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Commerce and economic-development groups defend sales-tax exemptions as a tool for big projects
Summary
Business and Commerce witnesses told a legislative committee that sales-and-use tax exemptions are a scalable, low-risk tool for attracting major capital projects; staff will follow up with data requests about reapplications, durations and which firms remain on incentives.
During an interim session of the Tax Reform Relief Advisory Committee, economic-development representatives and the Department of Commerce presented the case for continuing sales-and-use tax exemptions for capital projects.
Matt Marshall of the Economic Development Association of North Dakota told members the exemption ‘‘is sometimes the most effective thing that can help move a business from making an investment or not’’ and urged lawmakers to keep current incentives unchanged. Marshall said sales-tax exemptions lower the risk profile for transformative projects and that, for very large projects, sales tax can move decisions that other tools do not.
Rich Grama, director of Economic Development and Finance at the North Dakota Department of Commerce, expanded on that rationale. Grama called the sales-and-use tax exemption “one of the strongest tools because it's simple, scalable, low risk, and tied directly to real private investment.” He outlined the administration’s process for primary-sector certification (a gatekeeping step for exemptions) and said certified firms must reapply — typically every four years — to maintain eligibility.
Committee members pressed Commerce and witnesses on several operational points: whether exemptions should include sunset clauses for long-running projects, whether tax commissioners can deny repeat reapplications under current statute, and whether a database exists showing how many firms remain dependent on incentives. Grama said packages are assembled across agencies, reapplication rules vary by exemption statute, and some authority to deny or adjust approvals would require explicit statutory language; he agreed to follow up with the Tax Commissioner and staff to provide requested company-level and historical reapplication data.
The committee asked staff to request additional information from the Tax Commissioner’s office on the longest granted exemption periods, the frequency of reapplications per firm, and whether the state can track when a business ‘‘weans off’’ incentive support.
If the committee considers statutory changes, members signaled they want specific data on fiscal trade-offs and how local governments — which also lose sales-tax revenues under a blanket state exemption — may be affected.
