HF 2163

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxes; expanding the sales tax base and reducing the rate; providing a
low income tax credit; appropriating money; amending Minnesota Statutes 2006,
sections 297A.61, subdivision 3; 297A.62, subdivision 1; 297A.67, subdivision
7; 297A.68, subdivisions 10, 19, by adding a subdivision; 297A.70, subdivision
10; proposing coding for new law in Minnesota Statutes, chapter 290; repealing
Minnesota Statutes 2006, sections 297A.67, subdivisions 8, 9, 10, 13, 13a, 14,
15, 16, 17; 297A.70, subdivision 12.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [290.0678] CLOTHING SALES TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section the following terms
have the meaning given.
new text end

new text begin (b) "Income" has the meaning given in section 290.067, subdivision 2a.
new text end

new text begin (c) "Qualifying child" has the meaning given in section 32(c) of the Internal
Revenue Code.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin An individual is allowed a credit against the tax imposed
under this chapter. The credit equals $40 for a married couple filing a joint return and $20
for all other filers, plus $40 for each qualifying child, but an individual may not claim the
credit for more than two qualifying children.
new text end

new text begin Subd. 3. new text end

new text begin Limitations. new text end

new text begin (a) The credit allowed in this section is reduced by one
percent of income in excess of a threshold. For married couples filing joint returns, the
threshold equals $48,000; for single and head of household filers, the threshold equals
$36,000; and for married individuals filing separate returns, the threshold equals $24,000.
new text end

new text begin (b) For a nonresident or part-year resident, the credit must be allocated based on the
percentage calculated under section 290.06, subdivision 2c, paragraph (e).
new text end

new text begin Subd. 4. new text end

new text begin Credit refundable. new text end

new text begin If the amount of credit which the claimant is eligible
to receive under this section exceeds the claimant's tax liability under this chapter, the
commissioner shall refund the excess to the claimant.
new text end

new text begin Subd. 5. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to pay the refunds required by this
section is appropriated to the commissioner from the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2006.
new text end

Sec. 2.

Minnesota Statutes 2006, section 297A.61, subdivision 3, is amended to read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited
to, each of the transactions listed in this subdivision.

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration
in money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

(d) Sale and purchase include the preparing for a consideration of food.
Notwithstanding section 297A.67, subdivision 2, taxable food includes, but is not limited
to, the following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy;

(4) dietary supplements; and

(5) all food sold through vending machines.

(e) A sale and a purchase includes the furnishing for a consideration of new text begin sewer
services, new text end electricity, gas, water, or steam for use or consumption within this state.

(f) A sale and a purchase includes the transfer for a consideration of prewritten
computer software whether delivered electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a consideration of the following
services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, and the making available of amusement devices, tanning facilities, reducing
salons, steam baths, turkish baths, health clubs, and spas or athletic facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground,
motel, or trailer camp and the granting of any similar license to use real property in a
specific facility, other than the renting or leasing of it for a continuous period of 30 days
or more under an enforceable written agreement that may not be terminated without
prior notice;

(3) nonresidential parking services, whether on a contractual, hourly, or other
periodic basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its
members sports and athletic facilities, without regard to whether a separate charge is
assessed for use of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public
on the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership
dues. Sports and athletic facilities include golf courses; tennis, racquetball, handball, and
squash courts; basketball and volleyball facilities; running tracks; exercise equipment;
swimming pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials and concrete block by a third party if the delivery
would be subject to the sales tax if provided by the seller of the aggregate material or
concrete block; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services
provided by coin operated facilities operated by the customer, and rustproofing,
undercoating, and towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting and
exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not
including services performed within the jurisdiction they serve by off-duty licensed peace
officers as defined in section 626.84, subdivision 1, or services provided by a nonprofit
organization for monitoring and electronic surveillance of persons placed on in-home
detention pursuant to court order or under the direction of the Minnesota Department
of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor
plant care; tree, bush, shrub, and stump removal, except when performed as part of a land
clearing contract as defined in section 297A.68, subdivision 40; and tree trimming for
public utility lines. Services performed under a construction contract for the installation of
shrubbery, plants, sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or
professional or upon written referral from a licensed health care facility or professional for
treatment of illness, injury, or disease; deleted text begin and
deleted text end

(viii) the furnishing of lodging, board, and care services for animals in kennels and
other similar arrangements, but excluding veterinary and horse boarding services deleted text begin . deleted text end new text begin ;
new text end

new text begin (ix) car repair services;
new text end

new text begin (x) general repair services;
new text end

new text begin (xi) legal services;
new text end

new text begin (xii) accounting, financial planning, and brokerage services;
new text end

new text begin (xiii) tattoos and body piercing;
new text end

new text begin (xiv) personal grooming and salon services, including, but not limited to, haircuts,
hair styling, and hair dyeing; hair extensions; shaving and waxing; manicures; pedicures;
facials; body wraps; and tanning services; and
new text end

new text begin (xv) funeral services.
new text end

In applying the provisions of this chapter, the terms "tangible personal property"
and "retail sale" include taxable services listed in clause (6), items (i) to (vi) and (viii),
and the provision of these taxable services, unless specifically provided otherwise.
Services performed by an employee for an employer are not taxable. Services performed
by a partnership or association for another partnership or association are not taxable if
one of the entities owns or controls more than 80 percent of the voting power of the
equity interest in the other entity. Services performed between members of an affiliated
group of corporations are not taxable. For purposes of the preceding sentence, "affiliated
group of corporations" means those entities that would be classified as members of an
affiliated group as defined under United States Code, title 26, section 1504, disregarding
the exclusions in section 1504(b).

(h) A sale and a purchase includes the furnishing for a consideration of tangible
personal property or taxable services by the United States or any of its agencies or
instrumentalities, or the state of Minnesota, its agencies, instrumentalities, or political
subdivisions.

(i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, including cable television services and direct satellite
services. Telecommunications services are taxed to the extent allowed under federal law.

(j) A sale and a purchase includes the furnishing for a consideration of installation if
the installation charges would be subject to the sales tax if the installation were provided
by the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer
to a customer when (1) the vehicle is rented by the customer for a consideration, or (2)
the motor vehicle dealer is reimbursed pursuant to a service contract as defined in section
65B.29, subdivision 1, clause (1).

Sec. 3.

Minnesota Statutes 2006, section 297A.62, subdivision 1, is amended to read:

Subdivision 1.

Generally.

Except as otherwise provided in subdivision 2 or 3 or
in this chapter, a sales tax of deleted text begin 6.5 deleted text end new text begin 4.5 new text end percent is imposed on the gross receipts from retail
sales as defined in section 297A.61, subdivision 4, made in this state or to a destination
in this state by a person who is required to have or voluntarily obtains a permit under
section 297A.83, subdivision 1.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 4.

Minnesota Statutes 2006, section 297A.67, subdivision 7, is amended to read:

Subd. 7.

deleted text begin Drugs; deleted text end Medical devices.

(a) Sales of the following deleted text begin drugs and deleted text end medical
devices are exempt:

(1) deleted text begin drugs for human use, including over-the-counter drugs;
deleted text end

deleted text begin (2) deleted text end single-use finger-pricking devices for the extraction of blood and other single-use
devices and single-use diagnostic agents used in diagnosing, monitoring, or treating
diabetes;

deleted text begin (3) insulin and medical oxygen for human use, regardless of whether prescribed
or sold over the counter;
deleted text end

deleted text begin (4) deleted text end new text begin (2) new text end prosthetic devices;

deleted text begin (5) deleted text end new text begin (3) new text end durable medical equipment for home use only;

deleted text begin (6) deleted text end new text begin (4) new text end mobility enhancing equipment deleted text begin ; and deleted text end new text begin .
new text end

deleted text begin (7) prescription corrective eyeglasses.
deleted text end

(b) For purposes of this subdivision:

(1) deleted text begin "Drug" means a compound, substance, or preparation, and any component of
a compound, substance, or preparation, other than food and food ingredients, dietary
supplements, or alcoholic beverages that is:
deleted text end

deleted text begin (i) recognized in the official United States Pharmacopoeia, official Homeopathic
Pharmacopoeia of the United States, or official National Formulary, and supplement
to any of them;
deleted text end

deleted text begin (ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention
of disease; or
deleted text end

deleted text begin (iii) intended to affect the structure or any function of the body.
deleted text end

deleted text begin (2) deleted text end "Durable medical equipment" means equipment, including repair and
replacement parts, but not including mobility enhancing equipment, that:

(i) can withstand repeated use;

(ii) is primarily and customarily used to serve a medical purpose;

(iii) generally is not useful to a person in the absence of illness or injury; and

(iv) is not worn in or on the body.

deleted text begin (3) deleted text end new text begin (2) new text end "Mobility enhancing equipment" means equipment, including repair and
replacement parts, but not including durable medical equipment, that:

(i) is primarily and customarily used to provide or increase the ability to move from
one place to another and that is appropriate for use either in a home or a motor vehicle;

(ii) is not generally used by persons with normal mobility; and

(iii) does not include any motor vehicle or equipment on a motor vehicle normally
provided by a motor vehicle manufacturer.

deleted text begin (4) "Over-the-counter drug" means a drug that contains a label that identifies the
product as a drug as required by Code of Federal Regulations, title 21, section 201.66. The
label must include a "drug facts" panel or a statement of the active ingredients with a list of
those ingredients contained in the compound, substance, or preparation. Over-the-counter
drugs do not include grooming and hygiene products, regardless of whether they otherwise
meet the definition. "Grooming and hygiene products" are soaps, cleaning solutions,
shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and sunscreens.
deleted text end

deleted text begin (5) "Prescribed" and "prescription" means a direction in the form of an order,
formula, or recipe issued in any form of oral, written, electronic, or other means of
transmission by a duly licensed health care professional.
deleted text end

deleted text begin (6) deleted text end new text begin (3) new text end "Prosthetic device" means a replacement, corrective, or supportive device,
including repair and replacement parts, worn on or in the body to:

(i) artificially replace a missing portion of the body;

(ii) prevent or correct physical deformity or malfunction; or

(iii) support a weak or deformed portion of the body.

Prosthetic device does not include corrective eyeglasses.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 5.

Minnesota Statutes 2006, section 297A.68, subdivision 10, is amended to read:

Subd. 10.

Publications; publication materials.

Tangible personal property that
is used or consumed in producing any publication regularly issued at average intervals
not exceeding three months is exempt deleted text begin , and any such publication is exempt deleted text end . "Publication"
includes, but is not limited to, a qualified newspaper as defined by section 331A.02,
together with any supplements or enclosures. "Publication" does not include magazines
and periodicals sold over the counter. Tangible personal property that is used or consumed
in producing a publication does not include machinery, equipment, implements, tools,
accessories, appliances, contrivances, furniture, and fixtures used in the publication, or
fuel, electricity, gas, or steam used for space heating or lighting.

Advertising contained in a publication is a nontaxable service and is exempt.
Persons who publish or sell newspapers are engaging in a nontaxable service with
respect to gross receipts realized from such news-gathering or news-publishing activities,
including the sale of advertising.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 6.

Minnesota Statutes 2006, section 297A.68, subdivision 19, is amended to read:

Subd. 19.

Petroleum products.

The following petroleum products are exempt:

(1) deleted text begin products upon which a tax has been imposed and paid under chapter 296A,
and for which no refund has been or will be allowed because the buyer used the fuel
for nonhighway use;
deleted text end

deleted text begin (2) deleted text end products that are used in the improvement of agricultural land by constructing,
maintaining, and repairing drainage ditches, tile drainage systems, grass waterways, water
impoundment, and other erosion control structures;

deleted text begin (3) deleted text end new text begin (2) new text end products purchased by a transit system receiving financial assistance under
section 174.24, 256B.0625, subdivision 17, or 473.384;

deleted text begin (4) deleted text end new text begin (3) new text end products purchased by an ambulance service licensed under chapter 144E;

deleted text begin (5) deleted text end new text begin (4) new text end products used in a passenger snowmobile, as defined in section 296A.01,
subdivision 39, for off-highway business use as part of the operations of a resort as
provided under section 296A.16, subdivision 2, clause (2); or

deleted text begin (6) deleted text end new text begin (5) new text end products purchased by a state or a political subdivision of a state for use in
motor vehicles exempt from registration under section 168.012, subdivision 1, paragraph
(b).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 7.

Minnesota Statutes 2006, section 297A.68, is amended by adding a subdivision
to read:

new text begin Subd. 42. new text end

new text begin Legal and accounting services. new text end

new text begin The sales of legal, accounting, financial
planning, and brokerage services are exempt if used in a trade or business.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 8.

Minnesota Statutes 2006, section 297A.70, subdivision 10, is amended to read:

Subd. 10.

Nonprofit tickets or admissions.

deleted text begin (a) deleted text end Tickets or admissions to an event
are exempt if all the gross receipts are recorded as such, in accordance with generally
accepted accounting principles, on the books of one or more organizations whose primary
mission is to provide an opportunity for citizens of the state to participate in the creation,
performance, or appreciation of the arts, and provided that each organization is:

(1) an organization described in section 501(c)(3) of the Internal Revenue Code in
which voluntary contributions make up at least the following percent of the organization's
annual revenue in its most recently completed 12-month fiscal year, or in the current year
if the organization has not completed a 12-month fiscal year:

(i) for sales made after July 31, 2001, and before July 1, 2002, for the organization's
fiscal year completed in calendar year 2000, three percent;

(ii) for sales made on or after July 1, 2002, and on or before June 30, 2003, for the
organization's fiscal year completed in calendar year 2001, three percent;

(iii) for sales made on or after July 1, 2003, and on or before June 30, 2004, for the
organization's fiscal year completed in calendar year 2002, four percent; and

(iv) for sales made in each 12-month period, beginning on July 1, 2004, and each
subsequent year, for the organization's fiscal year completed in the preceding calendar
year, five percent;

(2) a municipal board that promotes cultural and arts activities; or

(3) the University of Minnesota, a state college and university, or a private nonprofit
college or university provided that the event is held at a facility owned by the educational
institution holding the event.

The exemption only applies if the entire proceeds, after reasonable expenses, are used
solely to provide opportunities for citizens of the state to participate in the creation,
performance, or appreciation of the arts.

deleted text begin (b) Tickets or admissions to the premises of the Minnesota Zoological Garden are
exempt, provided that the exemption under this paragraph does not apply to tickets or
admissions to performances or events held on the premises unless the performance or
event is sponsored and conducted exclusively by the Minnesota Zoological Board or
employees of the Minnesota Zoological Garden.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end

Sec. 9. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2006, sections 297A.67, subdivisions 8, 9, 10, 13, 13a, 14, 15,
16, and 17; and 297A.70, subdivision 12, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2007.
new text end