1.1                          A bill for an act 
  1.2             relating to health; providing for imposition, 
  1.3             collection, and administration of the MinnesotaCare 
  1.4             tax; amending Minnesota Statutes 1994, sections 
  1.5             295.51, subdivision 1, and by adding a subdivision; 
  1.6             295.52, by adding a subdivision; and 295.54, 
  1.7             subdivisions 1, 2, and by adding a subdivision; 
  1.8             Minnesota Statutes 1995 Supplement, sections 295.50, 
  1.9             subdivision 3; and 295.53, subdivisions 1, 5, and by 
  1.10            adding a subdivision; repealing Minnesota Statutes 
  1.11            1994, section 295.50, subdivisions 8, 9, 9a, 11, 12, 
  1.12            and 12a. 
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  Minnesota Statutes 1995 Supplement, section 
  1.15  295.50, subdivision 3, is amended to read: 
  1.16     Subd. 3.  [GROSS REVENUES.] "Gross revenues" are total 
  1.17  amounts received in money or otherwise by: 
  1.18     (1) a resident hospital for patient services; 
  1.19     (2) a resident surgical center for patient services; 
  1.20     (3) a nonresident hospital for patient services provided to 
  1.21  patients domiciled in Minnesota; 
  1.22     (4) a nonresident surgical center for patient services 
  1.23  provided to patients domiciled in Minnesota; 
  1.24     (5) a resident health care provider, other than a staff 
  1.25  model health carrier, for patient services; 
  1.26     (6) a nonresident health care provider for patient services 
  1.27  provided to an individual domiciled in Minnesota or patient 
  1.28  services provided in Minnesota; 
  1.29     (7) (4) a wholesale drug distributor for sale or 
  2.1   distribution of legend drugs that are delivered:  (i) to a 
  2.2   Minnesota resident by a wholesale drug distributor who is a 
  2.3   nonresident pharmacy directly, by common carrier, or by mail; or 
  2.4   (ii) in Minnesota by the wholesale drug distributor, by common 
  2.5   carrier, or by mail, unless the legend drugs are delivered to 
  2.6   another wholesale drug distributor who sells legend drugs 
  2.7   exclusively at wholesale.  Legend drugs do not include 
  2.8   nutritional products as defined in Minnesota Rules, part 
  2.9   9505.0325; 
  2.10     (8) (5) a staff model health plan company as gross premiums 
  2.11  for enrollees, copayments, deductibles, coinsurance, and fees 
  2.12  for patient services covered under its contracts with groups and 
  2.13  enrollees; and 
  2.14     (9) (6) a resident pharmacy for medical supplies, 
  2.15  appliances, and equipment; and 
  2.16     (10) a nonresident pharmacy for medical supplies, 
  2.17  appliances, and equipment provided to consumers domiciled in 
  2.18  Minnesota or delivered into Minnesota. 
  2.19     Sec. 2.  Minnesota Statutes 1994, section 295.51, 
  2.20  subdivision 1, is amended to read: 
  2.21     Subdivision 1.  [BUSINESS TRANSACTIONS IN MINNESOTA.] A 
  2.22  hospital, surgical center, pharmacy, or health care provider is 
  2.23  subject to tax under sections 295.50 to 295.58 295.59 if it is 
  2.24  "transacting business in Minnesota."  A hospital, surgical 
  2.25  center, pharmacy, or health care provider is transacting 
  2.26  business in Minnesota only if it: 
  2.27     (1) maintains an office in Minnesota used in the trade or 
  2.28  business of providing patient services or medical supplies, 
  2.29  appliances, or equipment; 
  2.30     (2) has employees, representatives, or independent 
  2.31  contractors conducting business in Minnesota related to the 
  2.32  trade or business of providing patient services or medical 
  2.33  supplies, appliances, or equipment; 
  2.34     (3) regularly provides patient services or medical 
  2.35  supplies, appliances, or equipment to customers that receive the 
  2.36  services in Minnesota; 
  3.1      (4) regularly solicits business from potential customers in 
  3.2   Minnesota.  A hospital, surgical center, pharmacy, or health 
  3.3   care provider is presumed to regularly solicit business within 
  3.4   Minnesota if it receives gross receipts for patient services or 
  3.5   medical supplies, appliances, or equipment from 20 or more 
  3.6   patients domiciled in Minnesota in a calendar year; 
  3.7      (5) regularly performs services outside Minnesota the 
  3.8   benefits of which are consumed in Minnesota; 
  3.9      (6) owns or leases tangible personal or real property 
  3.10  physically located in Minnesota and used in the trade or 
  3.11  business of providing patient services or medical supplies, 
  3.12  appliances, or equipment; or 
  3.13     (7) receives medical assistance payments from the state of 
  3.14  Minnesota. maintains contacts with or presence in the state of 
  3.15  Minnesota sufficient to permit taxation of gross revenues 
  3.16  received for patient services under the United States 
  3.17  Constitution. 
  3.18     Sec. 3.  Minnesota Statutes 1994, section 295.51, is 
  3.19  amended by adding a subdivision to read: 
  3.20     Subd. 1a.  [NEXUS IN MINNESOTA.] A wholesale drug 
  3.21  distributor has nexus in Minnesota if its contacts with or 
  3.22  presence in Minnesota is sufficient to satisfy the requirements 
  3.23  of the United States Constitution. 
  3.24     Sec. 4.  Minnesota Statutes 1994, section 295.52, is 
  3.25  amended by adding a subdivision to read: 
  3.26     Subd. 4a.  [TAX COLLECTION.] A wholesale drug distributor 
  3.27  with nexus in Minnesota, who is not subject to tax under 
  3.28  subdivision 3, on all or a particular transaction, is required 
  3.29  to collect the tax imposed under subdivision 4, from the 
  3.30  purchaser of the drugs and give the purchaser a receipt for the 
  3.31  tax paid.  The tax collected shall be remitted to the 
  3.32  commissioner in the manner prescribed by section 295.55, 
  3.33  subdivision 3. 
  3.34     Sec. 5.  Minnesota Statutes 1995 Supplement, section 
  3.35  295.53, subdivision 1, is amended to read: 
  3.36     Subdivision 1.  [EXEMPTIONS.] (a) The following payments 
  4.1   are excluded from the gross revenues subject to the hospital, 
  4.2   surgical center, or health care provider taxes under sections 
  4.3   295.50 to 295.57: 
  4.4      (1) payments received for services provided under the 
  4.5   Medicare program, including payments received from the 
  4.6   government, and organizations governed by sections 1833 and 1876 
  4.7   of title XVIII of the federal Social Security Act, United States 
  4.8   Code, title 42, section 1395, and enrollee deductibles, 
  4.9   coinsurance, and copayments, whether paid by the Medicare 
  4.10  enrollee or by a Medicare supplemental coverage as defined in 
  4.11  section 62A.011, subdivision 3, clause (10).  Payments for 
  4.12  services not covered by Medicare are taxable; 
  4.13     (2) medical assistance payments including payments received 
  4.14  directly from the government or from a prepaid plan; 
  4.15     (3) payments received for home health care services; 
  4.16     (4) payments received from hospitals or surgical centers 
  4.17  for goods and services on which liability for tax is imposed 
  4.18  under section 295.52 or the source of funds for the payment is 
  4.19  exempt under clause (1), (2), (7), (8), or (10); 
  4.20     (5) payments received from health care providers for goods 
  4.21  and services on which liability for tax is imposed under this 
  4.22  chapter or the source of funds for the payment is exempt under 
  4.23  clause (1), (2), (7), (8), or (10); 
  4.24     (6) amounts paid for legend drugs, other than nutritional 
  4.25  products, to a wholesale drug distributor reduced by 
  4.26  reimbursements received for legend drugs under clauses (1), (2), 
  4.27  (7), and (8); 
  4.28     (7) payments received under the general assistance medical 
  4.29  care program including payments received directly from the 
  4.30  government or from a prepaid plan; 
  4.31     (8) payments received for providing services under the 
  4.32  MinnesotaCare program including payments received directly from 
  4.33  the government or from a prepaid plan and enrollee deductibles, 
  4.34  coinsurance, and copayments.  For purposes of this clause, 
  4.35  coinsurance means the portion of payment that the enrollee is 
  4.36  required to pay for the covered service; 
  5.1      (9) payments received by a resident health care provider or 
  5.2   the wholly owned subsidiary of a resident health care provider 
  5.3   for care provided outside Minnesota to a patient who is not 
  5.4   domiciled in Minnesota; 
  5.5      (10) payments received from the chemical dependency fund 
  5.6   under chapter 254B; 
  5.7      (11) payments received in the nature of charitable 
  5.8   donations that are not designated for providing patient services 
  5.9   to a specific individual or group; 
  5.10     (12) payments received for providing patient services 
  5.11  incurred through a formal program of health care research 
  5.12  conducted in conformity with federal regulations governing 
  5.13  research on human subjects.  Payments received from patients or 
  5.14  from other persons paying on behalf of the patients are subject 
  5.15  to tax; 
  5.16     (13) payments received from any governmental agency for 
  5.17  services benefiting the public, not including payments made by 
  5.18  the government in its capacity as an employer or insurer; 
  5.19     (14) payments received for services provided by community 
  5.20  residential mental health facilities licensed under Minnesota 
  5.21  Rules, parts 9520.0500 to 9520.0690, community support programs 
  5.22  and family community support programs approved under Minnesota 
  5.23  Rules, parts 9535.1700 to 9535.1760, and community mental health 
  5.24  centers as defined in section 245.62, subdivision 2; 
  5.25     (15) government payments received by a regional treatment 
  5.26  center; 
  5.27     (16) payments received for hospice care services; 
  5.28     (17) payments received by a resident health care 
  5.29  provider or the wholly owned subsidiary of a resident health 
  5.30  care provider for medical supplies, appliances and equipment 
  5.31  delivered outside of Minnesota; 
  5.32     (18) payments received by a post-secondary educational 
  5.33  institution from student tuition, student activity fees, health 
  5.34  care service fees, government appropriations, donations, or 
  5.35  grants.  Fee for service payments and payments for extended 
  5.36  coverage are taxable; and 
  6.1      (19) payments received for services provided by:  assisted 
  6.2   living programs and congregate housing programs; and 
  6.3      (20) payments received by a staff model health plan company 
  6.4   directly from the federal Office of Personnel Management for 
  6.5   services provided under the Federal Employees Health Benefit 
  6.6   Program. 
  6.7      (b) Payments received by wholesale drug distributors for 
  6.8   prescription drugs sold directly to veterinarians or veterinary 
  6.9   bulk purchasing organizations are excluded from the gross 
  6.10  revenues subject to the wholesale drug distributor tax under 
  6.11  sections 295.50 to 295.59. 
  6.12     Sec. 6.  Minnesota Statutes 1995 Supplement, section 
  6.13  295.53, subdivision 5, is amended to read: 
  6.14     Subd. 5.  [EXEMPTIONS FOR PHARMACIES.] (a) Pharmacies may 
  6.15  exclude from their gross revenues subject to tax payments for 
  6.16  medical supplies, appliances, and devices that are exempt under 
  6.17  subdivision 1, clauses (1), (2), (4), (5), (7), (8), and (13). 
  6.18     (b) Resident Pharmacies may exclude from their gross 
  6.19  revenues subject to tax payments received for medical supplies, 
  6.20  appliances, and equipment delivered outside of Minnesota. 
  6.21     Sec. 7.  Minnesota Statutes 1995 Supplement, section 
  6.22  295.53, is amended by adding a subdivision to read: 
  6.23     Subd. 6.  [TEMPORARY EXEMPTION; DRUG SALES TO FEDERAL AND 
  6.24  TRIBAL GOVERNMENTS.] (a) The wholesale drug distributor tax 
  6.25  under section 295.52, subdivision 3, does not apply to payments 
  6.26  received from federal or tribal governments under contracts 
  6.27  entered into before April 23, 1992, and according to pricing 
  6.28  terms that were binding on the wholesale drug distributor on 
  6.29  April 23, 1992.  The distributor must include the payments in 
  6.30  its reported gross revenues and subtract the payments as an 
  6.31  exemption under section 295.53, subdivision 1. 
  6.32     (b) The exemption under this subdivision is retroactive and 
  6.33  applies to gross revenues from sales after April 23, 1992, and 
  6.34  before September 30, 1998. 
  6.35     (c) No refunds for previously paid tax may be paid, if the 
  6.36  tax was passed through to and paid by the federal or tribal 
  7.1   government.  As a condition for paying refunds, the commissioner 
  7.2   may require distributors to provide documentation that the tax 
  7.3   was not passed through and paid by the federal or tribal 
  7.4   government. 
  7.5      (d) This subdivision expires effective for gross revenues 
  7.6   received after September 30, 1998. 
  7.7      Sec. 8.  Minnesota Statutes 1994, section 295.54, 
  7.8   subdivision 1, is amended to read: 
  7.9      Subdivision 1.  [TAXES PAID TO ANOTHER STATE.] A resident 
  7.10  hospital, resident surgical center, pharmacy, or resident health 
  7.11  care provider who is liable for that has paid taxes payable to 
  7.12  another state or province or territory of Canada measured by 
  7.13  gross receipts revenues and is subject to tax under section 
  7.14  sections 295.52 to 295.59 on the same gross revenues is entitled 
  7.15  to a credit for the tax legally due and paid to another state or 
  7.16  province or territory of Canada to the extent of the lesser of 
  7.17  (1) the tax actually paid to the other state or province or 
  7.18  territory of Canada, or (2) the amount of tax imposed by 
  7.19  Minnesota on the gross receipts revenues subject to tax in the 
  7.20  other taxing jurisdictions. 
  7.21     Sec. 9.  Minnesota Statutes 1994, section 295.54, 
  7.22  subdivision 2, is amended to read: 
  7.23     Subd. 2.  [PHARMACY CREDIT.] A resident pharmacy may claim 
  7.24  a quarterly credit against the total amount of tax the pharmacy 
  7.25  owes during that quarter under section 295.52, subdivision 1b, 
  7.26  as provided in this subdivision.  The credit shall equal two 
  7.27  percent of the amount paid by the pharmacy to a wholesale drug 
  7.28  distributor subject to tax under section 295.52, subdivision 3, 
  7.29  for legend drugs delivered by the pharmacy outside of Minnesota. 
  7.30  If the amount of the credit exceeds the tax liability of the 
  7.31  pharmacy under section 295.52, subdivision 1b, the commissioner 
  7.32  shall provide the pharmacy with a refund equal to the excess 
  7.33  amount. 
  7.34     Sec. 10.  Minnesota Statutes 1994, section 295.54, is 
  7.35  amended by adding a subdivision to read: 
  7.36     Subd. 3.  [WHOLESALE DRUG DISTRIBUTOR CREDIT.] A wholesale 
  8.1   drug distributor who has paid taxes to another state or province 
  8.2   or territory of Canada measured by gross revenues or sales and 
  8.3   is subject to tax under sections 295.52 to 295.59 on the same 
  8.4   gross revenues or sales is entitled to a credit for the tax 
  8.5   legally due and paid to another state or province or territory 
  8.6   of Canada to the extent of the lesser of (1) the tax actually 
  8.7   paid to the other state or province or territory of Canada or 
  8.8   (2) the amount of tax imposed by Minnesota on the gross revenues 
  8.9   or sales subject to tax in the other taxing jurisdictions. 
  8.10     Sec. 11.  [REPEALER.] 
  8.11     Minnesota Statutes 1994, section 295.50, subdivisions 8, 9, 
  8.12  9a, 11, 12, and 12a, are repealed.  
  8.13     Sec. 12.  [EFFECTIVE DATES.] 
  8.14     Sections 1, 2, 5 to 9, and 11 are effective the day 
  8.15  following final enactment except that the amendment to Minnesota 
  8.16  Statutes, section 295.53, subdivision 1, clause (20), providing 
  8.17  an exemption for payments received by a staff model health plan 
  8.18  company from the federal Office of Personnel Management is 
  8.19  effective for gross revenues generated by services performed 
  8.20  after June 30, 1996. 
  8.21     Sections 3, 4, and 10 are effective for tax periods 
  8.22  beginning on or after January 1, 1997.