them,” Will said. “If you have a $5,000, $10,000 or $20,000 repair bill, this amounts to a lot of money.”

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The tax, a product of the 2013 legislative session, has few defenders. Many lawmakers, including some who voted for it, are disavowing it.

Gov. Mark Dayton has signaled a willingness to put the issue on the agenda for next month’s special session, though he has said he’ll call the session only if GOP leaders agree to otherwise limit it to disaster relief. Republicans want it also to include the repeal of other new taxes.

The tax applies to labor on farm equipment repair. Replacement parts remain exempt from the tax, which was part of a broader expansion of the state’s 6.875 percent sales tax to commercial equipment repairs.

Dayton has said he wasn’t aware until it was too late that it also included farm equipment. He wants to pass a narrow exemption for farm equipment.

“The special session affords us the opportunity to do this,” Dayton spokesman Matt Swenson said. The governor “knows that farmers are paying this tax now, and he wants to do something to fix it.”

GOP Rep. Paul Anderson, a farmer from Starbuck, wants refunds for people who’ve already paid the tax.

“What strikes me as the funniest was the governor saying he didn’t know about this tax. My goodness, that’s what his staff is for. That’s a little bit concerning,” Anderson said. “I appreciate the fact that he’s willing to say it’s a mistake; let’s go back and do it over. But it maybe shouldn’t have happened in the first place.”

Rep. Zachary Dorholt, of St. Cloud, was among the DFL legislative majority that passed the session’s main tax bill. But Dorholt said he never favored the farm equipment repair provision and says it should be repealed.

“This is part of the legislative process,” Dorholt said. “Nobody ever said it was clean.”

Larry Welle, chief financial officer at Arnold’s, a farm implement dealer and service chain, said collecting the new tax has been a major headache. Tax officials have struggled to explain it, adding confusion to an already difficult process, he said.

“We’ve already spent quite a bit of money — a lot of headaches and a lot of time — putting things in place to collect the tax,” Welle said. “After we’ve spent all the time and energy to do this, they’re going to repeal this? Why didn’t they figure it out first?”