Modified local option sales tax analysis for Nisswa, Minnesota: Estimated contributions of residents and non-residents to a local option sales tax

Abstract

Nisswa is a small town in central Minnesota, surrounded by popular tourist destinations and resorts. Its charming downtown is home to many gift shops and restaurants, with the Paul Bunyan bike trail running through it. The location of Nisswa’s downtown has allowed the community to draw tourists to the region, either visiting for the day or staying overnight at one of the town’s seven lodging businesses—including one of the largest resorts in the state.

A small resident population combined with a strong tourism economy challenges local leaders when making decisions about balancing financial investments made by residents with providing infrastructure used by everyone. To address this dynamic, the City of Nisswa is exploring how a local option sales tax (LOST) would impact residents while also providing the necessary amenities desired by the community.

With advances in technology, University of Minnesota Extension’s community economics team partnered with the City of Nisswa to pilot using mobile data to supplement the traditional ways of estimating a LOST impact. Findings provided not only an estimate based on the available sales tax information but also confirmed visitor trends using mobile data. This innovative approach provides the community with an estimate that would have previously been unavailable.