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Minnesota would lose jobs if warehouse services taxed, trucking official says

Trucking officials say Minnesota will simply become uncompetitive on price because states lose when they tax warehousing services as proposed by Gov. Mark Dayton. (The Trucker file photo)

The Trucker News Services

5/16/2013

ROSEVILLE, Minn. — Minnesota Gov. Mark Dayton and state legislators are on the verge of enacting legislation that will cripple Minnesotan’s ability to participate in the growing economy of logistics and distribution, says the head of the Minnesota Trucking Association.

 “First, we have driven manufacturers out of our state, and now the goal is to tax the industry which has replaced heavy manufacturing: logistics and distribution,” said MTA President/CEO John Hausladen.  “Under the House offer made this morning, warehousing is the only service the sales tax is being extended to. If this tax sticks, Minnesota will be the only state in the entire country to tax warehousing services.

“Warehousing sits in the bulls-eye because it is one of the least glamorous – and misunderstood – business services offered.  After all, you are just renting space for your stuff, right?” 

According to Hausladen, the modern warehouse is a hub of activity providing valued added services to a just-in-time economy with many providing a range of logistics services including labeling, breaking bulk, inventory control and management, light assembly, order entry and fulfillment, packaging, pick and pack, price marking and ticketing, and transportation arrangement. 

Many of Minnesota’s largest companies, including 3M, General Mills, Target and Best Buy, use third-party warehousing services to either augment or provide  their own warehouse needs, and the decision where to warehouse is based on cost calculations.   Hausladen said warehouse customers decide where to position their inventories based on price, distance from the end-customer, and services provided by the warehouse. 

“Our experience shows those same customers will reposition their inventories to other states if they can meet their service levels at a lower price,” Hausladen said.  “And the states around us, Wisconsin, Illinois, Iowa and North Dakota who do not impose sales taxes on warehouse services, will be pleased to move our jobs to their states.”

Warehousing services operate on very low margins, with little ability to absorb cost increases, Hausladen said, adding that he believed that by adding a 6.5 percent sales tax to the vast array of warehousing services, Dayton and legislators will make Minnesota the location of last choice overnight.

 “We will simply become uncompetitive on price,” Hausladen said. “States lose when they tax warehousing services.  Inventories move, warehouses reduce their footprint, truckers have less freight to haul, employees lose jobs and tax incomes plummet.  Massachusetts, Maryland, Florida and Michigan tried this and then quickly repealed their legislation.  The revenues projected by the various state agencies just don’t materialize.”

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.

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