SF 35

as introduced - 88th Legislature (2013 - 2014) Posted on 02/08/2013 08:43am

A bill for an act
relating to taxation; sales and use; reducing the sales and use tax rate; taxing
digital products; amending Minnesota Statutes 2012, sections 297A.61,
subdivisions 3, 10, 24, by adding subdivisions; 297A.62, subdivision 1.

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

Section 1.

Minnesota Statutes 2012, 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.

(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;

(4) dietary supplements; and

(5) all food sold through vending machines.

(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, Turkish 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; 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
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.

In applying the provisions of this chapter, the terms "tangible personal property"
and "retail sale" include taxable services listed in 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).

For purposes of clause (5), "road construction" means construction of (1) public
roads, (2) cartways, and (3) private roads in townships located outside of the seven-county
metropolitan area up to the point of the emergency response location sign.

(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, cable television services, and direct satellite 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.

new text begin (l) A sale and a purchase includes the furnishing for a consideration of digital goods
or granting the right for a consideration to use digital goods on a temporary or permanent
basis, regardless of whether the purchaser is required to make continued payments for the
right. A digital good is furnished or used when the purchaser first accesses, downloads,
possesses, stores, opens, manipulates, or otherwise uses the digital good.
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, 2013.
new text end

Sec. 2.

Minnesota Statutes 2012, section 297A.61, subdivision 10, is amended to read:

Subd. 10.

Tangible personal property.

(a) "Tangible personal property" means
personal property that can be seen, weighed, measured, felt, or touched, or that is in
any other manner perceptible to the senses. "Tangible personal property" includes, but
is not limited to, electricity, water, gas, steam, deleted text begin and deleted text end prewritten computer software new text begin , and
digital goods new text end .

(b) Tangible personal property does not include:

(1) large ponderous machinery and equipment used in a business or production
activity which at common law would be considered to be real property;

(2) property which is subject to an ad valorem property tax;

(3) property described in section 272.02, subdivision 9, clauses (a) to (d); and

(4) property described in section 272.03, subdivision 2, clauses (3) and (5).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2013.
new text end

Sec. 3.

Minnesota Statutes 2012, section 297A.61, subdivision 24, is amended to read:

Subd. 24.

Telecommunications services.

(a) "Telecommunications services" means
the electronic transmission, conveyance, or routing of voice, data, audio, video, or any
other information or signals to a point, or between or among points.

(b) Telecommunications services include transmission, conveyance, or routing in
which computer processing applications are used to act on the form, code, or protocol
of the content for purposes of transmission, conveyance, or routing, without regard to
whether the service is referred to as voice over Internet protocol services or is classified by
the Federal Communications Commission as enhanced or value added.

(c) Telecommunications services do not include:

(1) data processing and information services that allow data to be generated,
acquired, stored, processed, or retrieved and delivered by an electronic transmission to
a purchaser when the purchaser's primary purpose for the underlying transaction is the
processed data or information;

(2) installation or maintenance of wiring or equipment on a customer's premises;

(3) tangible personal property;

(4) advertising, including, but not limited to, directory advertising;

(5) billing and collection services provided to third parties;

(6) Internet access service;

(7) radio and television audio and video programming services, regardless of the
medium, including the furnishing of transmission, conveyance, and routing of such
services by the programming service provider. Radio and television audio and video
programming services includes, but is not limited to, cable service as defined in United
States Code, title 47, section 522(6), and audio and video programming services delivered
by commercial mobile radio service providers, as defined in Code of Federal Regulations,
title 47, section 20.3;

(8) ancillary services; or

(9) digital deleted text begin products delivered electronically, including, but not limited to, software,
music, video, reading materials, or ring tones deleted text end new text begin goods 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, 2013.
new text end

Sec. 4.

Minnesota Statutes 2012, section 297A.61, is amended by adding a subdivision
to read:

new text begin Subd. 49. new text end

new text begin Digital goods. new text end

new text begin (a) "Digital goods" means sounds, images, data, facts, or
information, or any combinations of them, that are delivered electronically, including, but
not limited to, specified digital products and digital codes.
new text end

new text begin (b) Digital goods do not include:
new text end

new text begin (1) telecommunications services;
new text end

new text begin (2) computer software; or
new text end

new text begin (3) the representation of a personal service in electronic form that primarily involves
the application of human effort originating after a customer request of service.
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, 2013.
new text end

Sec. 5.

Minnesota Statutes 2012, section 297A.61, is amended by adding a subdivision
to read:

new text begin Subd. 50. new text end

new text begin Digital code. new text end

new text begin "Digital code" means a code obtained by any means that
provides a purchaser with the right to obtain one or more digital products, if all of the
digital products to be obtained through the use of the code have the same sales and use tax
treatment. Digital code does not include a code that represents a stored monetary value
that is deducted from a total as it is used by the purchaser. Digital code also does not
include a code that represents a redeemable card, gift card, or gift certificate that entitles
the holder to select digital products of an indicated cash value.
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, 2013.
new text end

Sec. 6.

Minnesota Statutes 2012, section 297A.61, is amended by adding a subdivision
to read:

new text begin Subd. 51. new text end

new text begin Specified digital products. new text end

new text begin (a) "Specified digital products" means digital
audiovisual works, digital audio works, and digital books that are delivered electronically.
new text end

new text begin (b) For purposes of this subdivision:
new text end

new text begin (1) "digital audiovisual works" mean a series of related images which, when shown
in succession, impart an impression of motion, together with accompanying sounds, if any;
new text end

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

new text begin (3) "digital books" mean works that are generally recognized in the ordinary and
usual sense as books.
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, 2013.
new text end

Sec. 7.

Minnesota Statutes 2012, section 297A.62, subdivision 1, is amended to read:

Subdivision 1.

Generally.

Except as otherwise provided in subdivision 3 or in this
chapter, a sales tax of deleted text begin 6.5 deleted text end new text begin ... new text end percent is imposed on the gross receipts from retail sales as
defined in section 297A.61, subdivision 4, 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 after
June 30, 2013.
new text end