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Clothes Tax Proposal Would Affect Local Businesses

Posted at: 01/15/2013 7:48 PM
Updated at: 01/15/2013 7:57 PM
By: Brittany Lewis

(ABC 6 NEWS) -- Tax free clothing. It’s one of the perks of living in Minnesota.

"The people from Illinois or Chicago has a 10% sales tax, they're surprised when something is $50... You mean it's just $50?” said Tim Berg, President and Owner of Hanny’s.

But that $50 charge could become $50 and change. Two bills proposed by Senator Ann Rest of New Hope would add a sales tax line to the bottom of clothing receipts.

"I'm opposed. We enjoy a competitive advantage over other states and I'd hate to lose that advantage,” said Berg.

Some of his customer base includes people outside of the states. 

"We're close to Iowa and Wisconsin so we do get a lot of business where people drive,” said Berg.
"We come here cause we get our clothes...cheap,” said Joshua Timmerman.

Timmerman and his friends drive nearly two hours once a month to avoid the Iowa sales tax.

"It's tax free. We, in Iowa, we get taxed on pretty much everything and our clothes are tax free and that's usually why we come,” said Timmerman.

There are some exemptions in the proposal. The first $200 of an item would not be taxed and a refundable credit would be allowed. Senator Carla Nelson notes the importance of out-of-state customers to area businesses.

"I see every weekend at apache mall particularly, the large number of folks who are from out of state who come to Minnesota, to shop and perhaps not having a sales tax on clothing is one of those reasons,” said Nelson.

Lawmakers will determine if the cost of added taxes is worth the price.

A tax on clothes has been proposed several times before, most recently in 2010. The proposal is one of many—as lawmakers say Minnesota’s tax code needs an overhaul.