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TJ Jerke, Forum News Service, Published January 28 2013

ND Legislature considers scrapping sales tax on clothes

BISMARCK – Some lawmakers say they believe clothing is a basic necessity and have proposed legislation to eliminate North Dakota’s sales tax on clothes.

Sen. George Sinner, D-Fargo, has proposed Senate Bill 2277, which he said has three benefits:

• Provides tax relief for everyone, regardless of financial ability.

• Provides relief for employees required to purchases their own uniforms, such as nurses.

• Putting North Dakota retailers on a level playing field with Minnesota and Montana, who do not have a sales tax on clothing.

“It would affect tourism trade in North Dakota in a very positive way,” Sinner told the Senate Finance and Taxation Committee on Monday. “We can do something we talked about all through the campaign, provide tax relief to every North Dakotan.”

If enacted, the change would go into effect Aug. 1 and reduce the state’s general fund and state aid distribution fund revenues by an estimated $39 million for the coming 2013-15 biennium. Cities and counties that impose a local sales tax would also be required to exempt clothing.

Currently cities can add additional tax rates on top of the state’s 5 percent. Cities that add on a tax include Fargo at 2 percent, Grand Forks at 1¾ percent and Dickinson at 1½ percent.

To compensate for lost revenue, $9.5 million from the state’s general fund would be appropriated to cities in two installments during the biennium by the state’s tax commissioner. There is no funding set aside to help cities after 2015.

Sinner pointed out a 2011 study by North Dakota State University that found an average farm family of 2.6 people spends $2,227 on clothing, and a family of four spends $3,000 a year, or $245 on sales tax.

He said during his fall campaign his constituents, especially women, loved the proposal.

“Women, as mothers and spouses, are the main buyers of clothing for the family,” he said. “So I ask you, before you cast your vote ... please speak to the women in your life and ask their opinion.”

Sen. Connie Triplett, D-Grand Forks, is the only female senator on the committee. She said the concept would help provide lower-income families with additional money but isn’t quite sure about eliminating it completely.

Rep. Jessica Haak, D-Jamestown, testified in favor of the bill and said many local businesses compete against online retail stores, which do not have a sales tax imposed on their clothing.

Committee member Sen. Joe Miller, R-Park River, asked if the proposed bill would be better if the sales tax were reduced to 4 percent and if the tax really has an impact on the state.

“Is there a better way to address tax reform than further eroding our tax base?” he asked.

Brad Schlossman, CEO of West Acres mall in Fargo, has spoken with Sinner in support of the bill.

Schlossman said in a phone interview that it would be a good move after many have said North Dakota’s tax causes some to shop in Minnesota.

Minnesota’s Gov. Mark Dayton has proposed changing that state’s tax structure to include a tax on clothing that costs more than $100.