New research commissioned by the International Warehouse Logistics Association (IWLA) takes a close look at U.S. warehouse taxes at the state level, revealing only five states with a service/sales tax on the warehouse-based distribution industry where the tax focuses on the majority of services provided inside that state or exclude interstate commerce.
“Imposing a warehouse sales/service tax is asking distribution companies to pack up and leave for a neighboring state without such provisions,” says IWLA President & CEO Joel D. Anderson. “The pending April 1 tax in Minnesota would make the state unique – in a bad way. The state budget isolates the logistics industry for a services/sales tax, giving great incentive for Minnesota companies to leave for the more friendly environments of Wisconsin and Iowa.”
The legislature in Minnesota passed a revenue budget that singles out the warehousing business sector: a 6.5-percent services tax will go in effect April 1, 2014. IWLA members in the state strongly oppose this legislation. They cite its effect as giving an advantage to warehousing operators in bordering states. This means that the logistics industry – and the jobs it creates – will likely leave the state.
“Warehousing businesses must have lean operations to survive. When states single out one business sector and impose taxes on it, business owners will reassess the cost of doing business in that state,” Anderson says. “Warehouse-based third-party logistics businesses are no exception to this cardinal rule. “
1) Of the 50 state tax structures examined, only Hawaii, Mississippi, New Mexico, South Dakota and West Virginia impose a service/sales tax on the warehouse-based distribution industry.
2) Hawaii, New Mexico, South Dakota and West Virginia impose general sales/services tax on the price of all domestic services. Mississippi imposes a sales tax on the sale of public warehousing but provides an exemption for goods stored in interstate transit and for perishable goods.
3) Minnesota’s new public warehousing sales tax, beginning April 1, 2014, will assess a sales tax on public warehousing and also exempt from such tax agricultural, refrigerated, electronic, self-storage and motor and recreational vehicles.
Minnesota is the only state to specifically target public warehousing for a sales/services tax; whereas the other states tax the majority of services provided inside that state. Only one state bordering Minnesota—South Dakota — has a comparable services/sales taxes on all domestic retail transactions.
“KPMG’s research reveals that the tax yield and the tax facts purported by the Minnesota Tax Commission were clearly in error, leading the legislators to mistakenly enact a warehouse services/sales tax.” Anderson says. He predicts severe consequences to the 72,865 hard-working people in the state’s transportation and warehousing employment sectors and to the small and large Minnesota businesses that rely on the in-state warehouse industry.
“It is time for legislators, now that they have accurate facts before them, to repeal the tax and look to the greater good of Minnesota’s job creation and economic health,” Anderson says.
To see a copy of the full report or speak to IWLA President & CEO Joel Anderson about this topic, please send your requests to mzenner@IWLA.com or call (847) 813-4696.
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Since 1891, the International Warehouse Logistics Association has been defining the standards of excellence in warehousing and logistics outsourcing. Based in Des Plaines, Ill., IWLA promotes the growth and success of third-party logistics companies by providing its nearly 500 member companies with resources, information, education and professional programs designed to advance their businesses and provide greater value to their customers. For more information, visit http://www.IWLA.com.