No relief for counties seeking equal treatment on sales tax for ARMER
WILLMAR -- Like the little brother who sometimes gets the short shrift, Kandiyohi and Meeker counties were once again left out of the cliche of counties that are exempt from paying sales tax on equipment needed for their new 800 MHz emergency radio systems.
"It's disappointing," said Meeker County Administrator Paul Virnig of the Legislature's decision not to grant a retroactive sales tax forgiveness to counties that had purchased equipment for their Allied Radio Matrix for Emergency Response, known as ARMER.
The first 14 counties that implemented the ARMER system, including those in the metro area, didn't have to pay the sales on their equipment.
But Kandiyohi County, which has been operating their ARMER system for over a year, wasn't given that same economic advantage.
Neither was Meeker County, which is in the process of installing their 800 MHz equipment.
The equipment allows different emergency entities from different counties to communicate with each other on a narrow bandwidth channel.
Representatives from Meeker and Kandiyohi counties, as well as counties who are on the verge of purchasing their equipment, lobbied the Legislature this spring to include them in the sales tax exemption for retroactive and future purchases.
"We had a lot of support for it at the capital," Kandiyohi County Administrator Larry Kelindl said. "They understood they needed to be consistent across the state of Minnesota."
The policy of making the sales exempt uniform across the state wasn't in dispute, said Joe Mathews, government policy analyst for the Association of Minnesota Counties. The issues was "whether there was money to pay for it or not."
The measure would've cost the state $3.3 million in 2011, $3.25 in 2012 and $1.6 million in 2013. Given the state's budget deficit, Mathews said legislators were worried about adding to the deficit.
But legislators had found a way to fund the bill by changing how automotive paint was taxes. Currently that paint taxed on the wholesale level. The bill would've shifted the tax to the retail side, raising $2.3 to $2.7 million a year.
The bill actually made it further than expected, Virnig said. It was still alive on the last day of the Legislature but failed to advance, in part, because of Gov. Tim Pawlenty's stance on not creating a tax increase.
As a result, Kandiyohi County has paid about $150,000 in sales tax on their ARMER equipment and Meeker County will pay $175,000. Those are taxes to the state that 14 other counties didn't have to pay, providing savings to property tax payers there.
Virnig and Kleindl said efforts will be made again next year to fund the sales tax exemption for all counties investing in the ARMER system.
Meanwhile, some counties are "sitting on the sidelines" waiting to purchase their equipment until they know if the sales tax will be exempt. But there is a timeline to consider, said Mathews. The federal government has given emergency entities until January 2013 to stop using the wide band radio channels.