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University of Minnesota Extension

Local option sales tax analysis for Koochiching County

Key findings

  • Seasonal residents and tourists bring significant non-resident spending to the county. According to the 2016 Census, seasonal housing accounted for 20 percent of all housing units. Seasonal residents in the area spend a significant amount of time in their homes — an average of 60 days per year.
  • Although local retailers note nearby Canadian residents have tempered their spending in recent years, Canadians are significant contributors to the county's retail and service sales. Their spending was estimated to be four times greater than seasonal residents in a 2015 study of the International Falls trade area.
  • A sizeable proportion of employed residents (27 percent) are employed outside the county, which facilitates out-shopping for retail goods and services. A smaller portion of people commute into Koochiching County, an activity which facilitates shopping.

About this report

University of Minnesota Extension conducted a study to estimate overall tax proceeds and the proportion of tax proceeds generated by Koochiching County residents. Comparing these results to non-residents using the 2016 sales and use tax data available from the Minnesota Department of Revenue (MN Revenue), Extension estimated that non-residents account for 41.6 percent of taxable sales. This equated to $41.2 million out of a total of $99.1 million in taxable sales in 2016. Under a half-percent local option sales tax, Extension estimated that each Koochiching County resident will pay an additional $22.70 on average, with non-residents paying the remainder of the tax.

The purpose of this report was not to make recommendations to county officials about what actions to take but rather determine the estimated sales tax proceeds from a local option tax program and what proportion of those dollars will likely be paid by year-round county residents versus non-residents.

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Authors: Ryan Pesch, Extension educator; John Bennett, Extension educator

Reviewed in 2018

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