HF 3189

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to sales and use tax; making the exemption for capital equipment an
upfront exemption; amending Minnesota Statutes 2005 Supplement, sections
297A.68, subdivision 5; 297A.75, subdivisions 1, 2, 3.

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

Section 1.

Minnesota Statutes 2005 Supplement, section 297A.68, subdivision 5,
is amended to read:

Subd. 5.

Capital equipment.

(a) Capital equipment is exempt. deleted text begin The tax must be
imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and
then refunded in the manner provided in section 297A.75.
deleted text end

"Capital equipment" means machinery and equipment purchased or leased, and used
in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining,
or refining tangible personal property to be sold ultimately at retail if the machinery and
equipment are essential to the integrated production process of manufacturing, fabricating,
mining, or refining. Capital equipment also includes machinery and equipment used
primarily to electronically transmit results retrieved by a customer of an on-line
computerized data retrieval system.

(b) Capital equipment includes, but is not limited to:

(1) machinery and equipment used to operate, control, or regulate the production
equipment;

(2) machinery and equipment used for research and development, design, quality
control, and testing activities;

(3) environmental control devices that are used to maintain conditions such as
temperature, humidity, light, or air pressure when those conditions are essential to and are
part of the production process;

(4) materials and supplies used to construct and install machinery or equipment;

(5) repair and replacement parts, including accessories, whether purchased as spare
parts, repair parts, or as upgrades or modifications to machinery or equipment;

(6) materials used for foundations that support machinery or equipment;

(7) materials used to construct and install special purpose buildings used in the
production process;

(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed
as part of the delivery process regardless if mounted on a chassis, repair parts for
ready-mixed concrete trucks, and leases of ready-mixed concrete trucks; and

(9) machinery or equipment used for research, development, design, or production
of computer software.

(c) Capital equipment does not include the following:

(1) motor vehicles taxed under chapter 297B;

(2) machinery or equipment used to receive or store raw materials;

(3) building materials, except for materials included in paragraph (b), clauses (6)
and (7);

(4) machinery or equipment used for nonproduction purposes, including, but not
limited to, the following: plant security, fire prevention, first aid, and hospital stations;
support operations or administration; pollution control; and plant cleaning, disposal of
scrap and waste, plant communications, space heating, cooling, lighting, or safety;

(5) farm machinery and aquaculture production equipment as defined by section
297A.61, subdivisions 12 and 13;

(6) machinery or equipment purchased and installed by a contractor as part of an
improvement to real property;

(7) machinery and equipment used by restaurants in the furnishing, preparing, or
serving of prepared foods as defined in section 297A.61, subdivision 31;

(8) machinery and equipment used to furnish the services listed in section 297A.61,
subdivision 3, paragraph (g), clause (6), items (i) to (vi) and (viii);

(9) machinery or equipment used in the transportation, transmission, or distribution
of petroleum, liquefied gas, natural gas, water, or steam, in, by, or through pipes, lines,
tanks, mains, or other means of transporting those products. This clause does not apply to
machinery or equipment used to blend petroleum or biodiesel fuel as defined in section
239.77; or

(10) any other item that is not essential to the integrated process of manufacturing,
fabricating, mining, or refining.

(d) For purposes of this subdivision:

(1) "Equipment" means independent devices or tools separate from machinery but
essential to an integrated production process, including computers and computer software,
used in operating, controlling, or regulating machinery and equipment; and any subunit or
assembly comprising a component of any machinery or accessory or attachment parts of
machinery, such as tools, dies, jigs, patterns, and molds.

(2) "Fabricating" means to make, build, create, produce, or assemble components or
property to work in a new or different manner.

(3) "Integrated production process" means a process or series of operations through
which tangible personal property is manufactured, fabricated, mined, or refined. For
purposes of this clause, (i) manufacturing begins with the removal of raw materials
from inventory and ends when the last process prior to loading for shipment has been
completed; (ii) fabricating begins with the removal from storage or inventory of the
property to be assembled, processed, altered, or modified and ends with the creation
or production of the new or changed product; (iii) mining begins with the removal of
overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and
ends when the last process before stockpiling is completed; and (iv) refining begins with
the removal from inventory or storage of a natural resource and ends with the conversion
of the item to its completed form.

(4) "Machinery" means mechanical, electronic, or electrical devices, including
computers and computer software, that are purchased or constructed to be used for the
activities set forth in paragraph (a), beginning with the removal of raw materials from
inventory through completion of the product, including packaging of the product.

(5) "Machinery and equipment used for pollution control" means machinery and
equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity
described in paragraph (a).

(6) "Manufacturing" means an operation or series of operations where raw materials
are changed in form, composition, or condition by machinery and equipment and which
results in the production of a new article of tangible personal property. For purposes of
this subdivision, "manufacturing" includes the generation of electricity or steam to be
sold at retail.

(7) "Mining" means the extraction of minerals, ores, stone, or peat.

(8) "On-line data retrieval system" means a system whose cumulation of information
is equally available and accessible to all its customers.

(9) "Primarily" means machinery and equipment used 50 percent or more of the time
in an activity described in paragraph (a).

(10) "Refining" means the process of converting a natural resource to an intermediate
or finished product, including the treatment of water to be sold at retail.

(11) This subdivision does not apply to telecommunications equipment as
provided in subdivision 35, and does not apply to wire, cable, fiber, poles, or conduit
for telecommunications services.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2006.
new text end

Sec. 2.

Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 1, is
amended to read:

Subdivision 1.

Tax collected.

The tax on the gross receipts from the sale of the
following exempt items must be imposed and collected as if the sale were taxable and the
rate under section 297A.62, subdivision 1, applied. The exempt items include:

(1) deleted text begin capital equipment exempt under section 297A.68, subdivision 5;
deleted text end

deleted text begin (2) deleted text end building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13;

deleted text begin (3) deleted text end new text begin (2) new text end building materials for mineral production facilities exempt under section
297A.71, subdivision 14;

deleted text begin (4) deleted text end new text begin (3) new text end building materials for correctional facilities under section 297A.71,
subdivision 3;

deleted text begin (5) deleted text end new text begin (4) new text end building materials used in a residence for disabled veterans exempt under
section 297A.71, subdivision 11;

deleted text begin (6) deleted text end new text begin (5) new text end elevators and building materials exempt under section 297A.71, subdivision
12;

deleted text begin (7) deleted text end new text begin (6) new text end building materials for the Long Lake Conservation Center exempt under
section 297A.71, subdivision 17;

deleted text begin (8) deleted text end new text begin (7) new text end materials, supplies, fixtures, furnishings, and equipment for a county law
enforcement and family service center under section 297A.71, subdivision 26;

deleted text begin (9) deleted text end new text begin (8) new text end materials and supplies for qualified low-income housing under section
297A.71, subdivision 23; and

deleted text begin (10) deleted text end new text begin (9) new text end materials, supplies, and equipment for municipal electric utility facilities
under section 297A.71, subdivision 35.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2006.
new text end

Sec. 3.

Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 2, is
amended to read:

Subd. 2.

Refund; eligible persons.

Upon application on forms prescribed by the
commissioner, a refund equal to the tax paid on the gross receipts of the exempt items
must be paid to the applicant. Only the following persons may apply for the refund:

(1) for subdivision 1, clauses (1) deleted text begin to (3) deleted text end new text begin and (2) new text end , the applicant must be the purchaser;

(2) for subdivision 1, clauses deleted text begin (4), (7), and (8) deleted text end new text begin (3), (6), and (7) new text end , the applicant must
be the governmental subdivision;

(3) for subdivision 1, clause deleted text begin (5) deleted text end new text begin (4) new text end , the applicant must be the recipient of the
benefits provided in United States Code, title 38, chapter 21;

(4) for subdivision 1, clause deleted text begin (6) deleted text end new text begin (5) new text end , the applicant must be the owner of the
homestead property;

(5) for subdivision 1, clause deleted text begin (9) deleted text end new text begin (8) new text end , the owner of the qualified low-income housing
project; and

(6) for subdivision 1, clause deleted text begin (10) deleted text end new text begin (9) new text end , the applicant must be a municipal electric
utility or a joint venture of municipal electric utilities.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2006.
new text end

Sec. 4.

Minnesota Statutes 2005 Supplement, section 297A.75, subdivision 3, is
amended to read:

Subd. 3.

Application.

(a) The application must include sufficient information
to permit the commissioner to verify the tax paid. If the tax was paid by a contractor,
subcontractor, or builder, under subdivision 1, clause new text begin (3), new text end (4), (5), (6), (7), (8), new text begin or new text end (9),
deleted text begin or (10), deleted text end the contractor, subcontractor, or builder must furnish to the refund applicant a
statement including the cost of the exempt items and the taxes paid on the items unless
otherwise specifically provided by this subdivision. The provisions of sections 289A.40
and 289A.50 apply to refunds under this section.

(b) An applicant may not file more than two applications per calendar year for
refunds for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2006.
new text end