New bill would allow "tax delinquent" bars and restaurants to keep liquor licenses [UPDATE]
A new piece of legislation could save Minnesota bars and restaurants from what they describe as the the shame and hassle of being labeled "tax delinquent."
Every day, the Minnesota Department of Revenue updates a public list of businesses that are more than ten days behind on their liquor tax obligations. After another three days, those same businesses are forbidden from purchasing more booze until they settle their bill, and any distributor who's caught breaking this law could lose their own license for 60 days and face a $2,000 fine.
"The whole thing is ridiculous," says Dan McElroy, president and CEO of Hospitality Minnesota, which lobbies on behalf of restaurants. "If you're on the delinquency list it can put you out of business."
To fix this catch-22, Rep. Paul Anderson (R-Starbuck) has written legislation that would spare businesses from going on the delinquency list so long as they establish a repayment plan with the state. The legislation (see page 2) passed the House Taxes Committee last week, and goes next to the House Ways and Means Committee on Tuesday.
Anderson says he was motivated by a restaurant in his district that found itself on the delinquency list after accidentally undercharging customers on liquor taxes. Although he declines to name the restaurant, he insists, "This is not an isolated incident."
Indeed, other restaurants have cried foul in recent years. Heidi's once turned up on the delinquency list even though the owners were able to provide City Pages with a tax statement showing a zero-balance.
For Anderson's legislation to be effective, it requires both the business and the state to work out a repayment deal in good faith. A spokesman for the Minnesota Department of Revenue declined to comment on this story, noting on Monday that members of the department's policy and legal teams were still reviewing the matter with legislators.
::: UPDATE :::
The Minnesota Department of Revenue produced a memo this morning estimating that Anderson's legislation -- which was intended as an amendment to an broader tax bill -- would cost the state more than $2.4 million (see page 2). It assumes that all tax delinquents would want a repayment plan and that one out of five would default, a number, they say, based on previous experience.
As a result, Rep. Greg Davids spiked the amendment for fear that it would detract votes from the main bill. He had been carrying the amendment at the committee level on behalf of Anderson (who couldn't be reached for comment). But Davids promised to redraft and reintroduce it next year with a narrow definition of who could and couldn't take advantage of a repayment plan, saying, "We'll live to fight another day."
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