Minn. special session on warehousing tax? Unlikely

ST. PAUL, Minn. -- Minnesota Republicans called for the immediate repeal of a just-approved tax on commercial warehousing on Thursday, but the demand was met with skepticism from top Democrats who noted that lawmakers have nearly a year to revise or scrap the tax before it takes effect.

Several Republicans were joined by leaders of affected companies in asking for a special legislative session, though Democratic Gov. Mark Dayton gave no indication he was seriously considering calling lawmakers back to the Capitol. The GOP lawmakers argued that uncertainty over the new tax will stifle business investment even if it doesn't take effect until April.

"This isn't about bigger government or smaller government. This is about dumb government," said Rep. Pat Garofalo, R-Farmington. "Everyone knows this is a bad idea. Let's fix it and fix it now."

Stephen Lawrence, who runs Lawrence Transportation Services, said his warehouse expansion plans are on hold or could be shifted across the river to Wisconsin as a way to keep his customers from having to pay sales tax on the services he provides.

"We're not sure what we should be doing next," he said during a news conference at the Capitol.

The tax is expected to generate $82 million in its first year by levying a tax on the cost of renting space to store commercial goods. Republicans didn't provide a concrete plan for filling that gap, but said stronger-than-expected state revenues could take care of some.

House Speaker Paul Thissen, DFL-Minneapolis, said he would prefer to get more feedback and facts rather than summoning the Legislature back to St. Paul to address the tax. Lawmakers are set to convene their 2014 session in late February, and leading legislators have already said the tax would be revisited then.

Dayton's office also discounted the idea of a special session.

"This is a stunt, not a solution," said Dayton deputy chief of staff Bob Hume. "The Legislature is coming back more than a month before this tax would take effect, which is more than enough time, if the revenues permit, to review and possible revise this tax."

But the Republican lawmakers say waiting would be costly.

Rep. Tim Kelly, R-Red Wing, said Minnesota risks losing $20 million warehouse under consideration by Red Wing Shoes Co., which is deciding whether to build it in Minnesota or in Missouri.

"Today we have already stopped business. That is revenue. That is jobs," Kelly said.

The shoe company's supply chain manager, John Sachen, said the 350,000-square foot facility _ enough to house 600,000 pairs of shoes waiting for shipment _ would consolidate the company's sprawling warehouse operations. He said the company would be leasing the space from an operations company, which could make the cost of housing the products subject to the state sales tax.

Sachen said the impending warehousing tax isn't the only consideration for deciding the new building's location, but he added, "It doesn't help."

Revenue Commissioner Myron Frans has said the storage tax wouldn't apply to agricultural products, refrigerated food, electronic data, vehicles and boats and mini-storage rentals. Businesses that own their own warehouses wouldn't owe tax on what they store there.

"The key is it's not based on the value of the item being stored, it's on the service being charged whether it's a warehouse or a storage service," Frans said.