Proposed expansion of state sales tax on creative services February 26, 2013

In supporting the Minnesota Communications Industry Coalition, the AIGA Minnesota board of directors is expressing its concern about the proposed expansion of the Minnesota state sales tax to advertising and related creative services. The board encourages AIGA Minnesota members to contact their state representatives and voice their opposition to the business services tax proposal.

AIGA Minnesota represents the interests of individual people and the profession at large, not of businesses or organizations. However, the board believes that expanding the Minnesota sales tax to advertising, advertising services, graphic design services, marketing consulting services, and related services — such as photography, illustration, and web development — would cause severe harm to the state’s cherished creative economy and, thus, to our members employed therein.

Minnesota, and the Twin Cities in particular, is home to one of the world’s most vibrant, important, acclaimed, and admired creative communities — a community paid for in large part by businesses choosing to purchase the advertising and design services our members provide.

Taxing these creative services would cause much more harm than good. Many creative service providers are small businesses competing locally and nationally for clients and would be unable to pass along to their clients a 5.5% increase in costs.

Indeed, some design and creative services are already taxed in Minnesota. But the experiences of many AIGA Minnesota members indicate that even these existing service taxes are difficult and expensive to administer; often the cost of compliance exceeds the taxes collected. It is a mistake to increase the burden on creative businesses by expanding the taxation of their services and, thus, expanding their administrative burden. Minnesota should be making it easier for creative businesses to operate and compete, not more complicated.

It’s important to note that the vast majority of AIGA Minnesota members derive their income or salary by performing business-to-business creative services. With rare exception, our members aren’t in the business of producing goods to be sold (widgets or coffee mugs or surfboards) – they provide services that help other things to be sold (brochures and websites and magazine advertisements). Our services are not an end product, but rather part of a process aimed at an eventual consumer sale. A tax on creative services therefore results in double taxation, which is universally recognized to be bad tax policy.

AIGA Minnesota’s mission is to be the first place to turn for inspiration, professional development, and excellence in design in Minnesota. “Design in Minnesota” will suffer greatly if this proposed tax is enacted.

Click here to read the full letter from the Minnesota Communications Industry Coalition which was sent to state legislators, the Governor and Commissioner on February 18, 2013.