Use of Sales Taxes in Minneapolis

As most people who have ever visited downtown Minneapolis know, it's a great place to work and play, dine and entertain.  Minneapolis is home to three major sports teams, a major university, five major stages, and a multitude of fine restaurants and cultural centers.  Those experiences, however, comes at a premium price in the form of local sales and use taxes.

There are five main sales & use taxes levied in Minneapolis:

• Sales tax (.5%)
• Downtown restaurant tax (3%)
• Downtown liquor tax (3%)
• Lodging tax (2.625%)
• Entertainment tax, levied on certain ticket and beverage sales (3%)

The first four taxes all flow into the Convention Center's Special Revenue Fund.  The majority of the entertainment tax goes directly into the city's General Fund, where it is used to offset public safety needs generated by visitors to the city; a small chunk is used to offset costs at the Target Center, a city-owned facility that is home to the Minnesota Timberwolves basketball team.  In 2011, according to the City's 2013 Budget, this tax totaled $14,077,000.

Although it is the smallest percent, the sales tax is the most lucrative tax for the city, likely because it is levied city-wide.  The sales tax revenues added up to $27.2 million in 2010, and $29.9 million in 2011, an increase of 9.7%.  At the time the budget was proposed (in the third quarter of 2012), 2012 sales tax revenues were projected to exceed $30 million.

All of the sales & use tax categories have seen increases in revenue collection from 2010 to 2011; 2012 projections were all also above the year prior.  Continuing substantial increases in tax collection were unexpected by staff at the Convention Center and in City Finance; it was widely expected that the slower U.S. economy would impact revenue.  However, major events such as the U2 concert at the University of Minnesota's TCF Stadium contributed to higher tax revenues, benefiting the city tremendously.

These taxes are put to use by the City primarily to benefit the Convention Center and its subordinate programs, including the marketing/sales agency known as Meet Minneapolis.  After operating revenues were collected for Convention Center usage and funds were distributed to pay for operations and debt service, the City netted approximately $3.9 million in 2011.

data source: http://www.minneapolismn.gov/www/groups/public/@finance/documents/webcontent/wcms1p-103684.pdf

Of similar interest: Results Minneapolis: annual progress report of the Minneapolis Convention Center