Minnesota bills would tap auto parts tax revenue for roads

A bill package moving through the Minnesota Senate would route 100% of tax revenue from auto parts sales to roads.

The state now puts a fixed portion ($145.6 million annually) of the taxes from the sale and purchase of motor vehicle repair and replacement parts to the highway user tax distribution fund. The other half is deposited into the state’s general fund.

Advocates say applying all tax revenue from auto parts sales to transportation would allow the state to rebuild the state’s transportation infrastructure without raising fuel taxes, tab fees, or sales taxes.

Allotting all auto parts sales tax revenue for transportation purposes would provide more than $314 million for roads and bridges in 2023, according to a nonpartisan Senate Fiscal analysis. The amounts would increase to $324 million in 2024, and to $336 million in 2025.

Sen. Scott Newman, R-Hutchinson, said the state has “plenty of money” to apply to transportation without resorting to asking Minnesotans to pay more.

“We’ve successfully pumped billions into transportation infrastructure over the last several sessions, but we have an opportunity to do so much more,” Newman said in a news release. “Directing the entirety of sales tax revenue from auto parts will allow us to continue rebuilding, repairing, and constructing roads and bridges without new taxes, new fees, or mileage taxes.”

His bill, SF3081, has advanced from the Senate Tax Committee to the Senate Finance Committee. The House version, HF3931, is in the House Transportation Finance and Policy Committee.

Money designated for local work

A related effort to clear the Senate Tax Committee would designate part of the money for road and bridge grants to cities and townships.

Currently, the town road account receives an annual funding dedication of 1.5% of all highway user tax distribution. The small cities assistance account does not receive any dedicated funding.

Sponsored by Sen. Jeff Howe, R-Rockville, the bill put 76% of auto parts sales tax revenue into the highway user tax distribution fund. The small cities assistance account and the town road account would split the remaining 24%.

An analysis shows the change would provide $37.7 million in fiscal year 2023 for both local accounts. The amounts would increase to $38.9 million in fiscal year 2024 and to $40.4 million in fiscal year 2025.

“We need to take a hard look at the state’s transportation funding, because the current flat amount of funding we’ve been using is not cutting it,” Howe stated.

His bill, SF3086, awaits further consideration in the Senate Finance Committee. The House version, HF3636, is in the House Transportation Finance and Policy Committee. LL

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