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House Research Department Local Sales Taxes in Minnesota Updated: October 2003 Page 3 ■ purchases shipped outside the taxing jurisdiction for use in a trade or business outside of the jurisdiction; . purchases temporarily stored in the taxing jurisdiction before being shipped by common carrier for sue outside of the jurisdiction; and purchases that are subject to the direct pay provisions for interstate motor carriers under Minnesota Statutes, section 297A.90. Requirements of a Comple�n�nfary Use Tax A complementary use La� is required in all jurisdictions with a local sales tax. Four local taxes enacted before 1997 did not include a use tax; a local use tax was imposed in these political subdivisions beginning 7anuary 1,2000. Affected jurisdictions are noted in #he chart on currently authorized local taxes (Table 1). The statute also allows a credit against the use tax owed for a local sales or uae tax paid to another political subdivision. This is similar to the credit against state sales and use tax for the amount of taxes paid to another state. Collection, Administration, and Enforcement of Local Taxes The statute requires the Commissioner of Revenue to administer and collect local sales and use taxes. This merely codifies existing practice. All local sales taxes, except for the tax imposed in the city of Duluth, have been administered and collected by the state. The city of Duluth, at its own request, is specifically exempted from the collection and administration provisions of the statute. However, the commissioner will begin to collect and administer the Duluth tax after December 31,2005. .,,, Th� tocal taxes are subject to the $a�ne p� �;��S��x, interest, and e�forcernent provisions as thc state:: :: ., sales tax. Refunds of excess state sales taxes paid must also� i��lude a refund of any excess local .- sales tax paid. The state deducts its collection and administration cosls from the lax revenue returned to the local taxing jurisdiction. The net local tax revenue is paid to the local taxing jurisdiction on a quarterly basis. Imposing and Repealing Local Sales Tax T o facilitate state administration of local taxes, the imposition of a tax may only begin on the first day of a calendar quarter. Repeal of a local tax is only effective starting on the last day of a calendar quarter. A local taxing jurisdiction must give the Deparllnent of Revenue at least 90 days notice before a tax is imposed or repealed. The notice provision was amended in 2003 to include Streamlined Sales Tax requirements. The tax will only be effective after �he commissioner has given sellers located ��t3�e area at least 60 days notice and will apply to � � The use tax is imposed on the consumption ar"use" of taxable items far which no sales tax was paid The tax is imposed mainly on purchases by resident buyers from sellers located outside of the local taxing jurisdiction TI�e use tax removes the disadvantage to local businesses from competition with businesses located outside of the taxing area who are not required to collect the local sales tax.