More than a new year: Local sales tax goes into effect Sunday

WILLMAR -- When the clock strikes midnight tonight, it'll bring not only the start of a new year but also the launch of an extra half-percent sales and use tax in Willmar.

The local-option tax, endorsed by Willmar voters in 2004 and approved by the Minnesota Legislature during the 2005 session, goes into effect Sunday.

"Everything that's charged 6.5 percent rolls up to 7 percent," said Kevin Halliday, city clerk.

The additional sales tax is expected to put $8 million into the city's coffers over the next seven years. City officials have earmarked most of the money -- $7 million -- for redeveloping the old airport site after a new city airport opens this coming year.

Money generated by the extra half-percent sales tax also will be used to develop hiking and biking trails, to buy 60 acres of land on U.S. Highway 71 north of Willmar, and to connect the Willmar Civic Center with the adjoining Blue Line Center.

For retailers and consumers alike, it's a bit of déj? vu. This is the second time in less than a decade that the city has turned to a local sales and use tax as a financing mechanism for special projects.

A half-percent local sales tax was in effect from 1998 through 2001 to help finance the expansion and remodeling of the Willmar Public Library. The tax was ended four years early after generating $4.5 million for the library project.

City officials plan to keep the new half-percent tax in place for seven years. During that time, it's expected to result in about $1.5 million in extra revenue each year.

Halliday said city officials are braced for a few minor glitches as the tax goes into effect. For the most part, though, it's an uneventful process, he said. "It's just a very seamless, smooth transaction."

Automation makes it relatively simple for most retailers to reprogram their cash registers. And because the switch occurs on a Saturday night, retailers who aren't open for business on Sunday have a little extra time to make the change.

There's no such break for establishments that are open 24 hours. At Cub Foods, for instance, the sales tax hike will be downloaded into the store's cash registers shortly after midnight, when the registers close to record the end of the business day.

It's a process that only takes a few minutes, said Ross Evink, store manager.

"Our point-of-sale system will automatically generate it," he said. "It's pretty painless for us... We're set to go."

The extra half-percent sales tax applies to everything for which the state's 6.5 percent sales tax already is charged, from car leases to pet food to utility bills.

Willmar residents also must pay an extra one-half percent use tax whenever they buy something, such as over the Internet or by phone, and aren't charged the local sales tax.

For the average consumer, the local sales tax shouldn't be too onerous, Halliday said. For a $28 purchase, for instance, the customer will pay 14 cents more.

The sales tax increase hasn't been without opponents. Ken Warner, president of the Willmar Lakes Area Chamber of Commerce, said he can sympathize with out-of-town residents who must pay the extra one-half percent for doing business in Willmar.

Overall, though, the chamber has supported the local-option tax, seeing it as "nothing but a win-win situation," he said.

"It's a great funding mechanism for the city to do needed improvements," he said. "It's a painless way to be able to do it."

Redevelopment of the airport site into an industrial park will help spur job creation and strengthen the economy regionally as well as locally, Warner said. "It does have regional impact. A lot of those jobs that will be created are people living in other communities that come here to work. What benefits Willmar benefits the other communities in the area, and what benefits other communities in the area benefits Willmar. We're all in this together."

Nor is the local-option sales tax likely to deter the city's tourism and convention business.

A number of cities in Minnesota, such as St. Cloud, have local taxes in effect, Warner said. "It's become so commonplace, most people don't even notice it."

To help prepare retailers for implementing the local tax, the chamber sponsored a meeting last month with the Minnesota Department of Revenue to present information about the tax, especially for businesses that have started up since the previous local sales tax was in effect.

So far, there've been few questions from chamber members, Warner said.

The chamber staff stands ready to forward queries to the Minnesota Department of Revenue, he said. "We'll help steer them in the right direction."