Warehouse Tax Provokes Outrage, DFL Could Backtrack

Updated: 06/19/2013 7:46 AM KSTP.com By: Stephen Tellier

Just one month after the governor signed a sweeping sales tax expansion into law, there are signs that some of the hikes could soon be history. The focus is now on a tax that's provoking outrage among business leaders.
The warehouse tax may sound boring, but it could end up impacting every single Minnesotan. The new law would apply the nearly 7 percent sales tax to warehousing services for the first time.
But lawmakers are leaving the door open for a reversal.
From dried fruit to fine wine to farm supplies. Products from Thailand to the Twin Cities. Millions in merchandise are constantly coming and going at the Murphy Warehouse Company in Minneapolis.
But if a warehouse tax takes effect in Minnesota, it might be the warehouse itself that gets shipped out.
"We would take part of our operation and move it probably to Wisconsin, at this point," said Richard Murphy, president and CEO of Murphy Warehouse Company.
Murphy said virtually every kind of product you've ever bought went through a warehouse like the ones he owns.
"Our role within the economy is so invisible to so many people -- they just don't know what we do," Murphy said.
And slapping a sales tax on each and every box could have Murphy seeing red.
"We're in a 3 to 5 percent net income bottom line industry, and this six-and-a-half-plus percent tax basically wipes that out," Murphy said.
So Murphy wants to wipe out the warehouse tax.
And while DFL leaders haven't put forward any specific proposals, they are saying that if lawmakers file bills to block the tax before it takes effect, they'll be given a full and fair hearing. They also said other sales tax backtracking would be up for debate as well -- if lawmakers push for such a debate.
Meanwhile, Murphy is already hearing it from the folks who own all these boxes.
"We've already had some clients tell us they're not paying the tax. They'll move instead of paying," Murphy said.
And companies looking for states without such taxes would have plenty of options.
"Minnesota's the only state in the country that has a warehouse tax, which from a competitive standpoint is not a good deal," Murphy said.
While some of the sales tax increases take effect on July 1, the warehouse tax doesn't kick in until April 2014. That means lawmakers would have plenty of time to reverse course.