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Minnesota Legislature

Office of the Revisor of Statutes

HF 1831

1st Engrossment - 90th Legislature (2017 - 2018) Posted on 03/01/2018 05:47pm

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to liquor; establishing the Minnesota Grape and Wine Council; establishing
a grant program for promotion, education, and development of Minnesota wines;
establishing sales and use tax nexus for certain direct shippers; depositing certain
revenues; requiring direct shipper's license for certain shipments of wine to
consumers; establishing reporting requirements for direct shippers; appropriating
money; amending Minnesota Statutes 2016, sections 295.75, subdivisions 1, 2,
11; 297A.66, subdivision 3; 340A.417; Minnesota Statutes 2017 Supplement,
section 297A.94; proposing coding for new law in Minnesota Statutes, chapter 17.

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

Section 1.

new text begin [17.6901] MINNESOTA GRAPE AND WINE COUNCIL.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment; membership. new text end

new text begin (a) The Minnesota Grape and Wine Council
is established. The council is composed of 15 voting members who are Minnesota residents
as follows:
new text end

new text begin (1) five wine producers licensed in the state of Minnesota;
new text end

new text begin (2) two commercial grape growers;
new text end

new text begin (3) one member of the Minnesota Farm Winery Association;
new text end

new text begin (4) one member of the Minnesota Grape Growers Association;
new text end

new text begin (5) one member of Explore Minnesota Tourism;
new text end

new text begin (6) one member representing the Minnesota grown program;
new text end

new text begin (7) one member representing the commissioner of agriculture;
new text end

new text begin (8) one member from the Minnesota Licensed Beverage Association;
new text end

new text begin (9) one member from the Minnesota Municipal Beverage Association; and
new text end

new text begin (10) one member from the Minnesota Cider Guild.
new text end

new text begin (b) Council members shall serve three-year terms. After the initial council is appointed,
subsequent appointments must be staggered so that one-third of council membership is
replaced each year. Council members must be nominated by their organizations and appointed
by the commissioner. The council may add ex officio members at its discretion. The council
must meet at least once per year, with all related expenses reimbursed by members'
sponsoring organizations or by the members themselves.
new text end

new text begin Subd. 2. new text end

new text begin Powers and duties. new text end

new text begin The council must review applications and select projects
to receive Minnesota grape and wine program grants, as authorized in section 17.6902. The
council must establish a program to provide grants for promotion, education, and development
of Minnesota wine and Minnesota grapes. The commissioner is responsible for all fiscal
and administrative duties.
new text end

new text begin Subd. 3. new text end

new text begin Rules. new text end

new text begin The commissioner's duties under this section and section 17.6902 are
not subject to the provisions of chapter 14.
new text end

Sec. 2.

new text begin [17.6902] MINNESOTA GRAPE AND WINE PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Eligible projects. new text end

new text begin Eligible projects must provide promotion, education,
or development of the Minnesota wine industry, to stimulate economic development through
value-added, sustainable agriculture. The council may also recommend projects to expand
grape production in Minnesota by establishing vineyard grower grants. The council may
recommend funding for a viticultural or an enological extension agent to work with growers
and wineries in the state.
new text end

new text begin Subd. 2. new text end

new text begin Awarding grants. new text end

new text begin Applications for program grants must be submitted in the
form prescribed by the Minnesota Grape and Wine Council. Applications must be submitted
on or before the deadline prescribed by the council. All applications are subject to a thorough
in-state review by a peer committee established and approved by the council. Each project
meeting the basic qualifications is subject to a yes or no vote by each council member.
Projects chosen to receive funding must achieve an affirmative vote from at least ten of the
15 council members or two-thirds of voting members present. Projects awarded program
funds must submit an annual progress report in the form prescribed by the council.
new text end

new text begin Subd. 3. new text end

new text begin Annual audit. new text end

new text begin The program must have an annual audit of financial activities
that the council must file with the commissioner on or before June 1 for the immediately
preceding year ending December 31.
new text end

Sec. 3.

new text begin [17.6903] MINNESOTA GRAPE AND WINE ACCOUNT.
new text end

new text begin A Minnesota grape and wine account is established in the agricultural fund. Money in
the account, including interest earned, is appropriated to the commissioner for grants
determined by the Minnesota Grape and Wine Council under section 17.6902. The
commissioner may use money from the account, if approved by vote by the council, to
provide administrative support to the council as required under section 17.6901, subdivision
2. The commissioner may also recover associated indirect costs from the account as required
under section 16A.127.
new text end

Sec. 4.

Minnesota Statutes 2016, section 295.75, subdivision 1, is amended to read:


Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given.

(b) "Commissioner" means the commissioner of revenue.

(c) new text begin"Direct shipper" means a winery holding a direct shipper license under section
340A.417, subdivision 1.
new text end

new text begin (d) new text end"Gross receipts" means the total amount received, in money or by barter or exchange,
for all liquor sales at retail as measured by the sales price, but does not include any taxes
imposed directly on the consumer that are separately stated on the invoice, bill of sale, or
similar document given to the purchaser.

deleted text begin (d)deleted text endnew text begin (e)new text end "Liquor" means:

(1) intoxicating liquor, as defined in section 340A.101, subdivision 14;

(2) beverage containing intoxicating liquor; and

(3) 3.2 percent malt liquor, as defined in section 340A.101, subdivision 19, when sold
at an on-sale or off-sale municipal liquor store or other establishment licensed to sell any
type of intoxicating liquor.

deleted text begin (e)deleted text endnew text begin (f)new text end "Liquor retailer" means a retailer that sells liquor.

deleted text begin (f)deleted text endnew text begin (g)new text end "Retail sale" has the meaning given in section 297A.61, subdivision 4.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2018.
new text end

Sec. 5.

Minnesota Statutes 2016, section 295.75, subdivision 2, is amended to read:


Subd. 2.

Gross receipts tax imposed.

A tax is imposed on each liquor retailer new text beginand direct
shipper
new text endequal to 2.5 percent of gross receipts from retail sales in Minnesota of liquor.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2018.
new text end

Sec. 6.

Minnesota Statutes 2016, section 295.75, subdivision 11, is amended to read:


Subd. 11.

Deposit of revenues.

new text begin(a) Except as provided in paragraph (b), new text endthe commissioner
shall deposit all revenues, including penalties and interest, derived from the tax imposed
by this section in the general fund.

new text begin (b) Starting August 1, 2018, and the first day of each month thereafter, the commissioner
shall deposit an amount of the remittances monthly into the state treasury and credit them
to the Minnesota grape and wine account established under section 17.6903, as a portion
of the estimated amount of taxes collected from remittances by wineries holding a direct
shipper license in that month for sales direct to consumers for personal use. For the
remittances under this paragraph, the monthly deposit amount is $.......
new text end

new text begin (c) Starting August 1, 2019, and the first day of each month thereafter, the monthly
deposit amount is one-twelfth of the product of: (1) the estimated percentage of total tax
revenues attributable to the retail sale of wine shipped direct to consumers for personal use
by holders of a direct shipper license; and (2) the total tax revenues collected under this
chapter for the calendar year ending before the start of that fiscal year. By August 1, 2018,
and August 1 of every second year thereafter, the commissioner shall estimate the percent
of total tax revenues collected in the previous calendar year that are attributable to retail
sales of wine shipped direct to consumers for personal use by holders of a direct shipper
license based on federal data and department of revenue consumption models.
new text end

new text begin (d) For purposes of this subdivision, "direct shipper license" has the meaning given in
section 340A.417, subdivision 1.
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, 2018.
new text end

Sec. 7.

Minnesota Statutes 2016, section 297A.66, subdivision 3, is amended to read:


Subd. 3.

Retailer not maintaining place of business in this state.

(a) To the extent
allowed by the United States Constitution and in accordance with the terms and conditions
of federal remote seller law, a retailer making retail sales from outside this state to a
destination within this state and not maintaining a place of business in this state shall collect
sales and use taxes and remit them to the commissioner under section 297A.77.

(b) To the extent allowed by the United States Constitution and the laws of the United
States, a retailer making retail sales from outside this state to a destination within this state
and not maintaining a place of business in this state shall collect sales and use taxes and
remit them to the commissioner under section 297A.77, if the retailer engages in the regular
or systematic soliciting of sales from potential customers in this state by:

(1) distribution, by mail or otherwise, of catalogs, periodicals, advertising flyers, or other
written solicitations of business to customers in this state;

(2) display of advertisements on billboards or other outdoor advertising in this state;

(3) advertisements in newspapers published in this state;

(4) advertisements in trade journals or other periodicals the circulation of which is
primarily within this state;

(5) advertisements in a Minnesota edition of a national or regional publication or a
limited regional edition in which this state is included as part of a broader regional or national
publication which are not placed in other geographically defined editions of the same issue
of the same publication;

(6) advertisements in regional or national publications in an edition which is not by its
contents geographically targeted to Minnesota but which is sold over the counter in Minnesota
or by subscription to Minnesota residents;

(7) advertisements broadcast on a radio or television station located in Minnesota; deleted text beginor
deleted text end

(8) any other solicitation by telegraphy, telephone, computer database, cable, optic,
microwave, or other communication systemnew text begin; or
new text end

new text begin (9) obtaining a direct shipper license under section 340A.417, subdivision 1new text end.

This paragraph must be construed without regard to the state from which distribution
of the materials originated or in which they were prepared.

(c) The location within or without this state of independent vendors that provide products
or services to the retailer in connection with its solicitation of customers within this state,
including such products and services as creation of copy, printing, distribution, and recording,
is not considered in determining whether the retailer is required to collect tax.

(d) A retailer not maintaining a place of business in this state is presumed, subject to
rebuttal, to be engaged in regular solicitation within this state if it engages in any of the
activities in paragraph (b)new text begin, clauses (1) to (8),new text end and:

(1) makes 100 or more retail sales from outside this state to destinations in this state
during a period of 12 consecutive months; or

(2) makes ten or more retail sales totaling more than $100,000 from outside this state
to destinations in this state during a period of 12 consecutive months.

new text begin (e) A retailer not maintaining a place of business in this state who has obtained a direct
shipper license under paragraph (b), clause (9), is presumed, subject to rebuttal, to be engaged
in regular solicitation within this state.
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, 2018.
new text end

Sec. 8.

Minnesota Statutes 2017 Supplement, section 297A.94, is amended to read:


297A.94 DEPOSIT OF REVENUES.

(a) Except as provided in this section, the commissioner shall deposit the revenues,
including interest and penalties, derived from the taxes imposed by this chapter in the state
treasury and credit them to the general fund.

(b) The commissioner shall deposit taxes in the Minnesota agricultural and economic
account in the special revenue fund if:

(1) the taxes are derived from sales and use of property and services purchased for the
construction and operation of an agricultural resource project; and

(2) the purchase was made on or after the date on which a conditional commitment was
made for a loan guaranty for the project under section 41A.04, subdivision 3.

The commissioner of management and budget shall certify to the commissioner the date on
which the project received the conditional commitment. The amount deposited in the loan
guaranty account must be reduced by any refunds and by the costs incurred by the Department
of Revenue to administer and enforce the assessment and collection of the taxes.

(c) The commissioner shall deposit the revenues, including interest and penalties, derived
from the taxes imposed on sales and purchases included in section 297A.61, subdivision 3,
paragraph (g), clauses (1) and (4), in the state treasury, and credit them as follows:

(1) first to the general obligation special tax bond debt service account in each fiscal
year the amount required by section 16A.661, subdivision 3, paragraph (b); and

(2) after the requirements of clause (1) have been met, the balance to the general fund.

(d) Beginning with sales taxes remitted after July 1, 2017, the commissioner shall deposit
in the state treasury the revenues collected under section 297A.64, subdivision 1, including
interest and penalties and minus refunds, and credit them to the highway user tax distribution
fund.

(e) The commissioner shall deposit the revenues, including interest and penalties,
collected under section 297A.64, subdivision 5, in the state treasury and credit them to the
general fund. By July 15 of each year the commissioner shall transfer to the highway user
tax distribution fund an amount equal to the excess fees collected under section 297A.64,
subdivision 5
, for the previous calendar year.

(f) Beginning with sales taxes remitted after July 1, 2017, in conjunction with the deposit
of revenues under paragraph (d), the commissioner shall deposit into the state treasury and
credit to the highway user tax distribution fund an amount equal to the estimated revenues
derived from the tax rate imposed under section 297A.62, subdivision 1, on the lease or
rental for not more than 28 days of rental motor vehicles subject to section 297A.64. The
commissioner shall estimate the amount of sales tax revenue deposited under this paragraph
based on the amount of revenue deposited under paragraph (d).

(g) Starting after July 1, 2017, the commissioner shall deposit an amount of the
remittances monthly into the state treasury and credit them to the highway user tax
distribution fund as a portion of the estimated amount of taxes collected from the sale and
purchase of motor vehicle repair parts in that month. For the remittances between July 1,
2017, and June 30, 2019, the monthly deposit amount is $2,628,000. For remittances in
each subsequent fiscal year, the monthly deposit amount is $12,137,000. For purposes of
this paragraph, "motor vehicle" has the meaning given in section 297B.01, subdivision 11,
and "motor vehicle repair and replacement parts" includes (i) all parts, tires, accessories,
and equipment incorporated into or affixed to the motor vehicle as part of the motor vehicle
maintenance and repair, and (ii) paint, oil, and other fluids that remain on or in the motor
vehicle as part of the motor vehicle maintenance or repair. For purposes of this paragraph,
"tire" means any tire of the type used on highway vehicles, if wholly or partially made of
rubber and if marked according to federal regulations for highway use.

(h) 72.43 percent of the revenues, including interest and penalties, transmitted to the
commissioner under section 297A.65, must be deposited by the commissioner in the state
treasury as follows:

(1) 50 percent of the receipts must be deposited in the heritage enhancement account in
the game and fish fund, and may be spent only on activities that improve, enhance, or protect
fish and wildlife resources, including conservation, restoration, and enhancement of land,
water, and other natural resources of the state;

(2) 22.5 percent of the receipts must be deposited in the natural resources fund, and may
be spent only for state parks and trails;

(3) 22.5 percent of the receipts must be deposited in the natural resources fund, and may
be spent only on metropolitan park and trail grants;

(4) three percent of the receipts must be deposited in the natural resources fund, and
may be spent only on local trail grants; and

(5) two percent of the receipts must be deposited in the natural resources fund, and may
be spent only for the Minnesota Zoological Garden, the Como Park Zoo and Conservatory,
and the Duluth Zoo.

(i) The revenue dedicated under paragraph (h) may not be used as a substitute for
traditional sources of funding for the purposes specified, but the dedicated revenue shall
supplement traditional sources of funding for those purposes. Land acquired with money
deposited in the game and fish fund under paragraph (h) must be open to public hunting
and fishing during the open season, except that in aquatic management areas or on lands
where angling easements have been acquired, fishing may be prohibited during certain times
of the year and hunting may be prohibited. At least 87 percent of the money deposited in
the game and fish fund for improvement, enhancement, or protection of fish and wildlife
resources under paragraph (h) must be allocated for field operations.

(j) The commissioner must deposit the revenues, including interest and penalties minus
any refunds, derived from the sale of items regulated under section 624.20, subdivision 1,
that may be sold to persons 18 years old or older and that are not prohibited from use by
the general public under section 624.21, in the state treasury and credit:

(1) 25 percent to the volunteer fire assistance grant account established under section
88.068;

(2) 25 percent to the fire safety account established under section 297I.06, subdivision
3; and

(3) the remainder to the general fund.

For purposes of this paragraph, the percentage of total sales and use tax revenue derived
from the sale of items regulated under section 624.20, subdivision 1, that are allowed to be
sold to persons 18 years old or older and are not prohibited from use by the general public
under section 624.21, is a set percentage of the total sales and use tax revenues collected in
the state, with the percentage determined under section 39.

(k) The revenues deposited under paragraphs (a) to deleted text begin(j)deleted text endnew text begin (n)new text end do not include the revenues,
including interest and penalties, generated by the sales tax imposed under section 297A.62,
subdivision 1a
, which must be deposited as provided under the Minnesota Constitution,
article XI, section 15.

new text begin (l) Starting August 1, 2018, and the first day of each month thereafter, the commissioner
shall deposit an amount of the remittances monthly into the state treasury and credit them
to the Minnesota grape and wine account established under section 17.6903, as a portion
of the estimated amount of taxes collected from remittances by wineries holding a direct
shipper license in that month for sales direct to consumers for personal use. For the
remittances under this paragraph, the monthly deposit amount is $.......
new text end

new text begin (m) Starting August 1, 2019, and the first day of each month thereafter, the monthly
deposit amount is one-twelfth of the product of: (1) the estimated percentage of total sales
tax revenues attributable to the sale and purchase of wine shipped direct to consumers for
personal use by holders of a direct shipper license; and (2) the total sales tax revenues
collected under this chapter for the calendar year ending before the start of that fiscal year.
By August 1, 2019, and August 1 of every second year thereafter, the commissioner shall
estimate the percent of total sales tax revenues collected in the previous calendar year that
are attributable to the sale and purchase of wine shipped direct to consumers for personal
use based on federal data and department consumption models.
new text end

new text begin (n) For purposes of this subdivision, "direct shipper license" has the meaning given in
section 340A.417, subdivision 1.
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, 2018.
new text end

Sec. 9.

Minnesota Statutes 2016, section 340A.417, is amended to read:


340A.417 new text beginDIRECT WINE new text endSHIPMENTS deleted text beginINTO MINNESOTAdeleted text endnew text begin; LICENSE
REQUIRED
new text end.

new text begin Subdivision 1. new text end

new text begin Direct shipper license. new text end

(a) Notwithstanding section 297G.07, subdivision
2
, or any provision of this chapter, a winery licensed in a state other than Minnesota, or a
winery located in Minnesota, deleted text beginmaydeleted text end new text beginmust obtain a direct shipper license in order to new text endship, for
personal use and not for resale, not more than two cases of wine, containing a maximum of
nine liters per case, in any calendar year to any resident of Minnesota age 21 or over. deleted text beginDelivery
of a shipment under this section may not be deemed a sale in this state.
deleted text end

new text begin (b) A winery applicant for an initial or renewal direct shipper license shall:
new text end

new text begin (1) file an application with the department on a form prescribed by the department;
new text end

new text begin (2) pay a license fee of $50;
new text end

new text begin (3) submit a copy of the applicant's current federal basic wine manufacturing permit;
new text end

new text begin (4) hold a Minnesota sales and use tax license issued by the Department of Revenue;
and
new text end

new text begin (5) be current on the remittance of all required state taxes.
new text end

new text begin (c) A direct shipper license under this section is valid for a calendar year.
new text end

new text begin (d) A holder of a direct shipper license may only ship wine that was produced by the
direct shipper in accordance with the direct shipper's federal basic wine manufacturing
permit.
new text end

new text begin (e) A holder of a direct shipper license is deemed to have consented to the jurisdiction
of the department and the courts of this state with respect to the enforcement of this section.
new text end

new text begin (f) Any sale and shipment of wine directly to a person in this state from a winery that
does not hold a valid direct shipper license is prohibited.
new text end

deleted text begin (b)deleted text endnew text begin (g)new text end The shipping container of any wine sent under this section must be clearly marked
"Alcoholic Beverages: adult signature (over 21 years of age) required."

deleted text begin (c)deleted text endnew text begin (h)new text end It is not the intent of this section to impair the distribution of wine through
distributors or importing distributors, but only to permit shipments of wine for personal use.

new text begin Subd. 2. new text end

new text begin Reporting. new text end

new text begin A holder of a direct shipper's license shall file quarterly reports
with the department on or before the 15th day of the month following each quarterly period.
The holder of a direct shipper's license may file an annual report if the amount owed under
chapters 295 and 297A is less than $500. The report shall include:
new text end

new text begin (1) the business name, address, and direct shipper license number of the holder of the
direct shipper license;
new text end

new text begin (2) the total liters of wine shipped to residents of this state during the quarterly period;
and
new text end

new text begin (3) the date, quantity, and purchase price of each shipment, along with any taxes paid
by the purchaser, during the quarterly period.
new text end

new text begin Subd. 3. new text end

new text begin Penalties. new text end

deleted text begin(d)deleted text endnew text begin (a)new text end No criminal penalty may be imposed on a person for a violation
of this section other than a violation described in paragraph deleted text begin(e)deleted text endnew text begin (b)new text end or deleted text begin(f)deleted text endnew text begin (c)new text end. Whenever it
appears to the commissioner that any person has engaged in any act or practice constituting
a violation of this section, and the violation is not within two years of any previous violation
of this section, the commissioner shall issue and cause to be served upon the person an order
requiring the person to cease and desist from violating this section. The order must give
reasonable notice of the rights of the person to request a hearing and must state the reason
for the entry of the order. Unless otherwise agreed between the parties, a hearing shall be
held not later than seven days after the request for the hearing is received by the commissioner
after which and within 20 days after the receipt of the administrative law judge's report and
subsequent exceptions and argument, the commissioner shall issue an order vacating the
cease and desist order, modifying it, or making it permanent as the facts require. If no hearing
is requested within 30 days of the service of the order, the order becomes final and remains
in effect until modified or vacated by the commissioner. All hearings shall be conducted in
accordance with the provisions of chapter 14. If the person to whom a cease and desist order
is issued fails to appear at the hearing after being duly notified, the person shall be deemed
in default, and the proceeding may be determined against the person upon consideration of
the cease and desist order, the allegations of which may be deemed to be true.

deleted text begin (e)deleted text endnew text begin (b)new text end Any person who violates this section within two years of a violation for which a
cease and desist order was issued under paragraph deleted text begin(d)deleted text endnew text begin (a)new text end, is guilty of a misdemeanor.

deleted text begin (f)deleted text endnew text begin (c)new text end Any person who commits a third or subsequent violation of this section within
any subsequent two-year period is guilty of a gross misdemeanor.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2019.
new text end