Online Tax 'Essentially Ruins' Minn. Business

Posted at: 06/28/2013 6:37 PM
Updated at: 06/28/2013 6:40 PM
By: Travis Dill

One Northland business owner said he'll lose a third of his income this year because of Minnesota's new online sales tax. And he said he's far from the only one hurting.

Bryan Hansel is a kayaking guide from Grand Marais. He also runs a website, paddlinglight.com, for paddling fanatics. His small business profits when he guides web traffic to online retailers.

“So they go to my website. They click on a link that goes Amazon. They purchase that item from Amazon. Then I get a commission,” Hansel said.

But the new online sales tax has retailers pulling out of partnerships like the one with Hansel to avoid the tax. The retailers only have to pay the tax if they are working with a Minnesota business.

“Then I don't get commission and because I don't get commission Amazon doesn't have to pay the sales tax,” Hansel said.

He said that cut out a third of his yearly income.

“I feel like I've been laid off with no warning,” Hansel said.

He said 5,200 businesses in the state operate like his website, and others he knows were “essentially ruined” by the change.

But Hansel does not blame the retailers. He blames the lawmakers who passed the tax. He said similar measures were bad for business in other states.

“In fact when it passed in Illinois a lot of the websites that were based in Illinois actually moved to Wisconsin. Governor Walker over there said he welcomes them all with open arms. So I wouldn't be surprised if you see some of the businesses from Minnesota move over to Wisconsin,” Hansel said.

He said he may not be able to paddle against the current of the new tax.

“So I've had about three weeks to decide whether or not I'm going to close the website down, whether I'm going to sell the website, what I'm going to do. There was no planning to deal with the loss of income like I'm dealing with,” Hansel said.

He said these businesses closing down, moving or just losing income will hurt Minnesota. He said the state could loose around $20 million of income tax revenue.

For comparison, state officials said the new online sales tax will generate $5 million. The tax will take effect on July 1.

The U.S. Senate has passed the Marketplace Fairness Act that would allow all 50 states to collect online sales tax, as long as the states simplify their tax laws.

Both Hansel and Amazon support the Marketplace Fairness Act, but the U.S. House of Representatives is still considering the bill.