Caught off guard: Tax letter causes some confusion for city residents
BEMIDJI – The local sales and use tax in the city of Bemidji is nothing new.
The half percent tax was implemented almost seven years ago – Jan. 1, 2006 – but city residents were caught off guard this past September when they received notice in their mail reminding them of their obligation to pay the local use tax.
The letter states that “local use tax applies when you buy items or services for use, storage, distribution or consumption in the local area without paying local sales tax to the seller.”
The state also has a general sales and use tax of 6.875 percent.
While the local tax is not new, a recent change in the agreement between the city and the Minnesota Department of Revenue, which administers the tax for the city, requires the city to provide notice to residents and business owners, said city finance director Ron Eischens. This was the first year the letter was sent out.
“Very few people are aware of use tax issues, which is why the Department of Revenue asked us to send the letter out,” Eischens said recently.
Erin Martin, the sales and use tax liaison at the Department of Revenue, said they received a number of calls about the tax in Bemidji after the letter came out. She said the state is trying to educate people about the tax.
“If you purchase something and you see on your bill that you see a sales tax, that’s great. If you don’t see a sales tax, then you might not take the steps to see why there isn’t sales tax on there,” Martin said. “So this is all part of the education of what use tax is.”
Eischens noted that it may be hard for the state to track compliance with use tax because it’s hard to know where items are being purchased from.
Eischens added that in next year’s letter, he plans to include some more clarification, including the fact that people can buy up to $770 worth of taxable items without owing a use tax.
The local sales and use tax was used to pay for $9.8 million in park and trail improvements in Bemidji. Since December 2011, the money has gone to paying construction bonds for the Sanford Center, Eischens said.