Sales tax exemption sought for annual community celebrations

Many community celebrations are a volunteer effort with any money raised going to help support local nonprofit efforts. In some case, sales tax needs to be collected and handed over to the state.

Rep. Joe McDonald

Rep. Joe McDonald (R-Delano) sponsors HF2019 that would provide a sales tax exemption for prepared food, wine and beer sales and event admissions at city-designated annual celebrations.

“It would be good tax policy to allow the cities to keep more of the money they collect for charitable contributions,” McDonald told the House Taxes Committee Wednesday. The bill was held over for possible omnibus bill inclusion.

As first presented, the bill would apply only to cities with a population of under 10,000; however, Rep. Lyndon Carlson Sr. (DFL-Crystal) successfully did away with that threshold. He said the number is arbitrary and problematic, and the exemption should apply to all those that meet the other conditions spelled out in the bill:

• that the celebration last no more than five days;
• it be run by the city or a nonprofit organization designated by the city;
• all receipts from the event be accounted for by the city or nonprofit; and
• all proceeds, minus expenses, go to the city or one or more nonprofit and used strictly for charitable education, civil or governmental purposes.

A Department of Revenue analysis shows $250,000 less to the General Fund annually. However, it was noted that Carlson’s amendment would most likely mean the fund takes a greater financial hit.

The bill would also provide tax amnesty for the Delano 4th of July Celebration. The four-day event is run by several community organizations and after a recent department audit they learned of a sales tax liability and a fine.

Jack Lynch, who serves on the board organizing the event, said they weren’t aware of the sales tax obligation. “The tax laws have gotten more confusing. … We don’t make that much money, and now we are hit with a $38,000 fine that will take us about three or four years to pay.”

Sen. Branden Petersen (R-Andover) sponsors the bill’s companion, SF1922. It awaits action by the Senate Taxes Committee.