HF 4082

as introduced - 91st Legislature (2019 - 2020) Posted on 03/04/2020 03:36pm

A bill for an act
relating to taxation; creating a gross receipts tax for cannabinoid products;
appropriating funds to the commissioner of public safety; amending Minnesota
Statutes 2018, sections 297A.61, subdivision 3; 297A.67, subdivisions 2, 7;
proposing coding for new law in Minnesota Statutes, chapter 295.

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

Section 1.

new text begin [295.81] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For purposes of sections 295.81 to 295.85, the following
terms have the meanings given.
new text end

new text begin Subd. 2. new text end

new text begin Cannabinoid product. new text end

new text begin "Cannabinoid product" means any product that contains
nonintoxicating cannabinoids extracted from hemp that is intended for human or animal
consumption by any route of administration.
new text end

new text begin Subd. 3. new text end

new text begin Cannabinoid product retailer. new text end

new text begin "Cannabinoid product retailer" means a retailer
that sells cannabinoid products.
new text end

new text begin Subd. 4. 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. 5. new text end

new text begin Gross receipts. new text end

new text begin "Gross receipts" means the total amount received, in money
or by barter or exchange, for all retail sales of cannabinoid product 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.
new text end

new text begin Subd. 6. new text end

new text begin Retail sale. new text end

new text begin "Retail sale" has the meaning given in section 297A.61, subdivision
4.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made on or after July 1,
2021.
new text end

Sec. 2.

new text begin [295.82] CANNABINOID PRODUCTS GROSS RECEIPTS TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Gross receipts tax imposed. new text end

new text begin A tax is imposed on each cannabinoid
product retailer equal to two percent of gross receipts from retail sales of cannabinoid
products in Minnesota.
new text end

new text begin Subd. 2. new text end

new text begin Use tax imposed; credit for taxes paid. new text end

new text begin (a) A person that receives cannabinoid
products for use or storage in Minnesota, other than from a retailer that paid the tax under
subdivision 1, is subject to tax at the rates imposed under subdivision 1. Liability for the
tax is incurred when the person has possession of the cannabinoid product in Minnesota.
The tax must be remitted to the commissioner in the same manner prescribed for the taxes
imposed under chapter 297A.
new text end

new text begin (b) A person that has paid taxes to another jurisdiction on the same transaction and is
subject to tax under this section is entitled to a credit for the tax legally due and paid to
another jurisdiction to the extent of the lesser of (1) the tax actually paid to the other
jurisdiction minus the amount of use tax owed under chapter 297A, or (2) the amount of
tax imposed under this section by the state of Minnesota on the transaction subject to tax
in the other jurisdiction.
new text end

new text begin Subd. 3. new text end

new text begin Tax collection required. new text end

new text begin A retailer that sells cannabinoid products with nexus
in Minnesota, who is not subject to tax under subdivision 1, is required to collect the tax
imposed under subdivision 2 from the purchaser of the cannabinoid products and give the
purchaser a receipt for the tax paid. The tax collected must be remitted to the commissioner
in the same manner prescribed for the taxes imposed under chapter 297A.
new text end

new text begin Subd. 4. new text end

new text begin Taxes paid to another jurisdiction; credit. new text end

new text begin A cannabinoid product retailer
that has paid taxes to another jurisdiction measured by gross receipts and is subject to tax
under this section on the same gross receipts is entitled to a credit for the tax legally due
and paid to another jurisdiction to the extent of the lesser of (1) the tax actually paid to the
other jurisdiction, or (2) the amount of tax imposed by the state of Minnesota on the gross
receipts subject to tax in the other taxing jurisdictions.
new text end

new text begin Subd. 5. new text end

new text begin Sourcing of sales. new text end

new text begin The provisions of section 297A.668 apply to the taxes
imposed by this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made on or after July 1,
2021.
new text end

Sec. 3.

new text begin [295.83] REGISTRATION REQUIREMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Minnesota cannabinoid product retailers. new text end

new text begin Prior to the sale of a
cannabinoid product, all cannabinoid product retailers located in Minnesota must file with
the commissioner a statement setting forth the retailer's name, trade name, address of the
principal place of business and any other place of business, and sales tax identification
number.
new text end

new text begin Subd. 2. new text end

new text begin Out-of-state cannabinoid product retailers. new text end

new text begin Prior to making delivery sales
or shipping cannabinoid products in connection with any sales, all cannabinoid product
retailers located outside of Minnesota must file with the commissioner a statement setting
forth the retailer's name, trade name, address of the principal place of business and any other
place of business, and sales tax identification number.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made on or after July 1,
2021.
new text end

Sec. 4.

new text begin [295.84] ADMINISTRATION.
new text end

new text begin Subdivision 1. new text end

new text begin Administration. new text end

new text begin Unless specifically provided otherwise by sections
295.81 to 295.85, the audit, assessment, refund, penalty, interest, enforcement, collection
remedies, appeal, and administrative provisions of chapters 270C and 289A that are
applicable to taxes imposed under chapter 297A apply to taxes imposed under section
295.82.
new text end

new text begin Subd. 2. new text end

new text begin Payment; reporting. new text end

new text begin (a) A cannabinoid product retailer must report the tax on
a return prescribed by the commissioner, and must remit the tax with the return. The return
and the tax must be filed and paid using the filing cycle and due dates provided for taxes
imposed under chapter 297A.
new text end

new text begin (b) A cannabinoid product retailer must use the sales tax identification number issued
by the commissioner for all returns filed for the tax imposed under section 295.82.
new text end

new text begin Subd. 3. new text end

new text begin Interest on overpayments. new text end

new text begin Interest must be paid on an overpayment refunded
or credited to the taxpayer from the date of payment of the tax until the date the refund is
paid or credited. For purposes of this subdivision, the date of payment is the due date of the
return or the date of actual payment of the tax, whichever is later.
new text end

new text begin Subd. 4. new text end

new text begin Deposit of revenues. new text end

new text begin The commissioner must deposit all revenues, including
penalties and interest, derived from the tax imposed by this section in the general fund.
new text end

new text begin Subd. 5. new text end

new text begin Appropriation to the commissioner of public safety. new text end

new text begin (a) $960,000 in fiscal
year 2022 is appropriated from the general fund to the commissioner of public safety.
new text end

new text begin (b) $510,000 in fiscal year 2023 and each fiscal year thereafter is appropriated to the
commissioner of public safety.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 5.

new text begin [295.85] DE MINIMIS EXEMPTION FROM TAX.
new text end

new text begin The use tax under section 295.82, subdivision 2, does not apply to the possession, use,
or storage of cannabinoid products if (1) the cannabinoid products have an aggregate cost
to the consumer of $50 or less in any calendar month, and (2) the cannabinoid products
were carried into this state by that consumer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for purchases made after June 30, 2021.
new text end

Sec. 6.

Minnesota Statutes 2018, section 297A.61, subdivision 3, is amended to read:

Subd. 3.

Sale and purchase.

(a) "Sale" and "purchase" include, but are not limited to,
each of the transactions listed in this subdivision. In applying the provisions of this chapter,
the terms "tangible personal property" and "retail sale" include the taxable services listed
in paragraph (g), clause (6), items (i) to (vi) and (viii), and the provision of these taxable
services, unless specifically provided otherwise. Services performed by an employee for
an employer are not taxable. Services performed by a partnership or association for another
partnership or association are not taxable if one of the entities owns or controls more than
80 percent of the voting power of the equity interest in the other entity. Services performed
between members of an affiliated group of corporations are not taxable. For purposes of
the preceding sentence, "affiliated group of corporations" means those entities that would
be classified as members of an affiliated group as defined under United States Code, title
26, section 1504, disregarding the exclusions in section 1504(b).

(b) Sale and purchase include:

(1) any transfer of title or possession, or both, of tangible personal property, whether
absolutely or conditionally, for a consideration in money or by exchange or barter; and

(2) the leasing of or the granting of a license to use or consume, for a consideration in
money or by exchange or barter, tangible personal property, other than a manufactured
home used for residential purposes for a continuous period of 30 days or more.

(c) Sale and purchase include the production, fabrication, printing, or processing of
tangible personal property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or processing.

(d) Sale and purchase include the preparing for a consideration of food. Notwithstanding
section 297A.67, subdivision 2, taxable food includes, but is not limited to, the following:

(1) prepared food sold by the retailer;

(2) soft drinks;

(3) candy; deleted text begin and
deleted text end

(4) dietary supplements new text begin ; and
new text end

new text begin (5) products that contain nonintoxicating cannabinoid extracted from hemp, authorized
for retail sale under section 151.72 new text end .

(e) A sale and a purchase includes the furnishing for a consideration of electricity, gas,
water, or steam for use or consumption within this state.

(f) A sale and a purchase includes the transfer for a consideration of prewritten computer
software whether delivered electronically, by load and leave, or otherwise.

(g) A sale and a purchase includes the furnishing for a consideration of the following
services:

(1) the privilege of admission to places of amusement, recreational areas, or athletic
events, and the making available of amusement devices, tanning facilities, reducing salons,
steam baths, health clubs, and spas or athletic facilities;

(2) lodging and related services by a hotel, rooming house, resort, campground, motel,
or trailer camp, including furnishing the guest of the facility with access to telecommunication
services, and the granting of any similar license to use real property in a specific facility,
other than the renting or leasing of it for a continuous period of 30 days or more under an
enforceable written agreement that may not be terminated without prior notice and including
accommodations intermediary services provided in connection with other services provided
under this clause;

(3) nonresidential parking services, whether on a contractual, hourly, or other periodic
basis, except for parking at a meter;

(4) the granting of membership in a club, association, or other organization if:

(i) the club, association, or other organization makes available for the use of its members
sports and athletic facilities, without regard to whether a separate charge is assessed for use
of the facilities; and

(ii) use of the sports and athletic facility is not made available to the general public on
the same basis as it is made available to members.

Granting of membership means both onetime initiation fees and periodic membership dues.
Sports and athletic facilities include golf courses; tennis, racquetball, handball, and squash
courts; basketball and volleyball facilities; running tracks; exercise equipment; swimming
pools; and other similar athletic or sports facilities;

(5) delivery of aggregate materials by a third party, excluding delivery of aggregate
material used in road construction; and delivery of concrete block by a third party if the
delivery would be subject to the sales tax if provided by the seller of the concrete block.
For purposes of this clause, "road construction" means construction of:

(i) public roads;

(ii) cartways; and

(iii) private roads in townships located outside of the seven-county metropolitan area
up to the point of the emergency response location sign; and

(6) services as provided in this clause:

(i) laundry and dry cleaning services including cleaning, pressing, repairing, altering,
and storing clothes, linen services and supply, cleaning and blocking hats, and carpet,
drapery, upholstery, and industrial cleaning. Laundry and dry cleaning services do not
include services provided by coin operated facilities operated by the customer;

(ii) motor vehicle washing, waxing, and cleaning services, including services provided
by coin operated facilities operated by the customer, and rustproofing, undercoating, and
towing of motor vehicles;

(iii) building and residential cleaning, maintenance, and disinfecting services and pest
control and exterminating services;

(iv) detective, security, burglar, fire alarm, and armored car services; but not including
services performed within the jurisdiction they serve by off-duty licensed peace officers as
defined in section 626.84, subdivision 1, or services provided by a nonprofit organization
or any organization at the direction of a county for monitoring and electronic surveillance
of persons placed on in-home detention pursuant to court order or under the direction of the
Minnesota Department of Corrections;

(v) pet grooming services;

(vi) lawn care, fertilizing, mowing, spraying and sprigging services; garden planting
and maintenance; tree, bush, and shrub pruning, bracing, spraying, and surgery; indoor plant
care; tree, bush, shrub, and stump removal, except when performed as part of a land clearing
contract as defined in section 297A.68, subdivision 40; and tree trimming for public utility
lines. Services performed under a construction contract for the installation of shrubbery,
plants, sod, trees, bushes, and similar items are not taxable;

(vii) massages, except when provided by a licensed health care facility or professional
or upon written referral from a licensed health care facility or professional for treatment of
illness, injury, or disease; and

(viii) the furnishing of lodging, board, and care services for animals in kennels and other
similar arrangements, but excluding veterinary and horse boarding services.

(h) A sale and a purchase includes the furnishing for a consideration of tangible personal
property or taxable services by the United States or any of its agencies or instrumentalities,
or the state of Minnesota, its agencies, instrumentalities, or political subdivisions.

(i) A sale and a purchase includes the furnishing for a consideration of
telecommunications services, ancillary services associated with telecommunication services,
and pay television services. Telecommunication services include, but are not limited to, the
following services, as defined in section 297A.669: air-to-ground radiotelephone service,
mobile telecommunication service, postpaid calling service, prepaid calling service, prepaid
wireless calling service, and private communication services. The services in this paragraph
are taxed to the extent allowed under federal law.

(j) A sale and a purchase includes the furnishing for a consideration of installation if the
installation charges would be subject to the sales tax if the installation were provided by
the seller of the item being installed.

(k) A sale and a purchase includes the rental of a vehicle by a motor vehicle dealer to a
customer when (1) the vehicle is rented by the customer for a consideration, or (2) the motor
vehicle dealer is reimbursed pursuant to a service contract as defined in section 59B.02,
subdivision 11.

(l) A sale and a purchase includes furnishing for a consideration of specified digital
products or other digital products or granting the right for a consideration to use specified
digital products or other digital products on a temporary or permanent basis and regardless
of whether the purchaser is required to make continued payments for such right. Wherever
the term "tangible personal property" is used in this chapter, other than in subdivisions 10
and 38, the provisions also apply to specified digital products, or other digital products,
unless specifically provided otherwise or the context indicates otherwise.

(m) The sale of the privilege of admission under section 297A.61, subdivision 3,
paragraph (g), clause (1), to a place of amusement, recreational area, or athletic event
includes all charges included in the privilege of admission's sales price, without deduction
for amenities that may be provided, unless the amenities are separately stated and the
purchaser of the privilege of admission is entitled to add or decline the amenities, and the
amenities are not otherwise taxable.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2021.
new text end

Sec. 7.

Minnesota Statutes 2018, section 297A.67, subdivision 2, is amended to read:

Subd. 2.

Food and food ingredients.

Except as otherwise provided in this subdivision,
food and food ingredients are exempt. For purposes of this subdivision, "food" and "food
ingredients" mean substances, whether in liquid, concentrated, solid, frozen, dried, or
dehydrated form, that are sold for ingestion or chewing by humans and are consumed for
their taste or nutritional value. Food and food ingredients exempt under this subdivision do
not include candy, soft drinks, dietary supplements, and prepared foods. new text begin Food and food
ingredients do not include cannabinoid products as defined in section 295.81, subdivision
2. new text end Food and food ingredients do not include alcoholic beverages and tobacco. For purposes
of this subdivision, "alcoholic beverages" means beverages that are suitable for human
consumption and contain one-half of one percent or more of alcohol by volume. For purposes
of this subdivision, "tobacco" means cigarettes, cigars, chewing or pipe tobacco, or any
other item that contains tobacco. For purposes of this subdivision, "dietary supplements"
means any product, other than tobacco, intended to supplement the diet that:

(1) contains one or more of the following dietary ingredients:

(i) a vitamin;

(ii) a mineral;

(iii) an herb or other botanical;

(iv) an amino acid;

(v) a dietary substance for use by humans to supplement the diet by increasing the total
dietary intake; and

(vi) a concentrate, metabolite, constituent, extract, or combination of any ingredient
described in items (i) to (v);

(2) is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form,
or if not intended for ingestion in such form, is not represented as conventional food and is
not represented for use as a sole item of a meal or of the diet; and

(3) is required to be labeled as a dietary supplement, identifiable by the supplement facts
box found on the label and as required pursuant to Code of Federal Regulations, title 21,
section 101.36.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2021.
new text end

Sec. 8.

Minnesota Statutes 2018, section 297A.67, subdivision 7, is amended to read:

Subd. 7.

Drugs; medical devices.

(a) Sales of the following drugs and medical devices
for human use are exempt:

(1) drugs, including over-the-counter drugs;

(2) single-use finger-pricking devices for the extraction of blood and other single-use
devices and single-use diagnostic agents used in diagnosing, monitoring, or treating diabetes;

(3) insulin and medical oxygen for human use, regardless of whether prescribed or sold
over the counter;

(4) prosthetic devices;

(5) durable medical equipment for home use only;

(6) mobility enhancing equipment;

(7) prescription corrective eyeglasses; and

(8) kidney dialysis equipment, including repair and replacement parts.

(b) Items purchased in transactions covered by:

(1) Medicare as defined under title XVIII of the Social Security Act, United States Code,
title 42, section 1395, et seq.; or

(2) Medicaid as defined under title XIX of the Social Security Act, United States Code,
title 42, section 1396, et seq.

(c) For purposes of this subdivision:

(1) "Drug" means a compound, substance, or preparation, and any component of a
compound, substance, or preparation, other than food and food ingredients, dietary
supplements new text begin , cannabinoid products new text end , or alcoholic beverages that is:

(i) recognized in the official United States Pharmacopoeia, official Homeopathic
Pharmacopoeia of the United States, or official National Formulary, and supplement to any
of them;

(ii) intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease;
or

(iii) intended to affect the structure or any function of the body.

(2) "Durable medical equipment" means equipment, including repair and replacement
parts, including single-patient use items, but not including mobility enhancing equipment,
that:

(i) can withstand repeated use;

(ii) is primarily and customarily used to serve a medical purpose;

(iii) generally is not useful to a person in the absence of illness or injury; and

(iv) is not worn in or on the body.

For purposes of this clause, "repair and replacement parts" includes all components or
attachments used in conjunction with the durable medical equipment, including repair and
replacement parts which are for single patient use only.

(3) "Mobility enhancing equipment" means equipment, including repair and replacement
parts, but not including durable medical equipment, that:

(i) is primarily and customarily used to provide or increase the ability to move from one
place to another and that is appropriate for use either in a home or a motor vehicle;

(ii) is not generally used by persons with normal mobility; and

(iii) does not include any motor vehicle or equipment on a motor vehicle normally
provided by a motor vehicle manufacturer.

(4) "Over-the-counter drug" means a drug that contains a label that identifies the product
as a drug as required by Code of Federal Regulations, title 21, section 201.66. The label
must include a "drug facts" panel or a statement of the active ingredients with a list of those
ingredients contained in the compound, substance, or preparation. Over-the-counter drugs
do not include grooming and hygiene products, regardless of whether they otherwise meet
the definition. "Grooming and hygiene products" are soaps, cleaning solutions, shampoo,
toothpaste, mouthwash, antiperspirants, and suntan lotions and sunscreens.

(5) "Prescribed" and "prescription" means a direction in the form of an order, formula,
or recipe issued in any form of oral, written, electronic, or other means of transmission by
a duly licensed health care professional.

(6) "Prosthetic device" means a replacement, corrective, or supportive device, including
repair and replacement parts, worn on or in the body to:

(i) artificially replace a missing portion of the body;

(ii) prevent or correct physical deformity or malfunction; or

(iii) support a weak or deformed portion of the body.

Prosthetic device does not include corrective eyeglasses.

(7) "Kidney dialysis equipment" means equipment that:

(i) is used to remove waste products that build up in the blood when the kidneys are not
able to do so on their own; and

(ii) can withstand repeated use, including multiple use by a single patient, notwithstanding
the provisions of clause (2).

(8) A transaction is covered by Medicare or Medicaid if any portion of the cost of the
item purchased in the transaction is paid for or reimbursed by the federal government or
the state of Minnesota pursuant to the Medicare or Medicaid program, by a private insurance
company administering the Medicare or Medicaid program on behalf of the federal
government or the state of Minnesota, or by a managed care organization for the benefit of
a patient enrolled in a prepaid program that furnishes medical services in lieu of conventional
Medicare or Medicaid coverage pursuant to agreement with the federal government or the
state of Minnesota.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2021.
new text end