Legislature mulls tax exemption on clothing

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BISMARCK — Cities in North Dakota are opposing a bill to exempt sales tax on clothing — a form of tax relief, its author says — even though the bill compensates them for the loss in revenue.

How would the state know exactly what to repay the cities if the tax isn’t collected? Jerry Hjelmstad, deputy director of the North Dakota League of Cities, asked the Senate Finance and Taxation Committee, which took up the issue Tuesday.

Senate Minority Leader Ryan Taylor, D-Towner, the author of Senate Bill 2333, said committee members can clearly see on cold and snowy days like today that clothing is as much a necessity as food, which the state also exempts from sales tax.

Tax relief of this kind, he said, ought to be higher in priority for the lawmakers than cuts to taxes on oil companies or on corporate income that have been called for. “This is something all North Dakotans need,” he said, from babies in diapers to oil workers in coveralls.

SB 2333 also would exempt other things such as aprons, bathing suits, girdles, lab coats, athletic uniforms and wedding apparel. It would not, however, exempt jewelry, fur coats, protective equipment or sewing supplies.

Sponsors include House Minority Leader Jerry Kelsh, D-Fullerton; Sen. Carolyn Nelson, D-Fargo; Rep. Larry Bellew, R-Minot; Rep. Stacey Dahl, R-Grand Forks; Rep. Corey Mock, R-Grand Forks.

Bellew has a bill, House Bill 1309, that also exempts clothing from sales taxes, but only for three days and it doesn’t repay cities. It was defeated 74 to 16.

The Tax Department estimates that the loss in revenue to cities from SB 2333 would amount to $9.5 million in the upcoming biennium. The loss to the state would total $38 million, of which $3 million could go to K-12 schools as part of property tax relief.

The state now collects 5 percent sales tax and cities and counties can collect more on top of that.

The city of Grand Forks collects 1 3/4 percent, which it uses for the Alerus Center debt, property tax relief, streets and sewers and economic development. The city of Fargo collects 2 percent, used for streets and sewers and flood control.

John Olson, a lobbyist for the city of Fargo, said the city draws shoppers from a large region, including Minnesota and Canada and SB 2333 could have a $2.7 million impact on the city’s budget. He noted also that many bonds sold are dependent on sales tax for repayment.

Taylor said a tax exemption would encourage more spending, but Committee Chairman Dwight Cook, R-Mandan, doubted the tax has deterred spending. When he accompanies his wife to shopping excursions in Fargo, he sees plenty of Minnesota license plates in the parking lots.

The committee listened to testimony, but did not take immediate action on the bill.

Tran is a reporter with the Grand Forks Herald, which is owned by Forum Communications Co.

Tags: north dakota legislature, sales tax, news, clothing