Senate Considers Bill To Give Cities Direct Sales Tax Authority for Some Projects

The proposal would let cities seek voter approval for local sales taxes to fund regional improvement projects without legislative approval.

On Feb. 26, the Senate Taxes Committee heard SF 375, which would allow cities to enact a local sales tax without needing legislative approval. The proposal was laid over, as amended (pdf), for possible inclusion in the committee’s budget bill. It’s sponsored by the Senate Taxes Committee Chair Sen. Ann Rest (DFL-New Hope).

Background

In 2023, the Legislature established a task force to review and make recommendations on local taxes. The Local Taxes Advisory Task Force made recommendations (pdf) to the Legislature in 2024 and many of those recommendations are reflected in this bill.

The proposal outlines projects and criteria the Legislature should allow to bypass the special law authorization process, including:

• Libraries
• Public safety facilities
• Parks and trials
• Community centers
• Athletic complexes

Cities could impose a sales tax rate of up to half-of-one-cent with voter approval.

The bill would also require a local equalization account for sharing revenues with neighboring cities. Of the tax collected, 5% of the revenue would be redistributed by the Minnesota Department of Revenue to qualifying cities.

Hearing and testimony

During the hearing, Sen. Rest offered an amendment to include a sales tax exemption for the construction materials purchased for these projects. The provision was not added to the bill due to the fiscal cost but did provide for discussion.

Sen. Rest committed to continue working with local government organizations on the language of the bill and the League will be participating in those meetings. Nisswa City Administrator and League Past President Jenny Max testified during the hearing in support of the bill.

View a recording of the hearing on SF 375.

Your next steps

Let your legislators know you support SF 375 and how this will help your city to budget and plan for new projects.

LMC staff take

This bill provides a clear and transparent process for cities to impose a local sales tax without requiring a special law authorization. This process is a significant improvement to current law and allows cities to budget better and provide a clearer picture to voters about the cost of projects. The Senate sponsor is the chair of the committee, and we are hopeful that this proposal will be included in the committee’s omnibus bill.  

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