Minnesota Session Laws - 1985, Regular Session

  

                         Laws of Minnesota 1985 

                        CHAPTER 83-S.F.No. 1329 
           An act relating to taxation; clarifying definitions 
          for sales and use tax; clarifying exemptions; 
          providing an exemption for certain mailing materials 
          used for advertising purposes; imposing civil and 
          criminal penalties for underreporting or failing to 
          report motor vehicle excise tax; repealing certain 
          refund procedures; amending Minnesota Statutes 1984, 
          sections 297A.01, subdivision 11; 297A.041; 297A.25, 
          subdivision 1; 297B.10; and 297B.11; repealing 
          Minnesota Statutes 1984, section 297A.35, subdivision 
          3. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1984, section 297A.01, 
subdivision 11, is amended to read: 
    Subd. 11.  "Tangible personal property" means corporeal 
personal property of any kind whatsoever, including property 
which is to become a fixture or which is to lose its identity by 
incorporation in or attachment to real property as a result of 
incorporation, attachment, or installation following its 
acquisition. 
    Personal property does not include: 
    (a) large ponderous machinery and equipment used in a 
business or production activity which at common law would be 
considered to be real property; 
    (b) property which is subject to an ad valorem property tax;
    (c) property described in section 272.02, subdivision 1, 
clause (8), paragraphs (a) to (d); 
    (d) property described in section 272.03, subdivision 2, 
clauses (3) and (5). 
    Sec. 2.  Minnesota Statutes 1984, section 297A.041, is 
amended to read:  
    297A.041 [OPERATOR OF FLEA MARKETS; SELLER'S PERMITS 
REQUIRED; PENALTY.] 
    The operator of a flea market, craft show, antique show, 
coin show, stamp show, comic book show, convention exhibit area, 
or similar selling event, as a prerequisite to renting or 
leasing space on the premises owned or controlled by the 
operator to a person desiring to engage in or conduct business 
as a seller, shall obtain evidence that the seller is the holder 
of a valid seller's permit issued pursuant to section 297A.04, 
or a written statement from the seller that he is not offering 
for sale any item that is taxable under this chapter.  
    Flea market, craft show, antique show, coin show, stamp 
show, comic book show, convention exhibit area, or similar 
selling event, as used in this section, means an activity 
involving a series of sales sufficient in number, scope, and 
character to constitute a regular course of business, and which 
would not qualify as an isolated or occasional sale pursuant to 
section 297A.25, subdivision 1, clause (k).  
    Any operator who fails or refuses to comply with the 
provisions of this section shall be subject to a penalty payable 
to the commissioner of revenue of $100 for each day of each 
selling event that the operator fails to obtain evidence that 
the seller is the holder of a valid seller's permit issued 
pursuant to section 297A.04.  
    This section shall does not apply to an operator of a flea 
market, craft show, antique show, coin show, stamp show, comic 
book show, convention exhibit area, or similar selling event 
which is:  (1) held in conjunction with a community sponsored 
festival which has a duration of four or fewer consecutive days 
no more than once a year; or (2) conducted by a nonprofit 
organization annually or less frequently.  
    Sec. 3.  Minnesota Statutes 1984, section 297A.25, 
subdivision 1, is amended to read:  
    Subdivision 1.  The following are specifically exempted 
from the taxes imposed by sections 297A.01 to 297A.44: 
    (a) The gross receipts from the sale of food products 
including but not limited to cereal and cereal products, butter, 
cheese, milk and milk products, oleomargarine, meat and meat 
products, fish and fish products, eggs and egg products, 
vegetables and vegetable products, fruit and fruit products, 
spices and salt, sugar and sugar products, coffee and coffee 
substitutes, tea, cocoa and cocoa products, and food products 
which are not taxable pursuant to section 297A.01, subdivision 
3, clause (c) and which are sold by a retailer, organized as a 
nonprofit corporation or association, within a place located on 
property owned by the state or an agency or instrumentality of 
the state, the entrance to which is subject to an admission 
charge.  This exemption does not include the following:  
    (i) candy and candy products, except when sold for 
fundraising purposes by a nonprofit organization that provides 
educational and social activities for young people primarily 
aged 18 and under; 
    (ii) carbonated beverages, beverages commonly referred to 
as soft drinks containing less than 15 percent fruit juice, or 
bottled water other than noncarbonated and noneffervescent 
bottled water sold in individual containers of one-half gallon 
or more in size; 
    (b) The gross receipts from the sale of prescribed drugs 
and medicine intended for use, internal or external, in the 
cure, mitigation, treatment or prevention of illness or disease 
in human beings and products consumed by humans for the 
preservation of health, including prescription glasses, 
therapeutic and prosthetic devices, but not including cosmetics 
or toilet articles notwithstanding the presence of medicinal 
ingredients therein; 
       (c) The gross receipts from the sale of and the storage, 
use or other consumption in Minnesota of tangible personal 
property, tickets, or admissions, electricity, gas, or local 
exchange telephone service, which under the Constitution or laws 
of the United States or under the Constitution of Minnesota, the 
state of Minnesota is prohibited from taxing; 
       (d) The gross receipts from the sale of tangible personal 
property (i) which, without intermediate use, is shipped or 
transported outside Minnesota by the purchaser and thereafter 
used in a trade or business or is stored, processed, fabricated 
or manufactured into, attached to or incorporated into other 
tangible personal property transported or shipped outside 
Minnesota and thereafter used in a trade or business outside 
Minnesota, and which is not thereafter returned to a point 
within Minnesota, except in the course of interstate commerce 
(storage shall not constitute intermediate use); provided that 
the property is not subject to tax in that state or country to 
which it is transported for storage or use, or, if subject to 
tax in that other state, that state allows a similar exemption 
for property purchased therein and transported to Minnesota for 
use in this state; except that sales of tangible personal 
property that is shipped or transported for use outside 
Minnesota shall be taxed at the rate of the use tax imposed by 
the state to which the property is shipped or transported, 
unless that state has no use tax, in which case the sale shall 
be taxed at the rate generally imposed by this state; and 
provided further that sales of tangible personal property to be 
used in other states or countries as part of a maintenance 
contract shall be specifically exempt; or (ii) which the seller 
delivers to a common carrier for delivery outside Minnesota, 
places in the United States mail or parcel post directed to the 
purchaser outside Minnesota, or delivers to the purchaser 
outside Minnesota by means of the seller's own delivery 
vehicles, and which is not thereafter returned to a point within 
Minnesota, except in the course of interstate commerce; 
      (e) The gross receipts from the sale of packing materials 
used to pack and ship household goods, the ultimate destination 
of which is outside the state of Minnesota and which are not 
thereafter returned to a point within Minnesota, except in the 
course of interstate commerce; 
      (f) The gross receipts from the sale of and storage, use or 
consumption of petroleum products upon which a tax has been 
imposed under the provisions of chapter 296, whether or not any 
part of said tax may be subsequently refunded; 
      (g) The gross receipts from the sale of clothing and 
wearing apparel except the following: 
      (i) all articles commonly or commercially known as jewelry, 
whether real or imitation; pearls, precious and semi-precious 
stones, and imitations thereof; articles made of, or ornamented, 
mounted or fitted with precious metals or imitations thereof; 
watches; clocks; cases and movements for watches and clocks; 
gold, gold-plated, silver, or sterling flatware or hollow ware 
and silver-plated hollow ware; opera glasses; lorgnettes; marine 
glasses; field glasses and binoculars; 
     (ii) articles made of fur on the hide or pelt, and articles 
of which such fur is the component material or chief value, but 
only if such value is more than three times the value of the 
next most valuable component material; 
     (iii) perfume, essences, extracts, toilet waters, 
cosmetics, petroleum jellies, hair oils, pomades, hair 
dressings, hair restoratives, hair dyes, aromatic cachous and 
toilet powders.  The tax imposed by this act shall not apply to 
lotion, oil, powder, or other article intended to be used or 
applied only in the case of babies; 
       (iv) trunks, valises, traveling bags, suitcases, satchels, 
overnight bags, hat boxes for use by travelers, beach bags, 
bathing suit bags, brief cases made of leather or imitation 
leather, salesmen's sample and display cases, purses, handbags, 
pocketbooks, wallets, billfolds, card, pass, and key cases and 
toilet cases; 
    (h) The gross receipts from the sale of and the storage, 
use, or consumption of all materials, including chemicals, 
fuels, petroleum products, lubricants, packaging materials, 
including returnable containers used in packaging food and 
beverage products, feeds, seeds, fertilizers, electricity, gas 
and steam, used or consumed in agricultural or industrial 
production of personal property intended to be sold ultimately 
at retail, whether or not the item so used becomes an ingredient 
or constituent part of the property produced.  Chemicals used 
for cleaning food processing machinery and equipment are 
included in this exemption.  Such production shall include, but 
is not limited to, research, development, design or production 
of any tangible personal property, manufacturing, processing 
(other than by restaurants and consumers) of agricultural 
products whether vegetable or animal, commercial fishing, 
refining, smelting, reducing, brewing, distilling, printing, 
mining, quarrying, lumbering, generating electricity and the 
production of road building materials.  Such production shall 
not include painting, cleaning, repairing or similar processing 
of property except as part of the original manufacturing 
process.  Machinery, equipment, implements, tools, accessories, 
appliances, contrivances, furniture and fixtures, used in such 
production and fuel, electricity, gas or steam used for space 
heating or lighting, are not included within this exemption; 
however, accessory tools, equipment and other short lived items, 
which are separate detachable units used in producing a direct 
effect upon the product, where such items have an ordinary 
useful life of less than 12 months, are included within the 
exemption provided herein; 
     (i) The gross receipts from the sale of and storage, use or 
other consumption in Minnesota of tangible personal property 
(except as provided in section 297A.14) which is used or 
consumed in producing any publication regularly issued at 
average intervals not exceeding three months, and any such 
publication.  For purposes of this subsection, "publication" as 
used herein shall include, without limiting the foregoing, a 
legal newspaper as defined by Minnesota Statutes 1965, section 
331.02, and any supplements or enclosures with or part of said 
newspaper; and the gross receipts of any advertising contained 
therein or therewith shall be exempt.  For this purpose, 
advertising in any such publication shall be deemed to be a 
service and not tangible personal property, and persons or their 
agents who publish or sell such newspapers shall be deemed to be 
engaging in a service with respect to gross receipts realized 
from such newsgathering or publishing activities by them, 
including the sale of advertising.  The term "publication" shall 
not include magazines and periodicals sold over the counter.  
Machinery, equipment, implements, tools, accessories, 
appliances, contrivances, furniture and fixtures used in such 
publication and fuel, electricity, gas or steam used for space 
heating or lighting, are not exempt; 
      (j) The gross receipts from all sales, including sales in 
which title is retained by a seller or a vendor or is assigned 
to a third party under an installment sale or lease purchase 
agreement under section 465.71, of tangible personal property 
to, and all storage, use or consumption of such property by, the 
United States and its agencies and instrumentalities or a state 
and its agencies, instrumentalities and political subdivisions. 
Sales exempted by this clause include sales pursuant to section 
297A.01, subdivision 3, clauses (d) and (f).  This exemption 
shall not apply to building, construction or reconstruction 
materials purchased by a contractor or a subcontractor as a part 
of a lump-sum contract or similar type of contract with a 
guaranteed maximum price covering both labor and materials for 
use in the construction, alteration or repair of a building or 
facility.  This exemption does not apply to construction 
materials purchased by tax exempt entities or their contractors 
to be used in constructing buildings or facilities which will 
not be used principally by the tax exempt entities; 
      (k) The gross receipts from the isolated or occasional sale 
of tangible personal property in Minnesota not made in the 
normal course of business of selling that kind of property, and 
the storage, use, or consumption of property acquired as a 
result of such a sale.  For purposes of this clause, sales by a 
nonprofit organization shall be deemed to be "isolated or 
occasional" if they occur at sale events that have a duration of 
three or fewer consecutive days.  The granting of the privilege 
of admission to places of amusement and the privilege of use of 
amusement devices by a nonprofit organization at an isolated or 
occasional event conducted on property owned or leased for a 
continuous period of more than 30 days by the nonprofit 
organization are also exempt.  The exemption provided for 
isolated sales of tangible personal property and of the granting 
of admissions or the privilege of use of amusement devices by 
nonprofit organizations pursuant to this clause shall be 
available only if the sum of the days on which the organization 
and any subsidiary nonprofit organization sponsored by it that 
does not have a separate sales tax exemption permit conduct 
sales of tangible personal property, plus the days with respect 
to which the organization charges for the use of amusement 
devices or admission to places of amusement, does not exceed 
eight days in a calendar year.  For purposes of this clause, a 
"nonprofit organization" means any corporation, society, 
association, foundation, or institution organized and operated 
exclusively for charitable, religious, or educational purposes, 
no part of the net earnings of which inures to the benefit of a 
private individual; 
      (l) The gross receipts from sales of rolling stock and the 
storage, use or other consumption of such property by railroads, 
freight line companies, sleeping car companies and express 
companies taxed on the gross earnings basis in lieu of ad 
valorem taxes.  For purposes of this clause "rolling stock" is 
defined as the portable or moving apparatus and machinery of any 
such company which moves on the road, and includes, but is not 
limited to, engines, cars, tenders, coaches, sleeping cars and 
parts necessary for the repair and maintenance of such rolling 
stock; 
     (m) The gross receipts from sales of airflight equipment 
and the storage, use or other consumption of such property by 
airline companies taxed under the provisions of sections 270.071 
to 270.079.  For purposes of this clause, "airflight equipment" 
includes airplanes and parts necessary for the repair and 
maintenance of such airflight equipment, and flight simulators; 
     (n) The gross receipts from the sale of telephone central 
office telephone equipment used in furnishing intrastate and 
interstate telephone service to the public; 
     (o) The gross receipts from the sale of and the storage, 
use or other consumption by persons taxed under the in lieu 
provisions of chapter 298, of mill liners, grinding rods and 
grinding balls which are substantially consumed in the 
production of taconite, the material of which primarily is added 
to and becomes a part of the material being processed; 
      (p) The gross receipts from the sale of tangible personal 
property to, and the storage, use or other consumption of such 
property by, any corporation, society, association, foundation, 
or institution organized and operated exclusively for 
charitable, religious or educational purposes if the property 
purchased is to be used in the performance of charitable, 
religious or educational functions, or any senior citizen group 
or association of groups that in general limits membership to 
persons age 55 or older and is organized and operated 
exclusively for pleasure, recreation and other nonprofit 
purposes, no part of the net earnings of which inures to the 
benefit of any private shareholders.  Sales exempted by this 
clause include sales pursuant to section 297A.01, subdivision 3, 
clauses (d) and (f).  This exemption shall not apply to 
building, construction or reconstruction materials purchased by 
a contractor or a subcontractor as a part of a lump-sum contract 
or similar type of contract with a guaranteed maximum price 
covering both labor and materials for use in the construction, 
alteration or repair of a building or facility.  This exemption 
does not apply to construction materials purchased by tax exempt 
entities or their contractors to be used in constructing 
buildings or facilities which will not be used principally by 
the tax exempt entities; 
      (q) The gross receipts from the sale of caskets and burial 
vaults; 
      (r) The gross receipts from the sale of an automobile or 
other conveyance if the purchaser is assisted by a grant from 
the United States in accordance with 38 United States Code, 
section 1901, as amended; 
       (s) The gross receipts from the sale to the licensed 
aircraft dealer of an aircraft for which a commercial use permit 
has been issued pursuant to section 360.654, if the aircraft is 
resold while the permit is in effect; 
       (t) The gross receipts from the sale of building materials 
to be used in the construction or remodeling of a residence when 
the construction or remodeling is financed in whole or in part 
by the United States in accordance with 38 United States Code, 
sections 801 to 805, as amended.  This exemption shall not be 
effective at time of sale of the materials to contractors, 
subcontractors, builders or owners, but shall be applicable only 
upon a claim for refund to the commissioner of revenue filed by 
recipients of the benefits provided in title 38 United States 
Code, chapter 21, as amended.  The commissioner shall provide by 
regulation for the refund of taxes paid on sales exempt in 
accordance with this paragraph; 
       (u) The gross receipts from the sale of textbooks which are 
prescribed for use in conjunction with a course of study in a 
public or private school, college, university and business or 
trade school to students who are regularly enrolled at such 
institutions.  For purposes of this clause a "public school" is 
defined as one that furnishes course of study, enrollment and 
staff that meets standards of the state board of education and a 
private school is one which under the standards of the state 
board of education, provides an education substantially 
equivalent to that furnished at a public school.  Business and 
trade schools shall mean such schools licensed pursuant to 
section 141.25; 
     (v) The gross receipts from the sale of and the storage of 
material designed to advertise and promote the sale of 
merchandise or services, which material is purchased and stored 
for the purpose of subsequently shipping or otherwise 
transferring outside the state by the purchaser for use 
thereafter solely outside the state of Minnesota.  Mailing and 
reply envelopes and cards used exclusively in connection with 
the advertising and promotional materials are included in this 
exemption; 
     (w) The gross receipt from the sale of residential heating 
fuels in the following manner: 
     (i) all fuel oil, coal, wood, steam, hot water, propane 
gas, and L.P. gas sold to residential customers for residential 
use; 
     (ii) natural gas sold for residential use to customers who 
are metered and billed as residential users and who use natural 
gas for their primary source of residential heat, for the 
billing months of November, December, January, February, March 
and April; 
     (iii) electricity sold for residential use to customers who 
are metered and billed as residential users and who use 
electricity for their primary source of residential heat, for 
the billing months of November, December, January, February, 
March and April; 
     (x) The gross receipts from the sale or use of tickets or 
admissions to the premises of or events sponsored by an 
association, corporation or other group of persons which 
provides an opportunity for citizens of the state to participate 
in the creation, performance or appreciation of the arts and 
which qualifies as a tax-exempt organization within the meaning 
of Minnesota Statutes 1980, section 290.05, subdivision 1, 
clause (i); 
      (y) The gross receipts from either the sales to or the 
storage, use or consumption of tangible personal property by an 
organization of military service veterans or an auxiliary unit 
of an organization of military service veterans, provided that: 
      (i) the organization or auxiliary unit is organized within 
the state of Minnesota and is exempt from federal taxation 
pursuant to section 501(c), clause (19), of the Internal Revenue 
Code as amended through December 31, 1982; and 
      (ii) the tangible personal property which is sold to or 
stored, used or consumed by the organization or auxiliary unit 
is for charitable, civic, educational, or nonprofit uses and not 
for social, recreational, pleasure or profit uses; 
    (z) The gross receipts from the sale of sanitary napkins, 
tampons, or similar items used for feminine hygiene; 
    (aa) The gross receipts from the sale of a manufactured 
home, as defined in section 327.31, subdivision 6, to be used by 
the purchaser for residential purposes, unless the sale is the 
first retail sale of the manufactured home in this state; 
    (bb) The gross receipts from the sale of equipment used for 
processing solid or hazardous waste at a resource recovery 
facility, as defined in section 115A.03, subdivision 28.  
    Sec. 4.  Minnesota Statutes 1984, section 297B.10, is 
amended to read:  
    297B.10 [PENALTIES.] 
    (1) Any person, including persons other than the purchaser, 
who prepares, completes or submits a false or fraudulent motor 
vehicle purchaser's certificate with intent to defeat or evade 
the tax imposed under Laws 1971, this chapter 853 or any 
purchaser who fails to complete or submit a motor vehicle 
purchaser's certificate with intent to defeat or evade the tax 
or who attempts to defeat or evade the tax in any manner, is 
guilty of a gross misdemeanor unless the tax involved exceeds 
$300, in which event he is guilty of a felony.  The term 
"person" as used in this section includes any officer or 
employee of a corporation or a member or employee of a 
partnership who as an officer, member or employee is under a 
duty to perform the act with respect to which the violation 
occurs.  Notwithstanding the provisions of section 628.26 or any 
other provision of the criminal laws of this state, an 
indictment may be found and filed, upon any criminal offense 
specified in this section, in the proper court within six years 
after the commission of the offense. 
    (2) Any person who violates any of the provisions of Laws 
1971, this chapter 853, unless the violation be of the type 
referred to in clause (1), is guilty of a misdemeanor and shall 
be punished by a fine of not less than $50 nor more than $100 or 
by imprisonment in the county jail for not less than 30 days, or 
both.  
    Sec. 5.  Minnesota Statutes 1984, section 297B.11, is 
amended to read:  
    297B.11 [MOTOR VEHICLE REGISTRAR TO ACT AS AGENT OF 
COMMISSIONER OF REVENUE IN ADMINISTRATION OF MOTOR VEHICLE 
EXCISE TAX; POWERS OF COMMISSIONER.] 
    The state commissioner of revenue is charged with the 
administration of Laws 1971, Chapter 853 the motor vehicle 
excise tax.  The commissioner may prescribe all rules and 
regulations not inconsistent with the provisions of Laws 1971, 
this chapter 853, necessary and advisable for the proper and 
efficient administration of Laws 1971, Chapter 853 the law.  The 
collection of this motor vehicle excise tax shall be carried out 
by the motor vehicle registrar who shall act as the agent of the 
commissioner and who shall be subject to all rules and 
regulations not inconsistent with the provisions of Laws 1971, 
this chapter 853, that may be prescribed by the 
commissioner.  The provisions of Laws 1971, Chapter 853, shall 
not be construed as preventing the collection of motor vehicle 
excise taxes by the commissioner of revenue in the course of any 
audit carried on by the commissioner of revenue.  
    The provisions of chapter 297A relating to the 
commissioner's authority to audit, assess, and collect the tax 
are applicable to the motor vehicle excise tax.  The 
commissioner may impose civil penalties as provided in chapter 
297A, and the additional tax and penalties are subject to 
interest at the rate provided in section 270.75.  
    Sec. 6.  [REPEALER.] 
    Minnesota Statutes 1984, section 297A.35, subdivision 3, is 
repealed.  
    Sec. 7.  [EFFECTIVE DATES.] 
    Sections 1 to 3 are effective the day following final 
enactment.  Sections 4 and 5 are effective July 1, 1985.  
Section 6 is effective for sales tax paid on electricity billed 
on or after January 1, 1987. 
    Approved May 8, 1985