The Warehouse Tax Beast Burdens another State

Aug. 19, 2013
But a coalition of allies in politics and industry hope a powerful weapon will soon vanquish this foe once and for all.

Joel Anderson must feel like he’s in a recurring nightmare. In it, he’s battling a relentless and mighty foe, and just as he thinks he vanquishes this beast, another pops out to continue the fight.

This beast is a big, hairy warehouse tax that has threatened Michigan and Pennsylvania, and is now going after Minnesota. As president and CEO of the International Warehouse Logistics Association (IWLA), Anderson and his organization have played a major role in educating state legislatures on why taxes on warehousing are such a bad idea. His battles in Michigan and Pennsylvania were successful, but draining—and now he’s taking up this fight once again in yet another state. When will politicians ever learn?

As we reported three years ago when a warehousing tax was being considered by Pennsylvania legislators, Anderson told them that such a tax would hurt Pennsylvania businesses because the third-party warehouse industry is interstate in nature, which means warehouse customers can choose to use warehouses anywhere along the supply chain, including those located in neighboring states.

In his letter to then Governor Rendell, Anderson cited a 2007 Michigan State University study that investigated the economic impact of a similar tax proposal on jobs in Michigan. The conclusion was that it would result in a loss of several thousand warehouse- and transportation-related jobs and a net loss of millions of dollars in tax revenues to the state. As a result, Michigan repealed this tax and the idea never took off in Pennsylvania.

Now in Minnesota, Anderson has allies in the Senate who are helping him fight the tax monster again. Sen. Dave Thompson, R-Lakeville, has drafted legislation to repeal the warehouse tax. In a press conference, Thompson urged Gov. Mark Dayton to take this action against the tax, quoting Minnesota business people that the tax is “toxic,” and would have a “ripple effect” on business activity in the state. Dayton has stated that a repeal of this tax was possible next year, but Thompson claims that would be too late, as businesses are already planning their 2014 budget and tax expenditures.

Anderson is optimistic that with the help of study done through KPMG, IWLA will finally be able to cite a standard reference guide to help them reverse such taxes whenever they come up.

“The KPMG study is mission central because there’s a lot of bogus data being tossed about by the Minnesota state tax department on ‘warehouse’ taxes, which they pick up as boat storage, self-storage, fur storage, bulk storage of coal and timber,” Anderson told me in an e-mail. “This shows the need to drill down to the 3PL level and provide a definite answer.”

Without such ammunition, Anderson added, politicians will always look at a nebulous term like “storage” and if they think they can generate revenue from it with a service tax, they will.

“Should we get this tax repealed (at least as to 3PLs), combined with the KPMG study, we will have a powerful fact sheet to share with the industry and other jurisdictions,” Anderson concluded.

Anderson, who is on MH&L’s editorial advisory board, plans to retire soon from his IWLA post, and he’s hoping Minnesota’s repeal of its warehousing service tax will be his final hurah. Let’s hope his dream comes true and his nightmare ends.