Auto parts sales tax proposals advance in the Minnesota Senate

Two bills passed the Senate Transportation Finance Committee this week to divert 100% of auto parts sales tax revenue out of the General Fund for transportation infrastructure purposes. About $145 million per year of this sales tax revenue is deposited in the Highway User Tax Distribution Fund (HUTDF), which is constitutionally dedicated to highways, roads, and bridges across the state, representing about half of the total revenue from this source.

While both proposals transfer all the auto parts revenue out of the General Fund, they allocate the revenue differently. One proposal would transfer all sales tax revenue to the HUTDF, while the other proposal would transfer 76% to the HUTDF, 12% to the small cities assistance account, and 12% to the town road account. Small cities and towns seek additional dedicated revenue to facilitate long-term transportation infrastructure planning.

There is clearly a need to provide sustainable funding for municipal streets and town roads, but further conversations will be necessary to determine whether all auto parts sales tax revenue should be transferred out of the General Fund, which funds critical areas of the state’s budget that do not have dedicated revenue streams like the transportation sector. (SF 3081SF 3086)