Updated: November 13, 2019 07:51 AM
Many Duluth residents thought a decision would finally be made on the 5 cent plastic bag fee ordinance Tuesday at city council but ultimately they voted to table the ordinance again.
There are new questions being raised about whether such a fee would legally be akin to a sales tax, therefore, requiring state legislative approval.
The Minnesota Retail Association sent a memo to the city council Tuesday, arguing that the city doesn't have authority to place a fee on bags.
The memo prepared by Hylden Advocacy and Law states:
"A municipality cannot, without special state legislation, impose a sales or income tax, and cannot avoid the statutory requirements of imposing taxes by labeling a new charge a fee. Because a tax is any charge imposed by a governmental entity on an individual, person, entity, transaction, good, service or other thing. A new charge imposed on bags requires special state legislation."
Minnesota Retail Association further states while local jurisdictions can raise revenue through property tax levies, the state has prohibited local units of government from imposing taxes on sales or income.
"The fee that the city is suggesting is really, in essence, a tax. If it is a tax, it requires the city to go to the state legislature for approval. We want city council to give some thought and do its own analysis to make sure what it's thinking about doing is actually legal," said Bruce Nustad, the president of Minnesota Retailers Association.
Nustad said a lot of cities have a local sales tax and said although it may be a small add on to local sales tax, they have to go through the same process of going through the legislature and getting the bill passed. He said this process could take a few months.
"If it's determined that the fee has to got through the state legislature, the legislature doesn't start up again until February of 2020 and it goes through May so somewhere in there is when they would have the opportunity to get approved," said Nustad.
In light of this legal matter, councilors voted 8-1 to table the ordinance. City Councilor Em Westerlund voted against another delay.
"I am not supportive of motion to table tonight, in part because I do think that the lead time that we have for implementation is reasonable for us to get some clarity from the Department of Revenue on the taxability of this fee once it is implemented," said Westerlund.
City Councilor Joel Sipress asked City Attorney Gunnar Johnson if he has heard from the state on the taxability. Johnson said he doesn't have answers from state officials on whether retailers would also collect a sales tax on fees they charge customers for plastic bags.
He further said there have been discussions with the Department of Revenue for several weeks now, stating their was some guidance given a couple of weeks ago but its being reconsidered.
"As of now I don not have a timeline on when the Department of Revenue is expected to have a final decision for this council," said Johnson.
He added that he'll attempt reach out again Wednesday and continue to push the Department of Revenue to give council direction.
Many community members spoke against tabling the vote and wanted the city to make a decision now to protect the environment.
"Resolving this issue should not prevent our city for leading Minnesota in the reduction of single use plastics. Citizens are tired of not getting this done," Jane Hovland a member of the board of the League of Women Voters, said.
Hovland further said studies show people are more willing to change their behavior when a small amount of money is involved as a transaction, rather than a gift.
"Hundreds and hundreds of cities have passed ordinances like this, they've dealt with the tax issue, that's not a new thing," said Sue Van Oss, a community member. She went on to unroll a petition signed by over 2,000 people. "It's getting frustrating that there isn't any action. Lets have Duluth and all of you city councilors be the leaders, lets not wait for the state of Minnesota."
Community members expressed that they have five months to figure out the taxation since the ordinance wouldn't go into effect until April 2020.
Some employees from Menards spoke against the ordinance, saying this would financially affect them and their costumers.
"As a retailer I'm concerned about losing business in our store. Duluth has a higher tax rate than neighboring communities like Superior. We are already losing business to the Superior Menards due to that," said Kayla Dzuck, a front-end manager for the West Duluth Menards.
Dzuck said although it doesn't sound like a large fee, she did the math and the amount of bags from last year in the Menards she works at would result in $66,000 in additional fees to guests.
Kevin Green who works at the West Duluth Menards as a general manager said he sees it as a potential burden on retailers and guests.
"Many visiting costumers could be surprised by that tax, it's something they're not used to. Our costumers see that as just another tax added on," said Green. "The bag tax affects our costumers disproportionally, especially low income individuals."
City Councilor Joel Sipress said although he looks forward to voting on this ordinance in the near future, he thinks they need to take reasonable steps to provide clarity to retailers regarding taxability before they vote.
Sipress added that if they don't get a clear answer from the Department of Revenue before their next meeting, they may have to vote on passing the ordinance.
"Perhaps the only way we will get clarity is to act to pass this and say to the Department of Revenue, now that we've enacted this, you must tell us if it's taxable," said Sipress.
Updated: November 13, 2019 07:51 AM
Created: November 12, 2019 09:45 PM
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