HF 1908

as introduced - 87th Legislature (2011 - 2012) Posted on 01/24/2012 10:50am

A bill for an act
relating to taxes; repealing the individual income and corporate franchise tax,
petroleum and motor fuels taxes, gambling taxes, cigarette and tobacco taxes,
solid waste management taxes, minerals occupation tax, and insurance taxes; and
replacing the lost revenue with a comprehensive general sales tax; amending
Minnesota Statutes 2010, sections 297A.62, subdivisions 1, 1a; 297A.66,
subdivision 3; proposing coding for new law in Minnesota Statutes, chapter
297A; repealing Minnesota Statutes 2010, sections 297A.61, subdivisions
2, 4, 10, 12, 13, 16a, 16b, 16c, 17, 17a, 17b, 18, 30, 31, 32, 33, 34, 36, 37,
38, 46; 297A.62, subdivision 3; 297A.63, subdivision 2; 297A.64; 297A.65;
297A.67; 297A.68, subdivisions 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16,
17, 19, 20, 22, 23, 24, 25, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40,
41; 297A.69; 297A.70, subdivisions 4, 5, 7, 8, 9, 11, 12, 13, 14, 15, 16, 17;
297A.71, subdivisions 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 17, 18, 20, 22,
32, 34, 35, 38, 40, 41, 42; 297A.75, subdivisions 4, 5; 297A.87, subdivision 3;
297A.89, subdivision 1; Minnesota Statutes 2011 Supplement, sections 297A.61,
subdivision 3; 297A.68, subdivisions 4, 42, 43; 297A.70, subdivisions 1, 2, 3, 6;
297A.71, subdivision 23; 297A.75, subdivisions 1, 2, 3; 297A.89, subdivision 2.

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

ARTICLE 1

CONSTITUTIONAL AMENDMENT; PROHIBITING INCOME TAXES AND
GROSS RECEIPTS TAXES AND REQUIRING A COMPREHENSIVE SALES TAX

Section 1. new text begin CONSTITUTIONAL AMENDMENTS PROPOSED.
new text end

new text begin An amendment to the Minnesota Constitution is proposed to the people. If the
amendment is adopted, article X, section 3, will be repealed
new text end

new text begin a section shall be added to article X, to read:
new text end

new text begin Sec. 9. new text end

new text begin (a) For all tax years beginning on or after January 1, 2014, no tax shall be
imposed upon any income derived from any source within this state, including corporate
and personal income taxes, franchise taxes, or occupation taxes. Beginning on January
1, 2014, no tax shall be imposed on gross receipts or consumption other than a general
comprehensive sales and use tax. All revenue lost as a result of the prohibition under this
section must be replaced by expanding the base of the general sales and use tax in this
state to all sales of taxable property and services, regardless of the location of the seller or
method of transfer, and increasing the general sales and use tax rate to a rate necessary to
replace the estimated revenues that, absent the prohibition, would have been collected
in the first year of the prohibition. "Taxable property and services" means any tangible
property, digital goods, or service, including leaseholds of any term or rents with respect
to the property, consumed or used in this state.
new text end

new text begin (b) Taxable property and services excludes property or services:
new text end

new text begin (1) purchased as a component part or ingredient of taxable property or service to be
sold at retail;
new text end

new text begin (2) purchased for a business purpose in a trade or business, including agriculture; and
new text end

new text begin (3) purchased for investment purposes. For purposes of this section, "purchased for
a business purpose in a trade or business" means purchased by a person engaged in a trade
or business and used in that trade or business for resale; to produce, provide, render, or sell
taxable property or services; or in furtherance of other bona fide business purposes. For
purposes of this section, "purchased for an investment purpose" means property purchased
exclusively for purposes of appreciation or the production of income, and tuition and fees
paid to an accredited institution of higher education for educational services. All sales
tax exemptions in place as of the effective date of this section exempting purchases other
than the purchases enumerated in this section are repealed.
new text end

new text begin (c) The Department of Revenue shall determine a method for providing a sales tax
rebate for each duly registered qualified household of the state beginning January 1, 2014.
The monthly amount of the rebate equals the product of (1) the combined sales tax rate
established under this section and under article XI, section 15, and (2) 1/12 of the annual
poverty guidelines updated periodically by the United States Department of Health and
Human Services or its successor agency. For purposes of this section, "qualified family"
means one or more relatives sharing a common residence. All relatives sharing a common
residence are considered part of one qualified family.
new text end

new text begin article XI, section 15, will read:
new text end

Sec. 15.

Beginning July 1, 2009, until June 30, 2034, the sales and use tax rate shall be
increased by three-eighths of one percent on sales and uses taxable under the general state
sales and use tax law. Receipts from the increase, plus penalties and interest and reduced
by new text begin the share of the rebate under article X, section 9 due to the sales tax rate in this section,
and by new text end any refunds, are dedicated, for the benefit of Minnesotans, to the following funds:
33 percent of the receipts shall be deposited in the outdoor heritage fund and may be spent
only to restore, protect, and enhance wetlands, prairies, forests, and habitat for fish, game,
and wildlife; 33 percent of the receipts shall be deposited in the clean water fund and may
be spent only to protect, enhance, and restore water quality in lakes, rivers, and streams
and to protect groundwater from degradation, and at least five percent of the clean water
fund must be spent only to protect drinking water sources; 14.25 percent of the receipts
shall be deposited in the parks and trails fund and may be spent only to support parks and
trails of regional or statewide significance; and 19.75 percent shall be deposited in the arts
and cultural heritage fund and may be spent only for arts, arts education, and arts access
and to preserve Minnesota's history and cultural heritage. An outdoor heritage fund; a
parks and trails fund; a clean water fund and a sustainable drinking water account; and
an arts and cultural heritage fund are created in the state treasury. The money dedicated
under this section shall be appropriated by law. The dedicated money under this section
must supplement traditional sources of funding for these purposes and may not be used
as a substitute. Land acquired by fee with money deposited in the outdoor heritage
fund under this section must be open to the public taking of fish and game during the
open season unless otherwise provided by law. If the base of the sales and use tax is
changed, the sales and use tax rate in this section may be proportionally adjusted by law
to within one-thousandth of one percent in order to provide as close to the same amount
of revenue as practicable for each fund as existed before the change to the sales and use
tax. new text begin The sales and use tax rate in this section must be proportionally adjusted on January
1, 2014, to within .001 percent in order to provide as close to the same amount of revenue
as practicable for each fund as existed before the change to the sales and use tax under
article X, section 9.
new text end

Sec. 2. new text begin SUBMISSION TO VOTERS.
new text end

new text begin The proposed amendment must be submitted to the people at the 2012 general
election. The question submitted must be:
new text end

new text begin "Shall the Minnesota Constitution be amended beginning January 1, 2014, to
eliminate individual and corporate income taxes and state gross receipts and sales taxes,
other then a fair tax which is a comprehensive sales and use tax imposed at a rate that
would offset lost revenue from the eliminated taxes and would be included in the gross
price on all new purchases of goods and services, including Internet sales and sales of
digital products, except for property purchased for business or investment; and to provide
each qualified family with a sales tax rebate to ensure that no state sales tax is paid on
purchases up to the federal poverty level?
new text end

	new text begin Yes . new text end
	new text begin No . " new text end

Sec. 3. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 and 2 apply to taxes and tax years beginning on or after January 1, 2014.
new text end

ARTICLE 2

SALES TAX CONFORMING CHANGES

Section 1.

new text begin [297A.611] ADDITIONAL FAIR TAX DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Applicability. new text end

new text begin When used in this chapter, the following words,
terms, and phrases have the meanings given them in this section, unless the context clearly
indicates a different meaning.
new text end

new text begin Subd. 2. new text end

new text begin Fair tax. new text end

new text begin "Fair tax" means the sales and use tax imposed under this chapter
and incorporated into the gross sales price of all taxable property and services.
new text end

new text begin Subd. 3. new text end

new text begin Basic interest rate. new text end

new text begin "Basic interest rate" means:
new text end

new text begin (1) in the case of a debt instrument, investment, financing lease, or account with a
term of not over three years, the applicable interest rate is a short-term rate based on the
average market yield during any one month on outstanding marketable obligations of the
United States with remaining periods of maturity of three years or fewer;
new text end

new text begin (2) in the case of a debt instrument, investment, financing lease, or account with a
term of over three years but not over nine years, the applicable interest rate is a midterm
rate based on the average market yield during any one month on outstanding marketable
obligations of the United States with remaining periods to maturity of more than three
years but not over nine years; or
new text end

new text begin (3) in the case of a debt instrument, investment, financing lease, or account with a
term over nine years, the applicable interest rate is a long-term rate based on the average
market yield during any one month on outstanding marketable obligations of the United
States with remaining periods to maturity of over nine years.
new text end

new text begin Subd. 4. new text end

new text begin Business purpose. new text end

new text begin "Business purpose" means a purchase made by a
person engaged in a trade or business and used in that trade or business for resale; to
produce, provide, render, or sell taxable property or services; or in furtherance of other
bona fide business purposes.
new text end

new text begin Subd. 5. new text end

new text begin Business use conversion. new text end

new text begin "Business use conversion" means the use
of taxable property or services upon which tax was imposed and actually paid that
commenced to be 95 percent or more used for business purposes.
new text end

new text begin Subd. 6. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of revenue.
new text end

new text begin Subd. 7. new text end

new text begin Digital products. new text end

new text begin (a) "Digital products" means all specified digital
products and all other digital products transferred electronically to the purchaser, including
a digital code or access to a digital code for receiving, accessing, or otherwise obtaining
the digital product.
new text end

new text begin (b) "Digital code" means a code that provides a purchaser with a right to obtain
one or more specified digital products or other digital products. A digital code may be
transferred electronically, such as through email, or it may be transferred on a tangible
medium such as a plastic card or paper invoice. A digital code is not a code that represents
stored monetary value that is deducted from a total as it is used by the purchaser, or a code
that represents a redeemable card, gift card, or gift card that entitles the holder to select a
digital product of an indicated cash value.
new text end

new text begin (c) "Specified digital product" means:
new text end

new text begin (1) digital audiovisual works that are a series of related images that, when shown in
succession, impart an impression of motion and accompanying sounds, if any;
new text end

new text begin (2) digital audio works that are works that result from the fixation of a series of
musical, spoken, or other sounds, including ringtones; and
new text end

new text begin (3) digital books that are works that are generally recognized in the ordinary and
usual sense as books.
new text end

new text begin (d) "Other digital products" means products other than specified digital products
that are transferred electronically to the purchaser and would otherwise be taxable if
delivered in a tangible form, including but not limited to art, greeting cards, and video
and electronic games.
new text end

new text begin (e) "Transferred electronically" means obtained by the purchaser by means other
than tangible storage media. It is not necessary that a copy of the product be physically
transferred to the purchaser. A product shall be considered delivered electronically to a
purchaser if the purchaser has access to the product.
new text end

new text begin Subd. 8. new text end

new text begin Education and training costs. new text end

new text begin "Education and training costs" includes
tuition for primary, secondary, or postsecondary education and job-related training
courses. Education and training does not include costs for room, board, sports activities,
recreational activities, hobbies, games, arts or crafts, or cultural activities.
new text end

new text begin Subd. 9. new text end

new text begin Explicitly charged fees. new text end

new text begin "Explicitly charged fees" means:
new text end

new text begin (1) brokerage fees;
new text end

new text begin (2) explicitly stated banking, loan origination, processing, documentation, credit
check fees, or other similar fees;
new text end

new text begin (3) safe deposit box fees;
new text end

new text begin (4) trustees' fees; and
new text end

new text begin (5) other financial services fees, including mutual fund management, sales, and
exit fees.
new text end

new text begin Subd. 10. new text end

new text begin Family member. new text end

new text begin "Family member" means any resident of this state
with a valid Social Security number who is:
new text end

new text begin (1) an individual;
new text end

new text begin (2) the individual's spouse;
new text end

new text begin (3) a lineal ancestor or descendant of the individual or the individual's spouse;
new text end

new text begin (4) a legally adopted child of the individual or the individual's spouse;
new text end

new text begin (5) a child under legal guardianship of the individual or of the individual's spouse; or
new text end

new text begin (6) a child living away from home. For purposes of this clause, "a child living away
from home" means any person who was a registered student during not fewer than five
months in a calendar year while living away from a common residence of a qualified
family but who receives over 50 percent of that person's support during a calendar year
from members of the qualified family. For purposes of this clause, a child living away
from home whose parents are divorced or legally separated is treated as part of the
qualified family of the custodial parent, and in cases of joint custody, the custodial parent
is the parent who has custody of the child for more than one-half of the time during a given
calendar year. A parent entitled to be treated as the custodial parent under this clause may
release the claim to the other parent if the release is in writing.
new text end

new text begin Subd. 11. new text end

new text begin Financial intermediation services. new text end

new text begin "Financial intermediation services"
means the sum of (1) explicitly charged fees for financial intermediation services, and (2)
implicitly charged fees for financial intermediation services.
new text end

new text begin Subd. 12. new text end

new text begin Government enterprise. new text end

new text begin "Government enterprise" means an entity
owned and operated by a federal, state, or local governmental unit or political subdivision
that receives gross payments from private persons, provided that in any quarter in the
calendar year it has revenues from selling taxable property or services that exceed $2,500.
new text end

new text begin Subd. 13. new text end

new text begin Gross imputed amount. new text end

new text begin "Gross imputed amount" means:
new text end

new text begin (1) with respect to any underlying interest-bearing investment or account, the
product of:
new text end

new text begin (i) the excess of the basic interest rate over the rate paid on the investment; and
new text end

new text begin (ii) the amount of the investment or account; or
new text end

new text begin (2) with respect to any underlying interest-bearing debt, the product of:
new text end

new text begin (i) the excess of the rate paid on the debt over the basic interest rate; and
new text end

new text begin (ii) the amount of the debt.
new text end

new text begin Subd. 14. new text end

new text begin Gross payment. new text end

new text begin "Gross payment" means the total amount charged for
taxable property and services, including the taxes imposed under this chapter.
new text end

new text begin Subd. 15. new text end

new text begin Implicitly charged fees. new text end

new text begin "Implicitly charged fees" means the gross
imputed amount in relation to any underlying interest-bearing investment, account, or debt.
new text end

new text begin Subd. 16. new text end

new text begin Intangible property. new text end

new text begin "Intangible property" includes copyrights,
trademarks, patents, goodwill, financial instruments, securities, commercial paper, debts,
notes and bonds, and other property deemed intangible under state law. Intangible
property does not include tangible personal property or rents or a leasehold of any term
on the tangible personal property, real property or rents or leaseholds of any term on
the real property, or computer software.
new text end

new text begin Subd. 17. new text end

new text begin Investment purpose. new text end

new text begin "Investment purpose" means the purchase of
property exclusively for the purpose of appreciation or the production of income but not
entailing more than minor personal efforts.
new text end

new text begin Subd. 18. new text end

new text begin Mixed-use property. new text end

new text begin "Mixed-use property" means a taxable property or
service used for both taxable use or consumption and for a business purpose.
new text end

new text begin Subd. 19. new text end

new text begin Net payment. new text end

new text begin "Net payment" means the total amount charged for taxable
property or services, excluding the taxes imposed under this chapter.
new text end

new text begin Subd. 20. new text end

new text begin Nonprofit organization. new text end

new text begin "Nonprofit organization" means any
corporation, society, association, foundation, or institution organized and operated
exclusively for charitable, religious, fraternal, civic, or educational purposes and is exempt
from federal income taxation pursuant to section 501(c) of the Internal Revenue Code.
new text end

new text begin Subd. 21. new text end

new text begin Person. new text end

new text begin "Person" means any natural person, and unless the context
clearly does not allow it, any corporation, partnership, limited liability company, trust,
estate, government, agency, administration, organization, association, or other legal
domestic or foreign entity.
new text end

new text begin Subd. 22. new text end

new text begin Produce, provide, render, or sell taxable property or services.
new text end

new text begin "Produce, provide, render, or sell taxable property or services" includes the following:
new text end

new text begin (1) a taxable property or service is used to produce, provide, render, or sell a taxable
property or service if the property or service is purchased by a person engaged in a trade
or business for the purpose of employing or using the taxable property or service in the
production, provision, rendering, or sale of other taxable property or services in the
ordinary course of that trade or business;
new text end

new text begin (2) taxable property or services used in a trade or business for the purpose of
research, experimentation, testing, and development is treated as used to produce, provide,
render, or sell taxable property or services;
new text end

new text begin (3) taxable property or services purchased by an insurer on behalf of an insured is
treated as used to produce, provide, render, or sell taxable property or services if the
premium for the insurance contract giving rise to the insurer's obligation was subject to
tax on financial intermediation services under this section; and
new text end

new text begin (4) education and training are treated as services used to produce, provide, render, or
sell taxable property or services.
new text end

new text begin Subd. 23. new text end

new text begin Qualified family. new text end

new text begin "Qualified family" means one or more family members
sharing a common residence. All family members sharing a common residence are
considered part of one qualified family.
new text end

new text begin Subd. 24. new text end

new text begin Taxable employer. new text end

new text begin (a) "Taxable employer" includes, but is not limited to,
the following:
new text end

new text begin (1) any household employing domestic servants; and
new text end

new text begin (2) any government except for government enterprises.
new text end

new text begin (b) Taxable employer does not include any employer that is:
new text end

new text begin (1) engaged in a trade or business;
new text end

new text begin (2) a nonprofit organization; or
new text end

new text begin (3) a government enterprise.
new text end

new text begin (c) Taxable employer also does not include the federal government or its agencies,
until such time as federal law allows state taxation of the federal government.
new text end

new text begin Subd. 25. new text end

new text begin Taxable property; taxable service. new text end

new text begin (a) "Taxable property" means
any tangible personal property and all digital products, including but not limited to the
following:
new text end

new text begin (1) property purchased for business use but subsequently converted to personal use,
that is subject to the tax imposed by this section at the fair market value of the converted
property as of the date of conversion;
new text end

new text begin (2) leaseholds of any term;
new text end

new text begin (3) rents with respect to the property;
new text end

new text begin (4) property exchanged in barter transactions, that must be taxed as if the transaction
were made in cash; and
new text end

new text begin (5) mixed use property, to the extent the property is used for a personal and not
a business purpose.
new text end

new text begin (b) "Taxable service" means any service, including any financial intermediation
service, performed by an employee for which the employee is paid wages by a taxable
employer, or any service performed by an employee for which the employee is paid
wages by:
new text end

new text begin (1) an employer in the regular course of the employer's trade or business;
new text end

new text begin (2) an employer that is a nonprofit organization;
new text end

new text begin (3) an employer that is a government enterprise; or
new text end

new text begin (4) taxable employers to employees directly providing education and training.
new text end

new text begin (c) Taxable property or taxable service does not include any intangible property
or used property or property held exclusively for an investment purpose, or any state
government functions that do not constitute the final consumption of property or services.
new text end

new text begin Subd. 26. new text end

new text begin Used property. new text end

new text begin "Used property" means property for which the tax under
this section has been collected and for which no credit has been allowed, or property that
was held other than for a business purpose on December 31, 2013.
new text end

new text begin Subd. 27. new text end

new text begin Wages. new text end

new text begin "Wages" means all compensation paid for employment service
including salaries, cash compensation, employee benefits, disability insurance, wage
replacement insurance payments, unemployment compensation insurance, workers'
compensation insurance, and the fair market value of any other consideration paid by an
employer to an employee in consideration for employment services rendered.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on or
after January 1, 2014, provided the constitutional amendment in article 1 passes.
new text end

Sec. 2.

Minnesota Statutes 2010, section 297A.62, subdivision 1, is amended to read:

Subdivision 1.

Generally.

Except as otherwise provided in deleted text begin subdivision 3 or in deleted text end this
chapter, a sales tax deleted text begin of 6.5 percent deleted text end new text begin at the rate calculated under section 8 new text end is imposed on deleted text begin the
gross receipts from retail sales as defined in section 297A.61, subdivision 4, deleted text end new text begin net payments
on the production, provision, rendering, or selling of taxable property or services new text end made in
this state or to a destination in this state by a person who is required to have or voluntarily
obtains a permit under section 297A.83, subdivision 1.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on or
after January 1, 2014, provided the constitutional amendment in article 1 passes.
new text end

Sec. 3.

Minnesota Statutes 2010, section 297A.62, subdivision 1a, is amended to read:

Subd. 1a.

Constitutionally required sales tax increase.

Except as otherwise
provided in deleted text begin subdivision 3 or in deleted text end this chapter, an additional sales tax deleted text begin of 0.375 percent deleted text end , as
required under the Minnesota Constitution, article XI, section 15, is imposed on the deleted text begin gross
receipts from retail sales as defined in section 297A.61, subdivision 4, deleted text end new text begin the net payments on
the production, provision, rendering, or selling of taxable property or services new text end made in this
state or to a destination in this state by a person who is required to have or voluntarily
obtains a permit under section 297A.83, subdivision 1. This additional tax expires July
1, 2034.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on or
after January 1, 2014, provided the constitutional amendment in article 1 passes.
new text end

Sec. 4.

Minnesota Statutes 2010, 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 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 deleted text begin , if the retailer engages in the regular or
systematic soliciting of sales from potential customers in this state by: deleted text end new text begin .
new text end

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

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

deleted text begin (3) advertisements in newspapers published in this state;
deleted text end

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

deleted text begin (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;
deleted text end

deleted text begin (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;
deleted text end

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

deleted text begin (8) any other solicitation by telegraphy, telephone, computer database, cable, optic,
microwave, or other communication system.
deleted text end

deleted text begin This paragraph (a) must be construed without regard to the state from which
distribution of the materials originated or in which they were prepared.
deleted text end

deleted text begin (b) 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.
deleted text end

deleted text begin (c) 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 (a) and:
deleted text end

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

deleted text begin (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.
deleted text end

new text begin (b) A retailer that is not subject to paragraph (a) that does not maintain a place of
business in this state but made taxable sales of at least $1,000,000 in the previous year
from outside this state to destinations within this state shall collect sales and use taxes but
shall be compensated for the administrative costs related to the collection and remittance
of the sales tax. The commissioner shall develop a method for calculating and paying the
compensation required under this paragraph. If a retailer subject to this paragraph and the
commissioner are unable to agree on the method for calculating compensation and the
retailer demands arbitration, the matter must be submitted to binding arbitration according
to sections 572B.01 to 572B.31 and the rules of the American Arbitration Association.
Retailers subject to this paragraph may choose to combine into a single group and jointly
request that their objections be combined and dealt with in a single arbitration. Within 30
days after the demand for arbitration, the parties shall each select an arbitrator or agree
on a single arbitrator. If the parties each select an arbitrator, the two arbitrators shall
select a third arbitrator within 45 days after the demand for arbitration. Each party shall
pay the fees and expenses of the selected arbitrator, and the parties shall share equally the
expenses of the third arbitrator or an arbitrator mutually agreed on by the parties.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on or
after January 1, 2014, provided the constitutional amendment in article 1 passes.
new text end

Sec. 5.

new text begin [297A.712] EXEMPTIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin The net payments from the sale of and storage, distribution,
use, or consumption of the taxable property and services in this section are specifically
exempted from the taxes imposed under this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Purchased for business purpose. new text end

new text begin Taxable property or services purchased
by a person engaged in a trade or business are exempt if used in that trade or business:
new text end

new text begin (1) for resale;
new text end

new text begin (2) to produce, provide, render, or sell taxable property or services; or
new text end

new text begin (3) in furtherance of other bona fide business purposes.
new text end

new text begin Subd. 3. new text end

new text begin Purchased for use outside state. new text end

new text begin Taxable property or services purchased
for export from the state of Minnesota for use or consumption outside of the state are
exempt.
new text end

new text begin Subd. 4. new text end

new text begin Purchased for investment purpose. new text end

new text begin Taxable property purchased
exclusively for appreciation or the production of income with minor personal effort are
exempt.
new text end

new text begin Subd. 5. new text end

new text begin Purchases by government enterprise. new text end

new text begin Taxable property and services
purchased by a government enterprise are exempt.
new text end

new text begin Subd. 6. new text end

new text begin Higher education costs. new text end

new text begin Education and training costs paid to an accredited
institution of higher education are exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on or
after January 1, 2014, provided the constitutional amendment in article 1 passes.
new text end

Sec. 6.

new text begin [297A.755] CREDITS AND REFUNDS.
new text end

new text begin Subdivision 1. new text end

new text begin Generally. new text end

new text begin Each person shall be allowed a credit with respect to the
taxes imposed under this chapter for each month equal to the sum of:
new text end

new text begin (1) the business use conversion credit under subdivision 2;
new text end

new text begin (2) the intermediate and export sales credit under subdivision 3;
new text end

new text begin (3) the insurance proceeds credit under subdivision 4;
new text end

new text begin (4) the bad debt credit under section 297A.81; or
new text end

new text begin (5) any amount paid in excess of the amount due.
new text end

new text begin Only one credit paid may be taken with respect to the sale or purchase of any
particular taxable property or service.
new text end

new text begin Subd. 2. new text end

new text begin Business use conversion credit. new text end

new text begin A person is eligible for a credit for the
fair tax paid on taxable property and services if the property or service is subsequently
used at least 95 percent for business purposes. The credit is equal to the tax included in the
gross payment on the taxable property or service.
new text end

new text begin Subd. 3. new text end

new text begin Intermediate and export sales credit. new text end

new text begin A person is eligible for a credit
for the fair tax paid on the purchase of any taxable property or service purchased for a
business purpose in a trade or business or exported from the state for use or consumption
outside of the United States.
new text end

new text begin Subd. 4. new text end

new text begin Insurance proceeds credit. new text end

new text begin (a) Any person receiving a payment from an
insurer pursuant to an insurance contract, if the insurance premium is subject to the tax
under this chapter, shall be entitled to a credit in an amount equal to the product of the tax
rates imposed under section 297A.62 and the amount of the payment made by the insurer,
adjusted as required in paragraphs (b) and (c). For purposes of this section, "insurance
contract" includes the following insurance contracts:
new text end

new text begin (1) life;
new text end

new text begin (2) health;
new text end

new text begin (3) property and casualty loss;
new text end

new text begin (4) general liability;
new text end

new text begin (5) marine;
new text end

new text begin (6) fire;
new text end

new text begin (7) accident;
new text end

new text begin (8) disability;
new text end

new text begin (9) long-term care; or
new text end

new text begin (10) any combination of clauses (1) to (9).
new text end

new text begin (b) The credit under paragraph (a) shall be paid by the insurer to the insured, and the
insurer shall be entitled to the credit in lieu of the insured, except that the insurer may
elect, in a form prescribed by the commissioner, not to pay the credit and require the
insured to apply for the credit. In the event of such election, the insurer must provide the
commissioner and the insured the name and tax identification number of the insurer and of
the insured and indicate the proper amount of the credit.
new text end

new text begin (c) If taxable property or services purchased by an insurer on behalf of the insured
are purchased free of tax as a purchase for use in a trade or business, then the credit is
not available for that purchase.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on or
after January 1, 2014, provided the constitutional amendment in article 1 passes.
new text end

Sec. 7. new text begin PROHIBITION ON CERTAIN TAXES; IMPOSITION OF FAIR TAX.
new text end

new text begin (a) For taxable years beginning after December 31, 2013, the following taxes are
repealed:
new text end

new text begin (1) the individual income and corporate franchise tax under Minnesota Statutes,
chapter 290;
new text end

new text begin (2) gross revenue and gross receipt taxes under Minnesota Statutes, chapter 295;
new text end

new text begin (3) petroleum and fuels taxes under Minnesota Statutes, chapter 296A;
new text end

new text begin (4) motor vehicle sales taxes under Minnesota Statutes, chapter 297B;
new text end

new text begin (5) gambling taxes under Minnesota Statutes, chapter 297E;
new text end

new text begin (6) cigarette and tobacco taxes under Minnesota Statutes, chapter 297F;
new text end

new text begin (7) solid waste management taxes under Minnesota Statutes, chapter 297H;
new text end

new text begin (8) insurance taxes under Minnesota Statutes, chapter 297I; and
new text end

new text begin (9) occupation taxes under Minnesota Statutes, section 298.01.
new text end

new text begin (b) For taxable years beginning after December 31, 2013, all revenues lost as a result
of the repeal of the taxes under paragraph (a) shall be replaced by the levy and imposition
of a sales tax upon all final use or consumption of taxable property or services in this
state. The sales tax under Minnesota Statutes, chapter 297A, shall be renamed the "fair
tax" and modified to expand the base and increase the rate as required by the constitution.
The fair tax shall be incorporated into the gross payment and sales price for all taxable
goods and services.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after passage of the
constitutional amendment in article 1.
new text end

Sec. 8. new text begin FAIR TAX LEGISLATION.
new text end

new text begin No later than February 1, 2013, the commissioner of revenue shall submit legislation
to the chairs and ranking minority members of the legislative committees having
jurisdiction over taxes in the senate and the house of representatives recommending the
repeal of any provision of law as necessary to comply with this act; the modification,
repeal, or enactment of any provision of law relating to sales and use tax under chapter
297A to comply with this act; and the enactment of any provision of law relating to
implementing the provisions of this act. The sourcing of sales, the duty to collect and remit
the tax, penalties, and other administrative provisions related to the fair tax shall follow
as closely as practical the sourcing, collection, remittance, penalties, and administrative
provisions of the existing sales tax with the exception that the fair tax must be included in
the sales price and not stated separately by the retailer. The legislation shall include, at a
minimum, the following:
new text end

new text begin (1) the repeal of any provision of law relating to withholding taxes;
new text end

new text begin (2) the repeal of any provision of law related to the repealed taxes under section 7;
new text end

new text begin (3) the repeal of the tax exemptions and deductions related to the repealed taxes
under section 6;
new text end

new text begin (4) the fair tax rate necessary to replace the current sales and use tax revenue and the
revenues lost as a result of the repealed taxes under section 7, paragraph (a);
new text end

new text begin (5) any modifications necessary to include the fair tax in the reported sale price
of all taxable property, including reporting and remittance requirements for the fair tax
collected by sellers;
new text end

new text begin (6) the method for collecting the fair tax;
new text end

new text begin (7) record-keeping requirements for all sellers;
new text end

new text begin (8) the method for providing each qualified taxpayer with a payment to offset the
burden of taxation of basic necessities as required by section 9;
new text end

new text begin (9) any provisions necessary for administering the credits allowed in section 6;
new text end

new text begin (10) provisions for reporting wages to the Social Security Administration;
new text end

new text begin (11) the statutory, language, and cross-reference changes necessary to effect the
provisions of this act, including the repeal of all sections related to the repeal of the taxes
in section 7, paragraph (a);
new text end

new text begin (12) recommendations for changes in rate or duration for all local sales taxes to
reflect the expanded tax base under the fair tax;
new text end

new text begin (13) recommendations for changes to existing local sales tax laws to allow their
administration with the fair tax; and
new text end

new text begin (14) any other recommendation or provision necessary to effect the provisions
of this act.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after passage of the
constitutional amendment in article 1.
new text end

Sec. 9. new text begin FAIR TAX RATE.
new text end

new text begin The commissioner shall determine a method for setting the fair tax rate for the tax
required under this act to replace the anticipated state revenue loss due to the repeal of
the taxes in section 7, paragraph (a), and the change from the existing sales tax to the fair
tax in section 8. The commissioner shall determine the rate change necessary to comply
with the Minnesota Constitution, article XI, section 15.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after passage of the
constitutional amendment in article 1.
new text end

Sec. 10. new text begin MONTHLY SALES TAX REBATE.
new text end

new text begin The commissioner shall determine a method for providing a monthly sales tax
rebate for each qualified family. The sales tax rebate must be distributed to each qualified
family on or before the first business day of the month for which the sales tax rebate is
being provided. The amount of the sales tax rebate must be determined annually and be
equal to the product of the rate of the sales tax established under section 9 and 1/12 of
the annual poverty guidelines updated periodically in the Federal Register by the United
States Department of Health and Human Services under the authority of United States
Code, title 42, section 9902(2), as amended.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after passage of the
constitutional amendment in article 1.
new text end

Sec. 11. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2010, sections 297A.61, subdivisions 2, 4, 10, 12, 13, 16a, 16b,
16c, 17, 17a, 17b, 18, 30, 31, 32, 33, 34, 36, 37, 38, and 46; 297A.62, subdivision 3;
297A.63, subdivision 2; 297A.64; 297A.65; 297A.67; 297A.68, subdivisions 1, 2, 3, 5, 6,
7, 8, 9, 10, 11, 12, 13, 14, 16, 17, 19, 20, 22, 23, 24, 25, 28, 29, 30, 31, 32, 33, 34, 35, 36,
37, 38, 39, 40, and 41; 297A.69; 297A.70, subdivisions 4, 5, 7, 8, 9, 11, 12, 13, 14, 15,
16, and 17; 297A.71, subdivisions 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 17, 18, 20, 22,
32, 34, 35, 38, 40, 41, and 42; 297A.75, subdivisions 4 and 5; 297A.87, subdivision 3;
and 297A.89, subdivision 1, new text end new text begin are repealed.
new text end

new text begin Minnesota Statutes 2011 Supplement, sections 297A.61, subdivision 3; 297A.68,
subdivisions 4, 42, and 43; 297A.70, subdivisions 1, 2, 3, and 6; 297A.71, subdivision 23;
297A.75, subdivisions 1, 2, and 3; and 297A.89, subdivision 2, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made on or
after January 1, 2014, provided the constitutional amendment in article 1 passes.
new text end