as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
|Introduction||Posted on 04/03/2003|
1.1 A bill for an act 1.2 relating to taxation; making changes to sales and use 1.3 tax provisions to conform to streamlined sales tax 1.4 project; amending Minnesota Statutes 2002, sections 1.5 289A.18, subdivision 4; 289A.20, subdivision 4; 1.6 289A.40, subdivision 2; 289A.50, by adding a 1.7 subdivision; 297A.61, subdivisions 3, 7, 10, 17, 30, 1.8 31, by adding subdivisions; 297A.66, by adding a 1.9 subdivision; 297A.668; 297A.67, subdivisions 7, 8, by 1.10 adding a subdivision; 297A.68, subdivision 36; 1.11 297A.72, subdivision 1; 297A.81; 297A.99, subdivisions 1.12 5, 10, 12; 297A.995, by adding a subdivision; 1.13 proposing coding for new law in Minnesota Statutes, 1.14 chapter 297A; repealing Minnesota Statutes 2002, 1.15 sections 297A.61, subdivisions 14, 15, 18; 297A.69, 1.16 subdivision 5. 1.17 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.18 Section 1. Minnesota Statutes 2002, section 289A.18, 1.19 subdivision 4, is amended to read: 1.20 Subd. 4. [SALES AND USE TAX RETURNS.] (a) Sales and use 1.21 tax returns must be filed on or before the 20th day of the month 1.22 following the close of the preceding reporting period, except 1.23 that annual use tax returns provided for under section 289A.11, 1.24 subdivision 1, must be filed by April 15 following the close of 1.25 the calendar year, in the case of individuals. Annual use tax 1.26 returns of businesses, including sole proprietorships, and 1.27 annual sales tax returns must be filed by February 5 following 1.28 the close of the calendar year. 1.29 (b) Returns for the June reporting period filed by 1.30 retailers required to remit their June liability under section 1.31 289A.20, subdivision 4, paragraph (b), are due on or before 2.1 August 20. 2.2 (c) If a retailer has an average sales and use tax 2.3 liability, including local sales and use taxes administered by 2.4 the commissioner, equal to or less than $500 per month in any 2.5 quarter of a calendar year, and has substantially complied with 2.6 the tax laws during the preceding four calendar quarters, the 2.7 retailer may request authorization to file and pay the taxes 2.8 quarterly in subsequent calendar quarters. The authorization 2.9 remains in effect during the period in which the retailer's 2.10 quarterly returns reflect sales and use tax liabilities of less 2.11 than $1,500 and there is continued compliance with state tax 2.12 laws. 2.13 (d) If a retailer has an average sales and use tax 2.14 liability, including local sales and use taxes administered by 2.15 the commissioner, equal to or less than $100 per month during a 2.16 calendar year, and has substantially complied with the tax laws 2.17 during that period, the retailer may request authorization to 2.18 file and pay the taxes annually in subsequent years. The 2.19 authorization remains in effect during the period in which the 2.20 retailer's annual returns reflect sales and use tax liabilities 2.21 of less than $1,200 and there is continued compliance with state 2.22 tax laws. 2.23 (e) The commissioner may also grant quarterly or annual 2.24 filing and payment authorizations to retailers if the 2.25 commissioner concludes that the retailers' future tax 2.26 liabilities will be less than the monthly totals identified in 2.27 paragraphs (c) and (d). An authorization granted under this 2.28 paragraph is subject to the same conditions as an authorization 2.29 granted under paragraphs (c) and (d). 2.30 (f) A taxpayer who is a materials supplier may report gross 2.31 receipts either on: 2.32 (1) the cash basis as the consideration is received; or 2.33 (2) the accrual basis as sales are made. 2.34 As used in this paragraph, "materials supplier" means a person 2.35 who provides materials for the improvement of real property; who 2.36 is primarily engaged in the sale of lumber and building 3.1 materials-related products to owners, contractors, 3.2 subcontractors, repairers, or consumers; who is authorized to 3.3 file a mechanics lien upon real property and improvements under 3.4 chapter 514; and who files with the commissioner an election to 3.5 file sales and use tax returns on the basis of this paragraph. 3.6 (g) Notwithstanding paragraphs (a) to (f), a seller that is 3.7 not a Model 1, 2, or 3 seller, as those terms are used in the 3.8 Streamlined Sales and Use Tax Agreement, that does not have a 3.9 legal requirement to register in Minnesota, and that is 3.10 registered under the agreement, must file a return by February 5 3.11 following the close of the calendar year in which the seller 3.12 initially registers, and must file subsequent returns on 3.13 February 5 on an annual basis in succeeding years. 3.14 Additionally, a return must be submitted on or before the 20th 3.15 day of the month following any month by which sellers have 3.16 accumulated state and local tax funds for the state in the 3.17 amount of $1,000 or more. 3.18 Sec. 2. Minnesota Statutes 2002, section 289A.20, 3.19 subdivision 4, is amended to read: 3.20 Subd. 4. [SALES AND USE TAX.] (a) The taxes imposed by 3.21 chapter 297A are due and payable to the commissioner monthly on 3.22 or before the 20th day of the month following the month in which 3.23 the taxable event occurred, or following another reporting 3.24 period as the commissioner prescribes or as allowed under 3.25 section 289A.18, subdivision 4, paragraph (f) or (g), except 3.26 that use taxes due on an annual use tax return as provided under 3.27 section 289A.11, subdivision 1, are payable by April 15 3.28 following the close of the calendar year. 3.29 (b) For a fiscal year ending before July 1, 2002, a vendor 3.30 having a liability of $120,000 or more during a fiscal year 3.31 ending June 30 must remit the June liability for the next year 3.32 in the following manner: 3.33 (1) Two business days before June 30 of the year, the 3.34 vendor must remit 75 percent of the estimated June liability to 3.35 the commissioner. 3.36 (2) On or before August 20 of the year, the vendor must pay 4.1 any additional amount of tax not remitted in June. 4.2 (c) A vendor having a liability of $120,000 or more during 4.3 a fiscal year ending June 30 must remit all liabilities on 4.4 returns due for periods beginning in the subsequent calendar 4.5 year by electronic means on or before the 20th day of the month 4.6 following the month in which the taxable event occurred, or on 4.7 or before the 20th day of the month following the month in which 4.8 the sale is reported under section 289A.18, subdivision 4, 4.9 except for 75 percent of the estimated June liability, which is 4.10 due two business days before June 30. The remaining amount of 4.11 the June liability is due on August 20. 4.12 Sec. 3. Minnesota Statutes 2002, section 289A.40, 4.13 subdivision 2, is amended to read: 4.14 Subd. 2. [BAD DEBT LOSS.] If a claim relates to an 4.15 overpayment because of a failure to deduct a loss due to a bad 4.16 debt or to a security becoming worthless, the claim is 4.17 considered timely if filed within seven years from the date 4.18 prescribed for the filing of the return. A claim relating to an 4.19 overpayment of taxes under chapter 297A must be filed within 4.20 3-1/2 years from the date prescribed for filing the return, plus 4.21 any extensions granted for filing the return, but only if filed 4.22 within the extended time
, or within one year from the date the4.23 taxpayer's federal income tax return is timely filed claiming4.24 the bad debt deduction, whichever period expires later. The 4.25 refund or credit is limited to the amount of overpayment 4.26 attributable to the loss. "Bad debt" for purposes of this 4.27 subdivision, has the same meaning as that term is used in United 4.28 States Code, title 26, section 166, except that the following 4.29 are excluded from the calculation of bad debt: financing 4.30 charges or interest; sales or use taxes charged on the purchase 4.31 price; uncollectible amounts on property that remain in the 4.32 possession of the seller until the full purchase price is paid; 4.33 expenses incurred in attempting to collect any debt; and 4.34 repossessed property. 4.35 Sec. 4. Minnesota Statutes 2002, section 289A.50, is 4.36 amended by adding a subdivision to read: 5.1 Subd. 2b. [CERTIFIED SERVICE PROVIDER; BAD DEBT CLAIM.] A 5.2 certified service provider, as defined in section 297A.995, 5.3 subdivision 2, may claim on behalf of a taxpayer that is its 5.4 client any bad debt allowance provided by this section. The 5.5 certified service provider must credit or refund to its client 5.6 the full amount of any bad debt allowance or refund received. 5.7 Sec. 5. Minnesota Statutes 2002, section 297A.61, 5.8 subdivision 3, is amended to read: 5.9 Subd. 3. [SALE AND PURCHASE.] (a) "Sale" and "purchase" 5.10 include, but are not limited to, each of the transactions listed 5.11 in this subdivision. 5.12 (b) Sale and purchase include: 5.13 (1) any transfer of title or possession, or both, of 5.14 tangible personal property, whether absolutely or conditionally, 5.15 for a consideration in money or by exchange or barter; and 5.16 (2) the leasing of or the granting of a license to use or 5.17 consume, for a consideration in money or by exchange or barter, 5.18 tangible personal property, other than a manufactured home used 5.19 for residential purposes for a continuous period of 30 days or 5.20 more. 5.21 (c) Sale and purchase include the production, fabrication, 5.22 printing, or processing of tangible personal property for a 5.23 consideration for consumers who furnish either directly or 5.24 indirectly the materials used in the production, fabrication, 5.25 printing, or processing. 5.26 (d) Sale and purchase include the preparing for a 5.27 consideration of food. Notwithstanding section 297A.67, 5.28 subdivision 2, taxable food includes, but is not limited to, the 5.29 following: 5.30 (1) prepared food sold by the retailer; 5.31 (2) soft drinks; 5.32 (3) candy; and 5.33 (4) all food sold through vending machines. 5.34 (e) A sale and a purchase includes the furnishing for a5.35 consideration of electricity, gas, water, or steam for use or5.36 consumption within this state.6.1 (f) A sale and a purchase includes the transfer for a6.2 consideration of computer software.6.3 (g)(e) A sale and a purchase includes the furnishing for a 6.4 consideration of the following services: 6.5 (1) the privilege of admission to places of amusement, 6.6 recreational areas, or athletic events, and the making available 6.7 of amusement devices, tanning facilities, reducing salons, steam 6.8 baths, turkish baths, health clubs, and spas or athletic 6.9 facilities; 6.10 (2) lodging and related services by a hotel, rooming house, 6.11 resort, campground, motel, or trailer camp and the granting of 6.12 any similar license to use real property other than the renting 6.13 or leasing of it for a continuous period of 30 days or more; 6.14 (3) parking services, whether on a contractual, hourly, or 6.15 other periodic basis, except for parking at a meter; 6.16 (4) the granting of membership in a club, association, or 6.17 other organization if: 6.18 (i) the club, association, or other organization makes 6.19 available for the use of its members sports and athletic 6.20 facilities, without regard to whether a separate charge is 6.21 assessed for use of the facilities; and 6.22 (ii) use of the sports and athletic facility is not made 6.23 available to the general public on the same basis as it is made 6.24 available to members. 6.25 Granting of membership means both onetime initiation fees and 6.26 periodic membership dues. Sports and athletic facilities 6.27 include golf courses; tennis, racquetball, handball, and squash 6.28 courts; basketball and volleyball facilities; running tracks; 6.29 exercise equipment; swimming pools; and other similar athletic 6.30 or sports facilities; 6.31 (5) delivery of aggregate materials and concrete block by a 6.32 third party if the delivery would be subject to the sales tax if 6.33 provided by the seller of the aggregate material or concrete 6.34 block; and 6.35 (6) services as provided in this clause: 6.36 (i) laundry and dry cleaning services including cleaning, 7.1 pressing, repairing, altering, and storing clothes, linen 7.2 services and supply, cleaning and blocking hats, and carpet, 7.3 drapery, upholstery, and industrial cleaning. Laundry and dry 7.4 cleaning services do not include services provided by coin 7.5 operated facilities operated by the customer; 7.6 (ii) motor vehicle washing, waxing, and cleaning services, 7.7 including services provided by coin operated facilities operated 7.8 by the customer, and rustproofing, undercoating, and towing of 7.9 motor vehicles; 7.10 (iii) building and residential cleaning, maintenance, and 7.11 disinfecting and exterminating services; 7.12 (iv) detective, security, burglar, fire alarm, and armored 7.13 car services; but not including services performed within the 7.14 jurisdiction they serve by off-duty licensed peace officers as 7.15 defined in section 626.84, subdivision 1, or services provided 7.16 by a nonprofit organization for monitoring and electronic 7.17 surveillance of persons placed on in-home detention pursuant to 7.18 court order or under the direction of the Minnesota department 7.19 of corrections; 7.20 (v) pet grooming services; 7.21 (vi) lawn care, fertilizing, mowing, spraying and sprigging 7.22 services; garden planting and maintenance; tree, bush, and shrub 7.23 pruning, bracing, spraying, and surgery; indoor plant care; 7.24 tree, bush, shrub, and stump removal; and tree trimming for 7.25 public utility lines. Services performed under a construction 7.26 contract for the installation of shrubbery, plants, sod, trees, 7.27 bushes, and similar items are not taxable; 7.28 (vii) massages, except when provided by a licensed health 7.29 care facility or professional or upon written referral from a 7.30 licensed health care facility or professional for treatment of 7.31 illness, injury, or disease; and 7.32 (viii) the furnishing of lodging, board, and care services 7.33 for animals in kennels and other similar arrangements, but 7.34 excluding veterinary and horse boarding services. 7.35 In applying the provisions of this chapter, the terms 7.36 "tangible personal property" and "sales at retail" include 8.1 taxable services and the provision of taxable services, unless 8.2 specifically provided otherwise. Services performed by an 8.3 employee for an employer are not taxable. Services performed by 8.4 a partnership or association for another partnership or 8.5 association are not taxable if one of the entities owns or 8.6 controls more than 80 percent of the voting power of the equity 8.7 interest in the other entity. Services performed between 8.8 members of an affiliated group of corporations are not taxable. 8.9 For purposes of this section, "affiliated group of corporations" 8.10 includes those entities that would be classified as members of 8.11 an affiliated group under United States Code, title 26, section 8.12 1504, and that are eligible to file a consolidated tax return 8.13 for federal income tax purposes. 8.14 (h)(f) A sale and a purchase includes the furnishing for a 8.15 consideration of tangible personal property or taxable services 8.16 by the United States or any of its agencies or 8.17 instrumentalities, or the state of Minnesota, its agencies, 8.18 instrumentalities, or political subdivisions. 8.19 (i)(g) A sale and a purchase includes the furnishing for a 8.20 consideration of telecommunications services, including cable 8.21 television services and direct satellite services. 8.22 Telecommunications services are taxed to the extent allowed 8.23 under federal law if those services:. 8.24 (1) either (i) originate and terminate in this state; or8.25 (ii) originate in this state and terminate outside the state and8.26 the service is charged to a telephone number customer located in8.27 this state or to the account of any transmission instrument in8.28 this state; or (iii) originate outside this state and terminate8.29 in this state and the service is charged to a telephone number8.30 customer located in this state or to the account of any8.31 transmission instrument in this state; or8.32 (2) are rendered by providing a private communications8.33 service for which the customer has one or more locations within8.34 Minnesota connected to the service and the service is charged to8.35 a telephone number customer located in this state or to the8.36 account of any transmission instrument in this state.9.1 All charges for mobile telecommunications services, as9.2 defined in United States Code, title 4, section 124, are deemed9.3 to be provided by the customer's home service provider and9.4 sourced to the customer's place of primary use and are subject9.5 to tax based upon the customer's place of primary use in9.6 accordance with the Mobile Telecommunications Sourcing Act,9.7 United States Code, title 4, sections 116 to 126. All other9.8 definitions and provisions of the Mobile Telecommunications9.9 Sourcing Act as provided in United States Code, title 4, are9.10 hereby adopted.9.11 (j)(h) A sale and a purchase includes the furnishing for a 9.12 consideration of installation if the installation charges would 9.13 be subject to the sales tax if the installation were provided by 9.14 the seller of the item being installed. 9.15 Sec. 6. Minnesota Statutes 2002, section 297A.61, 9.16 subdivision 7, is amended to read: 9.17 Subd. 7. [SALES PRICE.] (a) "Sales price" means the 9.18 measure subject to sales tax, and means the total amount of 9.19 consideration, including cash, credit, personal property, and 9.20 services, for which personal property or services are sold, 9.21 leased, or rented, valued in money, whether received in money or 9.22 otherwise, without any deduction for the following: 9.23 (1) the seller's cost of the property sold; 9.24 (2) the cost of materials used, labor or service cost, 9.25 interest, losses, all costs of transportation to the seller, all 9.26 taxes imposed on the seller, and any other expenses of the 9.27 seller; 9.28 (3) charges by the seller for any services necessary to 9.29 complete the sale, other than delivery and installation charges; 9.30 (4) delivery charges; 9.31 (5) installation charges; and 9.32 (6) the value of exempt property given to the purchaser 9.33 when taxable and exempt personal property have been bundled 9.34 together and sold by the seller as a single product or piece of 9.35 merchandise. 9.36 (b) Sales price does not include: 10.1 (1) discounts, including cash, terms, or coupons that are 10.2 not reimbursed by a third party and that are allowed by the 10.3 seller and taken by a purchaser on a sale; 10.4 (2) interest, financing, and carrying charges from credit 10.5 extended on the sale of personal property or services, if the 10.6 amount is separately stated on the invoice, bill of sale, or 10.7 similar document given to the purchaser; and 10.8 (3) any taxes legally imposed directly on the consumer that 10.9 are separately stated on the invoice, bill of sale, or similar 10.10 document given to the purchaser. 10.11 Sec. 7. Minnesota Statutes 2002, section 297A.61, 10.12 subdivision 10, is amended to read: 10.13 Subd. 10. [TANGIBLE PERSONAL PROPERTY.] (a) "Tangible 10.14 personal property" means corporeal personal property of any10.15 kind, including property that is to become real property as a10.16 result of incorporation, attachment, or installation following10.17 its acquisition.10.18 (b) Tangible personal property includes, but is not limited10.19 to:10.20 (1) computer software, whether contained on tape, discs,10.21 cards, or other devices; and10.22 (2) prepaid telephone calling cards.10.23 (c)personal property that can be seen, weighed, measured, 10.24 felt, or touched, or that is in any other manner perceptible to 10.25 the senses. "Tangible personal property" includes electricity, 10.26 water, gas, steam, and prewritten computer software. 10.27 (b) Tangible personal property does not include: 10.28 (1) large ponderous machinery and equipment used in a 10.29 business or production activity which at common law would be 10.30 considered to be real property; 10.31 (2) property which is subject to an ad valorem property 10.32 tax; 10.33 (3) property described in section 272.02, subdivision 9, 10.34 clauses (a) to (d); and 10.35 (4) property described in section 272.03, subdivision 2, 10.36 clauses (3) and (5). 11.1 Sec. 8. Minnesota Statutes 2002, section 297A.61, is 11.2 amended by adding a subdivision to read: 11.3 Subd. 14a. [LEASE OR RENTAL.] (a) "Lease or rental" means 11.4 any transfer of possession or control of tangible personal 11.5 property for a fixed or indeterminate term for consideration. A 11.6 lease or rental may include future options to purchase or extend. 11.7 (b) Lease or rental does not include: 11.8 (1) a transfer of possession or control of property under a 11.9 security agreement or deferred payment plan that requires the 11.10 transfer of title upon completion of the required payments; 11.11 (2) a transfer of possession or control of property under 11.12 an agreement that requires the transfer of title upon completion 11.13 of required payments and payment of an option price does not 11.14 exceed the greater of $100 or one percent of the total required 11.15 payments; or 11.16 (3) providing tangible personal property along with an 11.17 operator for a fixed or indeterminate period of time. A 11.18 condition of this exclusion is that the operator is necessary 11.19 for the equipment to perform as designed. For the purpose of 11.20 this subdivision, an operator must do more than maintain, 11.21 inspect, or set up the tangible personal property. 11.22 (c) Lease or rental does include agreements covering motor 11.23 vehicles and trailers where the amount of consideration may be 11.24 increased or decreased by reference to the amount realized upon 11.25 sale or disposition of the property as defined in United States 11.26 Code, title 26, section 7701(h)(l). 11.27 (d) This definition must be used for sales and use tax 11.28 purposes regardless if a transaction is characterized as a lease 11.29 or rental under generally accepted accounting principles, the 11.30 Internal Revenue Code, chapter 336, or other provisions of 11.31 federal, state, or local law. 11.32 [EFFECTIVE DATE.] This section is effective for leases or 11.33 rentals entered into on or after the day following final 11.34 enactment. 11.35 Sec. 9. Minnesota Statutes 2002, section 297A.61, 11.36 subdivision 17, is amended to read: 12.1 Subd. 17. [PREWRITTEN COMPUTER SOFTWARE.] "Prewritten 12.2 computer software" means a computer program, either in the form12.3 of written procedures or contained on tapes, discs, cards, or12.4 another device, or any required documentation or manuals12.5 designed to facilitate the use of the computer program.computer 12.6 software, including prewritten upgrades, that is not designed 12.7 and developed by the author or other creator to the 12.8 specifications of a specific purchaser. The combining of two or 12.9 more "prewritten computer software" programs or prewritten 12.10 portions of the programs does not cause the combination to be 12.11 other than "prewritten computer software." "Prewritten computer 12.12 software" includes software designed and developed by the author 12.13 or other creator to the specifications of a specific purchaser 12.14 when it is sold to a person other than the purchaser. If a 12.15 person modifies or enhances computer software of which the 12.16 person is not the author or creator, the person is deemed to be 12.17 the author or creator only of such person's modifications or 12.18 enhancements. "Prewritten computer software" or a prewritten 12.19 portion of it that is modified or enhanced to any degree, if the 12.20 modification or enhancement is designed and developed to the 12.21 specifications of a specific purchaser, remains "prewritten 12.22 computer software"; provided, however, that if there is a 12.23 reasonable, separately stated charge or an invoice or other 12.24 statement of the price given to the purchaser for such 12.25 modification or enhancement, the modification or enhancement 12.26 does not constitute "prewritten computer software." For 12.27 purposes of this subdivision: 12.28 (1) "computer" does not include tape-controlled automatic12.29 drilling, milling, or other manufacturing machinery or equipment12.30 means an electronic device that accepts information in digital 12.31 or similar form and manipulates it for a result based on a 12.32 sequence of instructions; and12.33 (2) "computer program" means information and directions12.34 that dictate the function performed by data processing12.35 equipment. It includes the complete plan for the solution of a12.36 problem, such as the complete sequence of automatic data13.1 processing equipment instructions necessary to solve a problem13.2 and includes both systems and application programs and13.3 subdivisions, such as assemblers, compilers, routines,13.4 generators, and utility programs. Computer program includes a13.5 "canned" or prewritten computer program that is held or existing13.6 for general or repeated sale or lease, even if the prewritten or13.7 "canned" program was initially developed on a custom basis or13.8 for in-house use."electronic" means relating to technology 13.9 having electrical, digital, magnetic, wireless, optical, 13.10 electromagnetic, or similar capabilities; and 13.11 (3) "computer software" means a set of coded instructions 13.12 designed to cause a "computer" or automatic data processing 13.13 equipment to perform a task. 13.14 Sec. 10. Minnesota Statutes 2002, section 297A.61, 13.15 subdivision 30, is amended to read: 13.16 Subd. 30. [DELIVERY CHARGES.] "Delivery charges" means 13.17 charges by the seller of personal property or services for 13.18 preparation and delivery to a location designated by the 13.19 purchaser of personal property or services including, but not 13.20 limited to, transportation, shipping, postage, handling, 13.21 crating, and packing. 13.22 Sec. 11. Minnesota Statutes 2002, section 297A.61, 13.23 subdivision 31, is amended to read: 13.24 Subd. 31. [PREPARED FOOD.] "Prepared food" means food that 13.25 meets either of the following conditions: 13.26 (1) the food is sold with eating utensils provided by the 13.27 seller, including plates, knives, forks, spoons, glasses, cups, 13.28 napkins, or straws; or 13.29 (2) the food is sold in a heated state or heated by the 13.30 seller or two or more food ingredients are mixed or combined by 13.31 the seller for sale as a single item, except for: 13.32 (i) bakery items, including, but not limited to, bread, 13.33 rolls, buns, biscuits, bagels, croissants, pastries, donuts, 13.34 danish, cakes, tortes, pies, tarts, muffins, bars, cookies, 13.35 tortillas; 13.36 (ii) ready-to-eat meat and seafood in an unheated state14.1 sold by weight;14.2 (iii)eggs, fish, meat, poultry, and foods containing these 14.3 raw animal foods requiring cooking by the consumer as 14.4 recommended by the Food and Drug Administration in chapter 3, 14.5 part 401.11 of its food code so as to prevent food borne 14.6 illnesses; or 14.7 (iv)(iii) food that is only sliced, repackaged, or 14.8 pasteurized by the seller. 14.9 Sec. 12. Minnesota Statutes 2002, section 297A.61, is 14.10 amended by adding a subdivision to read: 14.11 Subd. 35. [DIRECT MAIL.] "Direct mail" means printed 14.12 material delivered or distributed by United States mail or other 14.13 delivery service to a mass audience or to addressees on a 14.14 mailing list provided by the purchaser or at the direction of 14.15 the purchaser when the cost of the items are not billed directly 14.16 to the recipients. "Direct mail" includes tangible personal 14.17 property supplied directly or indirectly by the purchaser to the 14.18 direct mail seller for inclusion in the package containing 14.19 printed material. "Direct mail" does not include multiple items 14.20 of printed material delivered to a single address. 14.21 Sec. 13. Minnesota Statutes 2002, section 297A.66, is 14.22 amended by adding a subdivision to read: 14.23 Subd. 5. [WITHDRAWAL FROM STREAMLINED SALES AND USE TAX 14.24 AGREEMENT.] If the state has withdrawn its membership or been 14.25 expelled from the streamlined sales and use tax agreement, it 14.26 shall not use a seller's registration with the central 14.27 registration system and the collection of sales and use taxes in 14.28 the state as a factor in determining whether the seller has 14.29 nexus with that state for any tax at any time. 14.30 Sec. 14. [297A.666] [AMNESTY FOR REGISTRATION.] 14.31 Subdivision 1. [AMNESTY PROVISIONS.] Subject to the 14.32 limitations of subdivision 2: 14.33 (1) this state shall provide amnesty for uncollected or 14.34 unpaid sales or use tax to a seller who registers to pay or to 14.35 collect and remit applicable sales or use tax on sales made to 14.36 purchasers in this state in accordance with the terms of the 15.1 streamlined sales and use tax agreement, provided that the 15.2 seller was not so registered in this state in the 12-month 15.3 period preceding the effective date of the state's participation 15.4 in the agreement; and 15.5 (2) the amnesty shall preclude assessment for uncollected 15.6 or unpaid sales or use tax together with penalty or interest for 15.7 sales made during the period the seller was not registered in 15.8 this state, provided registration occurs within 12 months of the 15.9 effective date of the state's participation in the agreement. 15.10 Subd. 2. [LIMITATIONS.] (a) The amnesty is not available 15.11 to a seller with respect to any matter or matters for which the 15.12 seller received notice of the commencement of an audit and the 15.13 audit is not yet finally resolved, including any related 15.14 administrative and judicial processes. 15.15 (b) The amnesty is not available for sales or use taxes 15.16 already paid or remitted to this state or to taxes collected by 15.17 the seller. 15.18 (c) The amnesty is fully effective, absent the seller's 15.19 fraud or intentional misrepresentation of a material fact, as 15.20 long as the seller continues registration and continues payment 15.21 or collection and remittance of applicable sales or use taxes 15.22 for a period of at least 36 months. The statute of limitations 15.23 provisions of chapter 289A applicable to asserting a sales or 15.24 use tax liability must be tolled during this 36-month period. 15.25 (d) The amnesty is applicable only to sales or use taxes 15.26 due from a seller in its capacity as a seller and not to sales 15.27 or use taxes due from a seller in its capacity as a buyer. 15.28 Sec. 15. Minnesota Statutes 2002, section 297A.668, is 15.29 amended to read: 15.30 297A.668 [SOURCING OF SALE; SITUS IN THIS STATE.] 15.31 Subdivision 1. [SOURCING RULES.] (a) The following 15.32 provisions apply regardless of the characterization of a product 15.33 as tangible personal property, a digital good, or a service; but 15.34 do not apply to telecommunications services, or the sales of 15.35 motor vehicles, watercraft, aircraft, modular homes, 15.36 manufactured homes, or mobile homes. These provisions only 16.1 apply to determine a seller's obligation to pay or collect and 16.2 remit a sales or use tax with respect to the seller's sale of a 16.3 product. These provisions do not affect the obligation of a 16.4 seller as purchaser to remit tax on the use of the 16.5 product. This subdivision does not apply to the lease or rental 16.6 of a product. 16.7 (b) When the product is received by the purchaser at a 16.8 business location of the seller, the sale is sourced to that 16.9 business location. 16.10 (c) When the product is not received by the purchaser at a 16.11 business location of the seller, the sale is sourced to the 16.12 location where receipt by the purchaser or the donee designated 16.13 by the purchaser occurs, including the location indicated by 16.14 instructions for delivery to the purchasers or the purchaser's 16.15 donee, known to the seller. 16.16 (d) When paragraphs (b) and (c) do not apply, the sale is 16.17 sourced to the location indicated by an address for the 16.18 purchaser that is available from the business records of the 16.19 seller that are maintained in the ordinary course of the 16.20 seller's business, when use of this address does not constitute 16.21 bad faith. 16.22 (e) When paragraphs (b), (c), and (d) do not apply, the 16.23 sale is sourced to the location indicated by an address for the 16.24 purchaser obtained during the consummation of the sale, 16.25 including the address of a purchaser's payment instrument if no 16.26 other address is available, when use of this address does not 16.27 constitute bad faith. 16.28 (f) When paragraphs (b), (c), (d), and (e) do not apply, 16.29 including the circumstance where the seller is without 16.30 sufficient information to apply the previous paragraphs, then 16.31 the location is determined by the address from which tangible 16.32 personal property was shipped, from which the digital good or 16.33 the computer software delivered electronically was first 16.34 available for transmission by the seller, or from which the 16.35 service was provided. For purposes of this paragraph, the 16.36 seller must disregard any location that merely provided the 17.1 digital transfer of the product sold. 17.2 (g) For purposes of this subdivision, the terms "receive" 17.3 and "receipt" mean taking possession of tangible personal 17.4 property, making first use of services, or taking possession or 17.5 making first use of digital goods or the computer software 17.6 delivered electronically, whichever occurs first. The terms 17.7 receive and receipt do not include possession by a carrier for 17.8 hire on behalf of the purchaser. 17.9 Subd. 2. [LEASE OR RENTAL OF TANGIBLE PERSONAL 17.10 PROPERTY.] The lease or rental of tangible personal property, 17.11 other than property identified in subdivision 3 or 4, shall be 17.12 sourced as required in paragraphs (a) to (c). 17.13 (a) For a lease or rental that requires recurring periodic 17.14 payments, the first periodic payment is sourced the same as a 17.15 retail sale in accordance with the provisions of subdivision 2. 17.16 Periodic payments made subsequent to the first payment are 17.17 sourced to the primary property location for each period covered 17.18 by the payment. The primary property location must be as 17.19 indicated by an address for the property provided by the lessee 17.20 that is available to the lessor from its records maintained in 17.21 the ordinary course of business, when use of this address does 17.22 not constitute bad faith. The property location must not be 17.23 altered by intermittent use at different locations, such as use 17.24 of business property that accompanies employees on business 17.25 trips and service calls. 17.26 (b) For a lease or rental that does not require recurring 17.27 periodic payments, the payment is sourced the same as a retail 17.28 sale in accordance with the provisions of subdivision 1. 17.29 (c) This subdivision does not affect the imposition or 17.30 computation of sales or use tax on leases or rentals based on a 17.31 lump sum or accelerated basis, or on the acquisition of property 17.32 for lease. 17.33 Subd. 3. [LEASE OR RENTAL OF MOTOR VEHICLES, TRAILERS, 17.34 SEMITRAILERS, OR AIRCRAFT THAT DO NOT QUALIFY AS TRANSPORTATION 17.35 EQUIPMENT.] The lease or rental of motor vehicles, trailers, 17.36 semitrailers, or aircraft that do not qualify as transportation 18.1 equipment, as defined in subdivision 4, shall be sourced as 18.2 required in paragraphs (a) to (c). 18.3 (a) For a lease or rental that requires recurring periodic 18.4 payments, each periodic payment is sourced to the primary 18.5 property location. The primary property location must be as 18.6 indicated by an address for the property provided by the lessee 18.7 that is available to the lessor from its records maintained in 18.8 the ordinary course of business, when use of this address does 18.9 not constitute bad faith. This location must not be altered by 18.10 intermittent use at different locations. 18.11 (b) For a lease or rental that does not require recurring 18.12 periodic payments, the payment is sourced the same as a retail 18.13 sale in accordance with the provisions of subdivision 1. 18.14 (c) This subdivision does not affect the imposition or 18.15 computation of sales or use tax on leases or rentals based on a 18.16 lump sum or accelerated basis, or on the acquisition of property 18.17 for lease. 18.18 Subd. 4. [TRANSPORTATION EQUIPMENT.] (a) The retail sale, 18.19 including lease or rental, of transportation equipment shall be 18.20 sourced the same as a retail sale in accordance with the 18.21 provisions of subdivision 1, notwithstanding the exclusion of 18.22 lease or rental in subdivision 1. 18.23 (b) "Transportation equipment" means any of the following: 18.24 (1) locomotives and railcars that are utilized for the 18.25 carriage of persons or property in interstate commerce; and/or 18.26 (2) trucks and truck-tractors with a gross vehicle weight 18.27 rating (GVWR) of 10,001 pounds or greater, trailers, 18.28 semitrailers, or passenger buses that are: 18.29 (i) registered through the international registration plan; 18.30 and 18.31 (ii) operated under authority of a carrier authorized and 18.32 certified by the United States Department of Transportation or 18.33 another federal authority to engage in the carriage of persons 18.34 or property in interstate commerce. 18.35 Subd. 2.5. [MULTIPLE POINTS OF USE.] (a) Notwithstanding 18.36 the provisions of subdivisionsubdivisions 1 to 4, a business 19.1 purchaser that is not a holder of a direct pay permit that knows 19.2 at the time of its purchase of a digital good, computer software 19.3 delivered electronically, or a service that the digital good, 19.4 computer software delivered electronically, or service will be 19.5 concurrently available for use in more than one taxing 19.6 jurisdiction shall deliver to the seller in conjunction with its 19.7 purchase a multiple points of use exemption certificate 19.8 disclosing this fact. For purposes of this paragraph, 19.9 "delivered electronically" means delivered to the purchaser by 19.10 means other than tangible storage media. 19.11 (b) Upon receipt of the multiple points of use exemption 19.12 certificate, the seller is relieved of the obligation to 19.13 collect, pay, or remit the applicable tax and the purchaser is 19.14 obligated to collect, pay, or remit the applicable tax on a 19.15 direct pay basis. 19.16 (c) A purchaser delivering the multiple points of use 19.17 exemption certificate may use any reasonable, but consistent and 19.18 uniform, method of apportionment that is supported by the 19.19 purchaser's business records as they exist at the time of the 19.20 consummation of the sale. 19.21 (d) The multiple points of use exemption certificate 19.22 remains in effect for all future sales by the seller to the 19.23 purchaser until it is revoked in writing, except as to the 19.24 subsequent sale's specific apportionment that is governed by the 19.25 principle of subdivision 3 and the facts existing at the time of 19.26 the sale. 19.27 (e) A holder of a direct pay permit is not required to 19.28 deliver a multiple points or use exemption certificate to the 19.29 seller. A direct pay permit holder shall follow the provisions 19.30 of paragraph (c) in apportioning the tax due on a digital good 19.31 or a service that will be concurrently available for use in more 19.32 than one taxing jurisdiction. 19.33 Subd. 3. [DEFINITION OF TERMS.] For purposes of this19.34 section, the terms "receive" and "receipt" mean taking19.35 possession of tangible personal property, making first use of19.36 services, or taking possession or making first use of digital20.1 goods, whichever occurs first. The terms receive and receipt do20.2 not include possession by a carrier for hire on behalf of the20.3 purchaser.20.4 Subd. 6. [DIRECT MAIL.] (a) Notwithstanding other 20.5 subdivisions of this section, a purchaser of direct mail that is 20.6 not a holder of a direct pay permit shall provide to the seller, 20.7 in conjunction with the purchase, either a direct mail form or 20.8 information to show the jurisdictions to which the direct mail 20.9 is delivered to recipients. 20.10 (1) Upon receipt of the direct mail form, the seller is 20.11 relieved of all obligations to collect, pay, or remit the 20.12 applicable tax and the purchaser is obligated to pay or remit 20.13 the applicable tax on a direct pay basis. A direct mail form 20.14 remains in effect for all future sales of direct mail by the 20.15 seller to the purchaser until it is revoked in writing. 20.16 (2) Upon receipt of information from the purchaser showing 20.17 the jurisdictions to which the direct mail is delivered to 20.18 recipients, the seller shall collect the tax according to the 20.19 delivery information provided by the purchaser. In the absence 20.20 of bad faith, the seller is relieved of any further obligation 20.21 to collect tax on any transaction for which the seller has 20.22 collected tax pursuant to the delivery information provided by 20.23 the purchaser. 20.24 (b) If the purchaser of direct mail does not have a direct 20.25 pay permit and does not provide the seller with either a direct 20.26 mail form or delivery information, as required by paragraph (a), 20.27 the seller shall collect the tax according to subdivision 1, 20.28 paragraph (f). Nothing in this paragraph limits a purchaser's 20.29 obligation for sales or use tax to any state to which the direct 20.30 mail is delivered. 20.31 (c) If a purchaser of direct mail provides the seller with 20.32 documentation of direct pay authority, the purchaser is not 20.33 required to provide a direct mail form or delivery information 20.34 to the seller. 20.35 Sec. 16. [297A.669] [TELECOMMUNICATION SOURCING.] 20.36 Subdivision 1. [CALL-BY-CALL BASIS SOURCING.] Except for 21.1 the defined telecommunication services in subdivision 3, the 21.2 sale of telecommunication service sold on a call-by-call basis 21.3 shall be sourced to (1) each level of taxing jurisdiction where 21.4 the call originates and terminates in that jurisdiction; or (2) 21.5 each level of taxing jurisdiction where the call either 21.6 originates or terminates and in which the service address is 21.7 also located. 21.8 Subd. 2. [OTHER THAN CALL-BY-CALL BASIS SOURCING.] Except 21.9 for the defined telecommunication services in subdivision 3, a 21.10 sale of telecommunications services sold on a basis other than a 21.11 call-by-call basis is sourced to the customer's place of primary 21.12 use. 21.13 Subd. 3. [DEFINED TELECOMMUNICATIONS SERVICES 21.14 SOURCING.] The sale of the following telecommunication services 21.15 shall be sourced to each level of taxing jurisdiction in 21.16 paragraphs (a) to (d). 21.17 (a) A sale of mobile telecommunications services, other 21.18 than air-to-ground radiotelephone service and prepaid calling 21.19 service, is sourced to the customer's place of primary use as as 21.20 required by the Mobile Telecommunications Sourcing Act. 21.21 (b) A sale of postpaid calling service is sourced to the 21.22 origination point of the telecommunications signal as first 21.23 identified by either: 21.24 (1) the seller's telecommunications system; or 21.25 (2) information received by the seller from its service 21.26 provider, where the system used to transport such signals is not 21.27 that of the seller. 21.28 (c) A sale of prepaid calling service is sourced in 21.29 accordance with section 297A.668, subdivisions 1 to 4. However, 21.30 in the case of a sale of mobile telecommunications service that 21.31 is a prepaid telecommunications service, the rule provided in 21.32 section 297A.668, subdivision 1, paragraph (f), shall include as 21.33 an option the location associated with the mobile telephone 21.34 number. 21.35 (d) A sale of a private communication service is sourced as 21.36 follows: 22.1 (1) service for a separate charge related to a customer 22.2 channel termination point is sourced to each level of 22.3 jurisdiction in which the customer channel termination point is 22.4 located; 22.5 (2) service where all customer termination points are 22.6 located entirely within one jurisdiction or levels of 22.7 jurisdiction is sourced in such jurisdiction in which the 22.8 customer channel termination points are located; 22.9 (3) service for segments of a channel between two customer 22.10 channel termination points located in different jurisdictions 22.11 and which segment of channel are separately charged is sourced 22.12 50 percent in each level of jurisdiction in which the customer 22.13 channel termination points are located; and 22.14 (4) service for segments of a channel located in more than 22.15 one jurisdiction or levels of jurisdiction and which segments 22.16 are not separately billed is sourced in each jurisdiction based 22.17 on the percentage determined by dividing the number of customer 22.18 channel termination points in the jurisdiction by the total 22.19 number of customer channel termination points. 22.20 Subd. 4. [AIR-TO-GROUND RADIOTELEPHONE 22.21 SERVICE.] "Air-to-ground radiotelephone service," for purposes 22.22 of this section, means a radio service, as that term is defined 22.23 in Code of Federal Regulations, title 47, section 22.99, in 22.24 which common carriers are authorized to offer and provide radio 22.25 telecommunications service for hire to subscribers in aircraft. 22.26 Subd. 5. [CALL-BY-CALL BASIS.] "Call-by-call basis," for 22.27 purposes of this section, means any method of charging for 22.28 telecommunications services where the price is measured by 22.29 individual calls. 22.30 Subd. 6. [COMMUNICATIONS CHANNEL.] "Communications 22.31 channel," for purposes of this section, means a physical or 22.32 virtual path of communications over which signals are 22.33 transmitted between or among customer channel termination points. 22.34 Subd. 7. [CUSTOMER.] "Customer," for purposes of this 22.35 section, means the person or entity that contracts with the 22.36 seller of telecommunications services. If the end user of 23.1 telecommunications services is not the contracting party, the 23.2 end user of the telecommunications service is the customer of 23.3 the telecommunication service, but this sentence applies only 23.4 for the purpose of sourcing sales of telecommunications services 23.5 under this section. Customer does not include a reseller of 23.6 telecommunications service or for mobile telecommunications 23.7 service of a serving carrier under an agreement to serve the 23.8 customer outside the home service provider's licensed service 23.9 area. 23.10 Subd. 8. [CUSTOMER CHANNEL TERMINATION POINT.] "Customer 23.11 channel termination point," for purposes of this section, means 23.12 the location where the customer either inputs or receives the 23.13 communications. 23.14 Subd. 9. [END USER.] "End user," for purposes of this 23.15 section, means the person who utilizes the telecommunication 23.16 service. In the case of an entity, end user means the 23.17 individual who utilizes the service on behalf of the entity. 23.18 Subd. 10. [HOME SERVICE PROVIDER.] "Home service provider," 23.19 for purposes of this section, means the same as that term is 23.20 defined in Section 124(5) of Public Law 106-252 (Mobile 23.21 Telecommunications Sourcing Act). 23.22 Subd. 11. [MOBILE TELECOMMUNICATIONS SERVICE.] "Mobile 23.23 telecommunications service," for purposes of this section, means 23.24 the same as that term is defined in Section 124(1) of Public Law 23.25 106-252 (Mobile Telecommunications Sourcing Act). 23.26 Subd. 12. [PLACE OF PRIMARY USE.] "Place of primary use," 23.27 for purposes of this section, means the street address 23.28 representative of where the customer's use of the 23.29 telecommunications service primarily occurs, which must be the 23.30 residential street address or the primary business street 23.31 address of the customer. In the case of mobile 23.32 telecommunications services, place of primary use must be within 23.33 the licensed service area of the home service provider. 23.34 Subd. 13. [POSTPAID CALLING SERVICE.] "Postpaid calling 23.35 service," for purposes of this section, means the 23.36 telecommunications service obtained by making a payment on a 24.1 call-by-call basis either through the use of a credit card or 24.2 payment mechanism such as a bank card, travel card, credit card, 24.3 or debit card, or by a charge made to a telephone number that is 24.4 not associated with the origination or termination of the 24.5 telecommunications service. A postpaid calling service includes 24.6 a telecommunications service that would be a prepaid calling 24.7 service except it is not exclusively a telecommunication service. 24.8 Subd. 14. [PREPAID CALLING SERVICE.] "Prepaid calling 24.9 service," for purposes of this section, means the right to 24.10 access exclusively telecommunications services, which must be 24.11 paid for in advance and which enables the origination of calls 24.12 using an access number or authorization code, whether manually 24.13 or electronically dialed, and that is sold in predetermined 24.14 units or dollars of which the number declines with use in a 24.15 known amount. 24.16 Subd. 15. [PRIVATE COMMUNICATION SERVICES.] "Private 24.17 communication services," for purposes of this section, means the 24.18 same as that term is defined in section 297A.61, subdivision 26. 24.19 Subd. 16. [SERVICE ADDRESS.] "Service address," for 24.20 purposes of this section, means: 24.21 (1) the location of the telecommunications equipment to 24.22 which a customer's call is charged and from which the call 24.23 originates or terminates, regardless of where the call is billed 24.24 or paid; 24.25 (2) if the location in paragraph (a) is not known, service 24.26 address means the origination point of the signal of the 24.27 telecommunications services first identified by either the 24.28 seller's telecommunications system or in information received by 24.29 the seller from its service provider, where the system used to 24.30 transport the signals is not that of the seller; or 24.31 (3) if the location in paragraphs (a) and (b) is not known, 24.32 the service address means the location of the customer's place 24.33 of primary use. 24.34 Sec. 17. Minnesota Statutes 2002, section 297A.67, 24.35 subdivision 7, is amended to read: 24.36 Subd. 7. [MEDICINES; MEDICAL DEVICES.] (a) Sales of the 25.1 following medicines and medical devices are exempt: 25.2 (1) Prescribed drugs and medicine, and insulin,intended 25.3 for internal or external use, in the cure, mitigation,25.4 treatment, or prevention of illness or disease inhuman beings25.5 are exempt. "Prescribed drugs and medicine" includesuse, 25.6 including over-the-counter drugs or medicine prescribed by a 25.7 licensed health care professional.practitioner; 25.8 (b) Nonprescription medicines consisting principally25.9 (determined by the weight of all ingredients) of analgesics that25.10 are approved by the United States Food and Drug Administration25.11 for internal use by human beings are exempt. For purposes of25.12 this subdivision, "principally" means greater than 50 percent25.13 analgesics by weight.25.14 (c) Prescription glasses, hospital beds, fever25.15 thermometers, reusable(2) single use finger-pricking devices 25.16 for the extraction of blood , blood glucose monitoring machines,25.17 and other single use devices and diagnostic agents used in 25.18 diagnosing, monitoring, or treating diabetes , and therapeutic25.19 and; 25.20 (3) insulin and medical oxygen for human use are also 25.21 exempt, regardless of whether it is prescribed or sold 25.22 over-the-counter; 25.23 (4) prosthetic devices are exempt. "Therapeutic devices"25.24 means devices that are attached or applied to the human body to25.25 cure, heal, or alleviate injury, illness, or disease, either25.26 directly or by administering a curative agent. "Prosthetic25.27 devices" means devices that replace injured, diseased, or25.28 missing parts of the human body, either temporarily or25.29 permanently., if prescribed by a licensed health care 25.30 practitioner, or paid for by Medicare or Medicaid; 25.31 (5) durable medical equipment; and 25.32 (6) mobility enhancing equipment. 25.33 (b) For purposes of this subdivision: 25.34 (1) "Drug" means a compound, substance, or preparation, and 25.35 any component of a compound, substance, or preparation, other 25.36 than food and food ingredients, dietary supplements, or 26.1 alcoholic beverages that is: 26.2 (i) recognized in the official United States Pharmacopoeia, 26.3 official Homeopathic Pharmacopoeia of the United States, or 26.4 official National Formulary, and supplement to any of them; 26.5 (ii) intended for use in the diagnosis, cure, mitigation, 26.6 treatment, or prevention of disease; or 26.7 (iii) intended to affect the structure or any function of 26.8 the body. 26.9 (2) "Durable medical equipment" means equipment, including 26.10 repair and replacement parts, but not including mobility 26.11 enhancing equipment, that: 26.12 (i) can withstand repeated use; 26.13 (ii) is primarily and customarily used to serve a medical 26.14 purpose; 26.15 (iii) generally is not useful to a person in the absence of 26.16 illness or injury; and 26.17 (iv) is not worn in or on the body. 26.18 (3) "Mobility enhancing equipment" means equipment, 26.19 including repair and replacement parts, but not including 26.20 durable medical equipment, that: 26.21 (i) is primarily and customarily used to provide or 26.22 increase the ability to move from one place to another and that 26.23 is appropriate for use either in a home or a motor vehicle; 26.24 (ii) is not generally used by persons with normal mobility; 26.25 and 26.26 (iii) does not include any motor vehicle or equipment on a 26.27 motor vehicle normally provided by a motor vehicle manufacturer. 26.28 (4) "Prescribed" means a direction in the form of an order, 26.29 formula, or recipe issued in any form of oral, written, 26.30 electronic, or other means of transmission by a duly licensed 26.31 health care practitioner. 26.32 (5) "Prosthetic device" means a replacement, corrective, or 26.33 supportive device, including repair and replacement parts, worn 26.34 on or in the body to: 26.35 (i) artificially replace a missing portion of the body; 26.36 (ii) prevent or correct physical deformity or malfunction; 27.1 or 27.2 (iii) support a weak or deformed portion of the body. 27.3 Sec. 18. Minnesota Statutes 2002, section 297A.67, 27.4 subdivision 8, is amended to read: 27.5 Subd. 8. [CLOTHING.] (a) Clothing is exempt. For purposes 27.6 of this subdivision, "clothing" means all human wearing apparel 27.7 suitable for general use. 27.8 (b) Clothing includes, but is not limited to, aprons, 27.9 household and shop; athletic supporters; baby receiving 27.10 blankets; bathing suits and caps; beach capes and coats; belts 27.11 and suspenders; boots; coats and jackets; costumes; children and 27.12 adult diapers, including disposable; ear muffs; footlets; formal 27.13 wear; garters and garter belts; girdles; gloves and mittens for 27.14 general use; hats and caps; hosiery; insoles for shoes; lab 27.15 coats; neckties; overshoes; pantyhose; rainwear; rubber pants; 27.16 sandals; scarves; shoes and shoe laces; slippers; sneakers; 27.17 socks and stockings; steel-toed boots; underwear; uniforms, 27.18 athletic and nonathletic; and wedding apparel. 27.19 (c) Clothing does not include the following: 27.20 (1) belt buckles sold separately; 27.21 (2) costume masks sold separately; 27.22 (3) patches and emblems sold separately; 27.23 (4) sewing equipment and supplies, including but not 27.24 limited to, knitting needles, patterns, pins, scissors, sewing 27.25 machines, sewing needles, tape measures, and thimbles; 27.26 (5) sewing materials that become part of clothing, 27.27 including but not limited to, buttons, fabric, lace, thread, 27.28 yarn, and zippers; 27.29 (6) clothing accessories or equipment; 27.30 (7) sports or recreational equipment; and 27.31 (8) protective equipment. 27.32 Clothing also does not include apparel made from fur if a 27.33 uniform definition of "apparel made from fur" is developed by 27.34 the member states of the Streamlined Sales and Use Tax Agreement. 27.35 For purposes of this subdivision, "clothing accessories or 27.36 equipment" means incidental items worn on the person or in 28.1 conjunction with clothing. Clothing accessories and equipment 28.2 include, but are not limited to, briefcases; cosmetics; hair 28.3 notions, including barrettes, hair bows, and hairnets; handbags; 28.4 handkerchiefs; jewelry; nonprescription sunglasses; umbrellas; 28.5 wallets; watches; and wigs and hairpieces. "Sports or 28.6 recreational equipment" means items designed for human use and 28.7 worn in conjunction with an athletic or recreational activity 28.8 that are not suitable for general use. Sports and recreational 28.9 equipment includes, but is not limited to, ballet and tap shoes; 28.10 cleated or spiked athletic shoes; gloves, including, but not 28.11 limited to, baseball, bowling, boxing, hockey, and golf gloves; 28.12 goggles; hand and elbow guards; life preservers and vests; mouth 28.13 guards; roller and ice skates; shin guards; shoulder pads; ski 28.14 boots; waders; and wetsuits and fins. "Protective equipment" 28.15 means items for human wear and designed as protection of the 28.16 wearer against injury or disease or as protection against damage 28.17 or injury of other persons or property but not suitable for 28.18 general use. Protective equipment includes, but is not limited 28.19 to, breathing masks; clean room apparel and equipment; ear and 28.20 hearing protectors; face shields; finger guards; hard hats; 28.21 helmets; paint or dust respirators; protective gloves; safety 28.22 glasses and goggles; safety belts; tool belts; and welders 28.23 gloves and masks. 28.24 Sec. 19. Minnesota Statutes 2002, section 297A.67, is 28.25 amended by adding a subdivision to read: 28.26 Subd. 31. [PREPARED FOOD; SALES BY A MEAT MARKET.] Sales 28.27 of prepared food by a business operating primarily as a meat 28.28 market are exempt. For purposes of this subdivision, a business 28.29 is "operating primarily as a meat market" if (1) it is 28.30 classified under sector 445210 of the North American Industry 28.31 Classification System; and (2) meat and poultry sales account 28.32 for at least 80 percent of its annual sales. 28.33 Sec. 20. Minnesota Statutes 2002, section 297A.68, 28.34 subdivision 36, is amended to read: 28.35 Subd. 36. [DELIVERY OR DISTRIBUTION CHARGES; PRINTED28.36 MATERIALSDIRECT MAIL.] Charges for the delivery or distribution 29.1 of printed materials, including individual account29.2 information,direct mail are exempt if (1)the charges are 29.3 separately stated , (2) the delivery or distribution is to a mass29.4 audience or to a mailing list provided at the direction of the29.5 customer, and (3) the cost of the materials is not billed29.6 directly to the recipients. 29.7 Sec. 21. Minnesota Statutes 2002, section 297A.72, 29.8 subdivision 1, is amended to read: 29.9 Subdivision 1. [DUTY OF RETAILER.] A fully completed 29.10 exemption certificate conclusively relieves the retailer from 29.11 collecting and remitting the tax if taken from the purchaser at 29.12 the time of sale. This relief from liability does not apply to 29.13 a seller who fraudulently fails to collect the tax or solicits 29.14 purchasers to participate in the unlawful claim of an exemption. 29.15 Sec. 22. Minnesota Statutes 2002, section 297A.81, is 29.16 amended to read: 29.17 297A.81 [UNCOLLECTIBLE DEBTS; OFFSET AGAINST OTHER TAXES.] 29.18 Subdivision 1. [GENERAL.] The taxpayer may offset against 29.19 the taxes payable for any reporting period the amount of taxes 29.20 imposed by this chapter previously paid as a result of any 29.21 transaction the consideration for which became a debt owed to 29.22 the taxpayer that became uncollectible during the reporting 29.23 period, but only in proportion to the portion of the debt that 29.24 became uncollectible. Section 289A.40, subdivision 2, applies 29.25 to an offset under this section. 29.26 Subd. 2. [MANNER OF ALLOWING DEDUCTION FOR UNCOLLECTIBLE 29.27 DEBT.] (a) Uncollectible debt is allowed as a deduction in the 29.28 manner provided in this subdivision. 29.29 (b) If the uncollectible debt arose with respect to a sale 29.30 required to be included in gross receipts, subject to a tax 29.31 imposed under chapter 297A, the entire amount of the debt 29.32 remaining uncollected is allowed as a deduction. 29.33 (c) If the uncollectible debt arose with respect to a sale 29.34 partly subject to the tax imposed under chapter 297A and partly 29.35 exempt, the amount of the uncollectible debt allowed as a 29.36 deduction is the amount derived by multiplying the uncollectible 30.1 debt by the percentage that the taxable sale bears to the total 30.2 sales. 30.3 (d) If the uncollectible debt arose with respect to two or 30.4 more sales made at successive intervals, payments made before 30.5 the date the debt became uncollectible must be applied first to 30.6 the earliest sale upon which there is an unpaid balance, and to 30.7 following sales in successive order. 30.8 (e) If the books and records of the taxpayer claiming the 30.9 bad debt allowance support an allocation of the bad debts among 30.10 the member states of the streamlined sales and use tax 30.11 agreement, such an allocation shall be allowed. 30.12 Subd. 3. [CERTIFIED SERVICE PROVIDER.] A certified service 30.13 provider, as defined in section 297A.995, subdivision 2, may 30.14 claim on behalf of a taxpayer who is its client any bad debt 30.15 allowance provided by this section, subject to section 289A.50, 30.16 subdivision 2b. 30.17 Sec. 23. Minnesota Statutes 2002, section 297A.99, 30.18 subdivision 5, is amended to read: 30.19 Subd. 5. [TAX RATE.] (a) The tax rate is as specified in 30.20 the special law authorization and as imposed by the political 30.21 subdivision. 30.22 (b) The full political subdivision rate applies to any 30.23 sales that are taxed at a state rate less than or more than the30.24 state general sales and use tax rate., and the political 30.25 subdivision must not have more than one local sales tax rate or 30.26 more than one local use tax rate. This paragraph does not apply 30.27 to sales or use taxes imposed on electricity, piped natural or 30.28 artificial gas, or other heating fuels delivered by the seller, 30.29 or the retail sale or transfer of motor vehicles, aircraft, 30.30 watercraft, modular homes, manufactured homes, or mobile homes. 30.31 Sec. 24. Minnesota Statutes 2002, section 297A.99, 30.32 subdivision 10, is amended to read: 30.33 Subd. 10. [USE OF ZIP CODE IN DETERMINING LOCATION OF 30.34 SALE.] To determine whether to impose the local tax, the30.35 retailer may use zip codes if the zip code area is entirely30.36 within the political subdivision. When a zip code area is not31.1 entirely within a political subdivision, the retailer shall not31.2 collect the local tax if the purchaser notifies the retailer31.3 that the purchaser's delivery address is outside of the31.4 political subdivision, unless the retailer verifies that the31.5 delivery address is in the political subdivision using a means31.6 other than the zip code.The lowest combined tax rate imposed 31.7 in the zip code area applies if the area includes more than one 31.8 tax rate in any level of taxing jurisdictions. If a nine-digit 31.9 zip code designation is not available for a street address or if 31.10 a seller is unable to determine the nine-digit zip code 31.11 designation of a purchaser after exercising due diligence to 31.12 determine the designation, the seller may apply the rate for the 31.13 five-digit zip code area. For the purposes of this subdivision, 31.14 there is a rebuttable presumption that a seller has exercised 31.15 due diligence if the seller has attempted to determine the 31.16 nine-digit zip code designation by utilizing software approved 31.17 by the governing board that makes this designation from the 31.18 street address and the five-digit zip code of the purchaser. 31.19 Notwithstanding subdivision 13, this subdivision applies to all 31.20 local sales taxes without regard to the date of 31.21 authorization. This subdivision does not apply when the 31.22 purchased product is received by the purchaser at the business 31.23 location of the seller. 31.24 Sec. 25. Minnesota Statutes 2002, section 297A.99, 31.25 subdivision 12, is amended to read: 31.26 Subd. 12. [EFFECTIVE DATES; NOTIFICATION.] (a) A political 31.27 subdivision may impose a tax under this section starting only on 31.28 the first day of a calendar quarter. A political subdivision 31.29 may repeal a tax under this section stopping only on the last 31.30 day of a calendar quarter. 31.31 (b) The political subdivision shall notify the commissioner 31.32 of revenue at least 90 days before imposing, changing the rate 31.33 of, or repealing a tax under this section. 31.34 (c) The political subdivision shall change the rate of tax 31.35 imposed under this section starting only on the first day of a 31.36 calendar quarter, and only after the commissioner has notified 32.1 sellers at least 60 days prior to the change. 32.2 (d) The political subdivision shall apply the rate change 32.3 for sales tax imposed under this section to purchases from 32.4 printed catalogs, wherein the purchaser computed the tax based 32.5 upon local tax rates published in the catalog, starting only on 32.6 the first day of a calendar quarter, and only after the 32.7 commissioner has notified sellers at least 120 days prior to the 32.8 change. 32.9 (e) The political subdivision shall apply local 32.10 jurisdiction boundary changes to taxes imposed under this 32.11 section starting only on the first day of a calendar quarter, 32.12 and only after the commissioner has notified sellers at least 60 32.13 days prior to the change. 32.14 Sec. 26. Minnesota Statutes 2002, section 297A.995, is 32.15 amended by adding a subdivision to read: 32.16 Subd. 10. [RELIEF FROM CERTAIN LIABILITY.] Notwithstanding 32.17 subdivision 9, sellers and certified service providers are 32.18 relieved from liability to the state for having charged and 32.19 collected the incorrect amount of sales or use tax resulting 32.20 from the seller or certified service provider (1) relying on 32.21 erroneous data provided by this state on tax rates, boundaries, 32.22 or taxing jurisdiction assignments, or (2) relying on erroneous 32.23 data provided by the state in its taxability matrix concerning 32.24 the taxability of products and services. 32.25 Sec. 27. [REPEALER.] 32.26 (a) Minnesota Statutes 2002, section 297A.61, subdivisions 32.27 14, 15, and 18, are repealed. 32.28 (b) Minnesota Statutes 2002, section 297A.69, subdivision 32.29 5, is repealed effective January 1, 2006. 32.30 Sec. 28. [EFFECTIVE DATE.] 32.31 Sections 1 to 27 are effective for sales and purchases made 32.32 after June 30, 2003.