Office of the Revisor of Statutes
Minnesota Session Laws - 1998, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 300-S.F.No. 2570
An act relating to taxation; making technical changes
to income, franchise, sales, excise, property,
healthcare provider, and gambling taxes; making
technical changes to tax administrative provisions;
requiring mandate explanations be attached to
legislative bills before committee hearings; amending
Minnesota Statutes 1996, sections 270.06; 270.069,
subdivision 1; 270.70, subdivision 15; 278.10;
289A.42, subdivision 2; 289A.65, subdivisions 7 and 8;
297E.15, subdivisions 8 and 9; Minnesota Statutes 1997
Supplement, sections 3.987, subdivision 2; 270.701,
subdivision 2; 289A.09, subdivision 2; 289A.20,
subdivision 2; 289A.38, subdivision 7; 290.0673,
subdivisions 4, 5, and 7; 290.92, subdivision 30;
295.53, subdivision 4a; 297A.01, subdivisions 3 and
11; 297F.22, subdivisions 6 and 7; and 297G.21,
subdivisions 6 and 7.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
ARTICLE 1
INCOME AND FRANCHISE TAXES
Section 1. Minnesota Statutes 1997 Supplement, section
289A.09, subdivision 2, is amended to read:
Subd. 2. [WITHHOLDING STATEMENT TO EMPLOYEE OR PAYEE AND
TO COMMISSIONER.] (a) A person required to deduct and withhold
from an employee a tax under section 290.92, subdivision 2a or
3, or 290.923, subdivision 2, or who would have been required to
deduct and withhold a tax under section 290.92, subdivision 2a
or 3, or persons required to withhold tax under section 290.923,
subdivision 2, determined without regard to section 290.92,
subdivision 19, if the employee or payee had claimed no more
than one withholding exemption, or who paid wages or made
payments not subject to withholding under section 290.92,
subdivision 2a or 3, or 290.923, subdivision 2, to an employee
or person receiving royalty payments in excess of $600, or who
has entered into a voluntary withholding agreement with a payee
under section 290.92, subdivision 20, must give every employee
or person receiving royalty payments in respect to the
remuneration paid by the person to the employee or person
receiving royalty payments during the calendar year, on or
before January 31 of the succeeding year, or, if employment is
terminated before the close of the calendar year, within 30 days
after the date of receipt of a written request from the employee
if the 30-day period ends before January 31, a written statement
showing the following:
(1) name of the person;
(2) the name of the employee or payee and the employee's or
payee's social security account number;
(3) the total amount of wages as that term is defined in
section 290.92, subdivision 1, paragraph (1); the total amount
of remuneration subject to withholding under section 290.92,
subdivision 20; the amount of sick pay as required under section
6051(f) of the Internal Revenue Code; and the amount of
royalties subject to withholding under section 290.923,
subdivision 2; and
(4) the total amount deducted and withheld as tax under
section 290.92, subdivision 2a or 3, or 290.923, subdivision 2.
(b) The statement required to be furnished by this
paragraph with respect to any remuneration must be furnished at
those times, must contain the information required, and must be
in the form the commissioner prescribes.
(c) The commissioner may prescribe rules providing for
reasonable extensions of time, not in excess of 30 days, to
employers or payers required to give the statements to their
employees or payees under this subdivision.
(d) A duplicate of any statement made under this
subdivision and in accordance with rules prescribed by the
commissioner, along with a reconciliation in the form the
commissioner prescribes of the statements for the calendar year,
including a reconciliation of the quarterly returns required to
be filed under subdivision 1, must be filed with the
commissioner on or before February 28 of the year after the
payments were made.
(e) If an employer cancels the employer's Minnesota
withholding account number required by section 290.92,
subdivision 24, the information required by paragraph (d), must
be filed with the commissioner within 30 days of the end of the
quarter in which the employer cancels its account number.
(f) The employer must submit the statements required to be
sent to the commissioner on magnetic media, if the magnetic
media was required to satisfy the federal reporting requirements
of section 6011(e) of the Internal Revenue Code and the
regulations issued under it.
(g) A "provider of payroll services third-party bulk filer"
as defined in section 289A.20 290.92, subdivision 2 30,
paragraph (f) (a), clause (2), must submit the returns required
by this subdivision and subdivision 1, paragraph (a), with the
commissioner by electronic means.
Sec. 2. Minnesota Statutes 1997 Supplement, section
289A.20, subdivision 2, is amended to read:
Subd. 2. [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING,
WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND
WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.]
(a) A tax required to be deducted and withheld during the
quarterly period must be paid on or before the last day of the
month following the close of the quarterly period, unless an
earlier time for payment is provided. A tax required to be
deducted and withheld from compensation of an entertainer and
from a payment to an out-of-state contractor must be paid on or
before the date the return for such tax must be filed under
section 289A.18, subdivision 2. Taxes required to be deducted
and withheld by partnerships and S corporations must be paid on
or before the date the return must be filed under section
289A.18, subdivision 2.
(b) An employer who, during the previous quarter, withheld
more than $1,500 of tax under section 290.92, subdivision 2a or
3, or 290.923, subdivision 2, must deposit tax withheld under
those sections with the commissioner within the time allowed to
deposit the employer's federal withheld employment taxes under
Treasury Regulation, section 31.6302-1, without regard to the
safe harbor or de minimis rules in subparagraph (f) or the
one-day rule in subsection (c), clause (3). Taxpayers must
submit a copy of their federal notice of deposit status to the
commissioner upon request by the commissioner.
(c) The commissioner may prescribe by rule other return
periods or deposit requirements. In prescribing the reporting
period, the commissioner may classify payors according to the
amount of their tax liability and may adopt an appropriate
reporting period for the class that the commissioner judges to
be consistent with efficient tax collection. In no event will
the duration of the reporting period be more than one year.
(d) If less than the correct amount of tax is paid to the
commissioner, proper adjustments with respect to both the tax
and the amount to be deducted must be made, without interest, in
the manner and at the times the commissioner prescribes. If the
underpayment cannot be adjusted, the amount of the underpayment
will be assessed and collected in the manner and at the times
the commissioner prescribes.
(e) If the aggregate amount of the tax withheld during a
fiscal year ending June 30 under section 290.92, subdivision 2a
or 3, is equal to or exceeds the amounts established for
remitting federal withheld taxes pursuant to the regulations
promulgated under section 6302(h) of the Internal Revenue Code,
the employer must remit each required deposit in the subsequent
calendar year by means of a funds transfer as defined in section
336.4A-104, paragraph (a). The funds transfer payment date, as
defined in section 336.4A-401, must be on or before the date the
deposit is due. If the date the deposit is due is not a funds
transfer business day, as defined in section 336.4A-105,
paragraph (a), clause (4), the payment date must be on or before
the funds transfer business day next following the date the
deposit is due.
(f) Providers of payroll services A third-party bulk filer
as defined in section 290.92, subdivision 30, paragraph (a),
clause (2), who remit remits withholding deposits must remit all
deposits by means of a funds transfer as provided in paragraph
(e), regardless of the aggregate amount of tax withheld during a
fiscal year for all of the employers. For the purposes of this
paragraph, "providers of payroll services" means persons who
have custody of or control over another employer's funds for the
purpose of paying on behalf of the other employer's Minnesota
withholding taxes.
Sec. 3. Minnesota Statutes 1997 Supplement, section
289A.38, subdivision 7, is amended to read:
Subd. 7. [FEDERAL TAX CHANGES.] If the amount of income,
items of tax preference, deductions, or credits for any year of
a taxpayer as reported to the Internal Revenue Service is
changed or corrected by the commissioner of Internal Revenue or
other officer of the United States or other competent authority,
or where a renegotiation of a contract or subcontract with the
United States results in a change in income, items of tax
preference, deductions, credits, or withholding tax, or, in the
case of estate tax, where there are adjustments to the taxable
estate resulting in a change to the credit for state death
taxes, the taxpayer shall report the change or correction or
renegotiation results in writing to the commissioner. The
report must be submitted within 180 days after the final
determination and must be in the form of either an amended
Minnesota estate, withholding tax, or income tax return
conceding the accuracy of the federal determination or a letter
detailing how the federal determination is incorrect or does not
change the Minnesota tax. An amended Minnesota income tax
return must be accompanied by an amended property tax refund
return, if necessary. A taxpayer filing an amended federal tax
return must also file a copy of the amended return with the
commissioner of revenue within 180 days after filing the amended
return.
Sec. 4. Minnesota Statutes 1996, section 289A.42,
subdivision 2, is amended to read:
Subd. 2. [FEDERAL EXTENSIONS.] When a taxpayer consents to
an extension of time for the assessment of federal withholding
or income taxes, the period in which the commissioner may
recompute the tax is also extended, notwithstanding any period
of limitations to the contrary, as follows:
(1) for the periods provided in section 289A.38,
subdivisions 8 and 9;
(2) for six months following the expiration of the extended
federal period of limitations when no change is made by the
federal authority. If no change is made by the federal
authority, and, but for this subdivision, the commissioner's
time period to adjust the tax has expired, and if the
commissioner has completed a field audit of the taxpayer, no
additional changes resulting in additional tax due or a refund
may be made. For purposes of this subdivision, "field audit"
has the meaning given it in section 289A.38, subdivision 9.
Sec. 5. Minnesota Statutes 1997 Supplement, section
290.0673, subdivision 4, is amended to read:
Subd. 4. [DUTIES OF PROGRAM.] (a) Each program certified
by the commissioner of children, families, and learning under
subdivision 2 must comply with the requirements of this
subdivision.
(b) Each program must maintain records for each graduate
for which the program provides a credit certificate to an
employer. These records must include information sufficient to
verify the graduate's eligibility under this section, identify
the employer, describe the job including its compensation rate
and benefits, and determine the amount of placement and
retention fees received.
(c) Each program must report to the commissioner of revenue
children, families, and learning by January 1, 1999, and by
January 1, 2001, on its use of the credit. Each report must
include, at least, information on:
(1) the number of graduates placed;
(2) demographic information on the graduates;
(3) the types of position in which each graduate is placed,
including compensation information;
(4) the tenure of each graduate at the placed position or
in other jobs;
(5) the amount of employer fees paid to the program;
(6) the amount of money raised by the program from other
sources; and
(7) the types and sizes of employers with which graduates
have been placed and retained.
(d) The commissioner of children, families, and learning
shall compile and summarize this information and report to the
legislature by February 15, 1999, and February 15, 2001.
Sec. 6. Minnesota Statutes 1997 Supplement, section
290.0673, subdivision 5, is amended to read:
Subd. 5. [ISSUANCE OF CREDIT CERTIFICATES.] (a) The total
amount of credits under this section is limited to $1,200,000
for taxable years beginning after December 31, 1996, and before
January 1, 2002. The commissioner of children, families, and
learning may issue under paragraph (b) no more than the
specified amount of certificates for taxable years beginning
during each calendar year:
1997 $100,000
1998 $200,000
1999 $300,000
2000 $300,000
2001 $300,000
Unused certificates for a taxable year carry over and may
be used for a later taxable year, regardless of when issued by
the commissioner of children, families, and learning.
(b) Upon application, the commissioner of children,
families, and learning shall issue certificates to job training
programs, certified under subdivision 2, up to the dollar amount
available for the taxable year. The certificates must be in a
dollar amount that is no greater than the dollar amount applied
for, and reflects the commissioner's commissioner of children,
families, and learning's estimate of the job training program's
projected fees for placements and retentions of qualifying
graduates. The commissioner of children, families, and learning
shall issue the certificates in the order in which applications
are received until the available authority has been issued.
(c) To the extent available, the job training program must
provide to employers of its qualified graduates certificates
issued by the commissioner of children, families, and learning
under this subdivision.
Sec. 7. Minnesota Statutes 1997 Supplement, section
290.0673, subdivision 7, is amended to read:
Subd. 7. [MANNER OF CLAIMING.] The commissioner of revenue
shall prescribe the manner in which the credit may be claimed.
This may include allowing the credit only as a separately
processed claim for a refund.
Sec. 8. Minnesota Statutes 1997 Supplement, section
290.92, subdivision 30, is amended to read:
Subd. 30. [REGISTRATION; THIRD-PARTY BULK FILER.] (a) For
purposes of this subdivision, the following terms have the
meanings given:
(1) Notwithstanding section 290.01, "person" means an
individual, fiduciary, partnership, corporation, limited
liability company, association, or other entity organized under
the laws of this state or any other jurisdiction.
(2) "Third-party bulk filer" means a person that collects
withholding taxes from more than one employer for the purpose of
filing returns and depositing the withheld taxes with the
commissioner who has custody or control over another employer's
funds for the purpose of filing returns and depositing the
withheld taxes of the other employer with the commissioner.
(b) A person shall not act as a third-party bulk filer
unless the person is registered with the commissioner under this
subdivision.
(c) A person may apply to the commissioner, on a form
prescribed by the commissioner, for registration as a
third-party bulk filer under this subdivision, and the
commissioner shall grant the application if the application
indicates that the person will comply with this subdivision.
(d) A third-party bulk filer must:
(1) keep client funds held for payment of federal or state
withholding taxes or other client obligations in an account
separate from the third-party bulk filer's own funds;
(2) permit the commissioner to conduct scheduled or
unscheduled audits of the third-party bulk filer's books and
records relating to compliance with this subdivision and fully
cooperate with the audits or, at the discretion of the
commissioner, submit an audit conducted by a certified public
accountant;
(3) file returns electronically and make deposits
electronically with the commissioner in compliance with the
commissioner's requirements for electronic filing and
depositing;
(4) provide to the commissioner at least monthly, in the
form requested by the commissioner, an updated client list that
includes at least the name, address, tax identification number,
and federal deposit frequency of each client. The address
listed for the client must be the client's actual street or post
office box address and not the third-party bulk filer's address;
(5) disclose in writing to prospective clients that:
(i) the third-party bulk filer may invest client funds
prior to depositing them with the commissioner and with the
Internal Revenue Service and that earnings from those
investments will be the property of the third-party bulk filer;
(ii) if the third-party bulk filer incurs losses on those
investments or uses the client's funds for other purposes, the
third-party bulk filer will still be liable to the client for
the amounts withheld but will be able to make required tax
deposits on behalf of the client only by using the third-party
bulk filer's own funds or other assets to replace the funds lost
through the investments or used for other purposes; and
(iii) no state or federal agency monitors or assumes any
responsibility for the financial solvency of third-party bulk
filers;
(6) timely file all returns and timely make all tax
deposits required under its contracts with its clients;
(7) upon request, provide to the commissioner, within the
time specified in the request, a copy of any contract with a
client; and
(8) comply with all other requirements of this section or
of rules adopted under this section.
(e) When the commissioner sends an order of assessment
issued under section 289A.37, in either paper or electronic
form, to a third-party bulk filer regarding a client, the
commissioner shall also send a paper copy of the order of
assessment to the client.
(f) If the commissioner determines that a required deposit
appears not to have been made, the commissioner shall send a
written notice of the delinquency, in electronic or paper form,
to the third-party bulk filer, and a copy to the client as
required under paragraph (e).
(g) If the commissioner determines that a required deposit
has not been made, and that continued operation of the
third-party bulk filer would present a risk of loss to its
clients, the commissioner may, upon ten business days' written
notice by certified mail to the third-party bulk filer, suspend
the registration of the third-party bulk filer for an indefinite
period, and notify the third-party bulk filer's clients that the
registration has been suspended. A registration may not be
suspended if the failure to make a deposit was caused by the
client's failure to deposit funds or provide the information
necessary to calculate appropriate tax withholding payments.
The commissioner shall, upon request, provide the third-party
bulk filer with the opportunity for an administrative appeal
under section 289A.65, subdivisions 1, 4, and 10, prior to
suspension; the hearing, if any, on the administrative appeal
must occur within the ten-day period unless the commissioner, in
the commissioner's sole discretion, agrees to delay the
suspension to permit a later hearing. The 60-day period
specified in section 289A.65, subdivision 4, does not apply to a
proceeding under this paragraph. Within 30 days after the
beginning of a suspension under this paragraph, the commissioner
may commence a proceeding to suspend or revoke under paragraph
(h); if the commissioner fails to do so, the suspension under
this paragraph terminates.
(h) If the commissioner determines, in compliance with
paragraph (i), that a third-party bulk filer has violated this
section without reasonable cause or is no longer eligible for
registration under this subdivision, the commissioner may
suspend or revoke the third-party bulk filer's registration or
may assess a civil penalty upon the third-party bulk filer, not
to exceed $5,000 per violation. A suspension of registration
may be for any period of less than six months and may include
conditions for reinstatement. If the commissioner revokes the
registration, the third-party bulk filer may not apply for
reregistration for six months after the revocation. If the
commissioner suspends or revokes a registration, the
commissioner shall notify the former registrant's clients that
the registration has been suspended or revoked. If the
commissioner assesses a civil penalty, the commissioner shall
not notify the third-party bulk filer's clients of the
assessment.
(i) Prior to a suspension, revocation, or assessment of a
civil penalty under paragraph (h), the commissioner shall first
provide 30 days' written notice to the third-party bulk filer,
specifying the violations and informing the third-party bulk
filer that the commissioner intends, based upon those
violations, to take action against the third-party bulk filer as
permitted under this paragraph and paragraph (h). The notice
shall advise the third-party bulk filer of the right to contest
the suspension, revocation, or assessment of a civil penalty and
of the general procedures for a contested case hearing under
chapter 14. The notice may be served personally or by mail in
the manner prescribed for service of an order of assessment
issued under section 289A.37. A suspension or revocation of
registration under this paragraph is effective when the
commissioner serves a notice of suspension or revocation upon
the third-party bulk filer after 30 days have passed following
the date of the notice of intent to suspend or revoke without
the third-party bulk filer requesting a hearing. If a hearing
is timely requested and held, the suspension or revocation is
effective upon service by the commissioner of an order of
suspension or revocation under section 14.62, subdivision 1.
(j) A third-party bulk filer may terminate its registration
by written notice to the commissioner, but the termination does
not affect the commissioner's authority to begin or continue a
proceeding to take action permitted under paragraph (h). The
commissioner shall notify the third-party bulk filer's clients
of a termination of registration under this paragraph.
(k) The commissioner shall remind employers at least
annually, through the department's regular informational
publications that it sends to employers, that employers may
telephone the department to determine whether a required filing
or deposit has been made by a third-party bulk filer.
Sec. 9. [EFFECTIVE DATES.]
Sections 1, 2, and 8 are effective for withholding on wages
paid after December 31, 1997. Sections 3 and 4 are effective
for federal extensions granted and final determinations made
after the date of final enactment. Sections 5 to 7 are
effective for certificates issued after December 31, 1996, and
used in taxable years beginning after July 31, 1997.
ARTICLE 2
SALES TAXES
Section 1. Minnesota Statutes 1996, section 270.069,
subdivision 1, is amended to read:
Subdivision 1. [COSTS DEDUCTED; APPROPRIATION.] If the
commissioner of revenue agrees to collect a locally imposed tax,
the local unit of government must agree that all the direct and
indirect costs of the department of revenue for collecting the
tax and any other statewide indirect costs will be deducted from
the amounts collected and paid to the local unit of government.
The amounts deducted must be deposited in the state treasury and
credited to the general fund.
Sec. 2. Minnesota Statutes 1997 Supplement, section
297A.01, subdivision 3, is amended to read:
Subd. 3. A "sale" and a "purchase" includes, but is not
limited to, each of the following transactions:
(a) Any transfer of title or possession, or both, of
tangible personal property, whether absolutely or conditionally,
and the leasing of or the granting of a license to use or
consume tangible personal property other than manufactured homes
used for residential purposes for a continuous period of 30 days
or more, for a consideration in money or by exchange or barter;
(b) 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;
(c) The furnishing, preparing, or serving for a
consideration of food, meals, or drinks. "Sale" or "purchase"
does not include:
(1) meals or drinks served to patients, inmates, or persons
residing at hospitals, sanitariums, nursing homes, senior
citizens homes, and correctional, detention, and detoxification
facilities;
(2) meals or drinks purchased for and served exclusively to
individuals who are 60 years of age or over and their spouses or
to the handicapped and their spouses by governmental agencies,
nonprofit organizations, agencies, or churches or pursuant to
any program funded in whole or part through 42 USCA sections
3001 through 3045, wherever delivered, prepared or served; or
(3) meals and lunches served at public and private schools,
universities, or colleges.
Notwithstanding section 297A.25, subdivision 2, taxable food or
meals include, but are not limited to, the following:
(i) food or drinks prepared sold by the retailer for
immediate consumption either on or off the retailer's premises.
For purposes of this subdivision, "food or drinks prepared for
immediate consumption" includes any food product upon which an
act of preparation including, but not limited to, cooking,
mixing, sandwich making, blending, heating, or pouring has been
performed by the retailer so the food product may be immediately
consumed by the purchaser. For purposes of this subdivision,
"premises" means the total space and facilities, including
buildings, grounds, and parking lots that are made available or
that are available for use by the retailer or customer for the
purpose of sale or consumption of prepared food and drinks.
Food and drinks sold within a building or grounds which require
an admission charge for entrance are presumed to be sold for
consumption on the premises. The premises of a caterer is the
place where the catered food or drinks are served;
(ii) food or drinks prepared by the retailer for immediate
consumption either on or off the retailer's premises. For
purposes of this subdivision, "food or drinks prepared for
immediate consumption" includes any food product upon which an
act of preparation including, but not limited to, cooking,
mixing, sandwich making, blending, heating, or pouring has been
performed by the retailer so the food product may be immediately
consumed by the purchaser;
(iii) ice cream, ice milk, or frozen yogurt products, or
frozen novelties sold in single or individual servings including
novelties, cones, sundaes, and snow cones, sold in single or
individual servings. For purposes of this subdivision, "single
or individual servings" does not include products prepackaged
and when sold in bulk containers or bulk packaging;
(iii) (iv) soft drinks and other beverages including all
carbonated and noncarbonated beverages or drinks sold in liquid
form except beverages or drinks which contain milk or milk
products, beverages or drinks containing 15 or more percent
fruit juice, or and noncarbonated and noneffervescent bottled
water sold in individual containers of one-half gallon or more
in size;
(iv) (v) gum, candy, and candy products, except when sold
for fundraising purposes by a nonprofit organization that
provides educational and social activities primarily for young
people 18 years of age and under;
(v) (vi) ice;
(vi) (vii) all food sold from vending machines, pushcarts,
lunch carts, motor vehicles, or any other form of vehicle except
home delivery vehicles;
(viii) all food for immediate consumption sold from
concession stands and vehicles;
(vii) (ix) party trays;
(viii) (x) all meals and single servings of packaged snack
food sold in restaurants and bars; and
(ix) (xi) bakery products:
(A) prepared by the retailer for consumption on the
retailer's premises;
(B) sold at a place that charges admission;
(C) sold from vending machines; or
(D) sold in single or individual servings from concession
stands, vehicles, bars, and restaurants. For purposes of this
subdivision, "single or individual servings" does not include
products when sold in bulk containers or bulk packaging.
For purposes of this subdivision, "premises" means the
total space and facilities, including buildings, grounds, and
parking lots that are made available or that are available for
use by the retailer or customer for the purpose of sale or
consumption of prepared food and drinks. The premises of a
caterer is the place where the catered food or drinks are
served;
(d) The granting of the privilege of admission to places of
amusement, recreational areas, or athletic events, except a
world championship football game sponsored by the national
football league, and the privilege of having access to and the
use of amusement devices, tanning facilities, reducing salons,
steam baths, turkish baths, health clubs, and spas or athletic
facilities;
(e) The furnishing for a consideration of lodging and
related services by a hotel, rooming house, tourist court, motel
or trailer camp and of the granting of any similar license to
use real property other than the renting or leasing thereof for
a continuous period of 30 days or more;
(f) The furnishing for a consideration of electricity, gas,
water, or steam for use or consumption within this state, or
local exchange telephone service, intrastate toll service, and
interstate toll service, if that service originates from and is
charged to a telephone located in this state. Telephone service
does not include services purchased with prepaid telephone
calling cards. Telephone service includes paging services and
private communication service, as defined in United States Code,
title 26, section 4252(d), as amended through December 31, 1991,
except for private communication service purchased by an agent
acting on behalf of the state lottery. The furnishing for a
consideration of access to telephone services by a hotel to its
guests is a sale under this clause. Sales by municipal
corporations in a proprietary capacity are included in the
provisions of this clause. The furnishing of water and sewer
services for residential use shall not be considered a sale.
The sale of natural gas to be used as a fuel in vehicles
propelled by natural gas shall not be considered a sale for the
purposes of this section;
(g) The furnishing for a consideration of cable television
services, including charges for basic service, charges for
premium service, and any other charges for any other
pay-per-view, monthly, or similar television services;
(h) The furnishing for a consideration of parking services,
whether on a contractual, hourly, or other periodic basis,
except for parking at a meter;
(i) The furnishing for a consideration of services listed
in this paragraph:
(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 and exterminating services;
(iv) detective services, security services, 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; 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 for consideration of lodging, board
and care services for animals in kennels and other similar
arrangements, but excluding veterinary and horse boarding
services.
The services listed in this paragraph are taxable under section
297A.02 if the service is performed wholly within Minnesota or
if the service is performed partly within and partly without
Minnesota and the greater proportion of the service is performed
in Minnesota, based on the cost of performance. In applying the
provisions of this chapter, the terms "tangible personal
property" and "sales at retail" include taxable services and the
provision of taxable services, unless specifically provided
otherwise. Services performed by an employee for an employer
are not taxable under this paragraph. Services performed by a
partnership or association for another partnership or
association are not taxable under this paragraph 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 this section, "affiliated
group of corporations" includes those entities that would be
classified as a member of an affiliated group under United
States Code, title 26, section 1504, as amended through December
31, 1987, and who are eligible to file a consolidated tax return
for federal income tax purposes;
(j) A "sale" and a "purchase" includes the transfer of
computer software, meaning information and directions that
dictate the function performed by data processing equipment. A
"sale" and a "purchase" does not include the design,
development, writing, translation, fabrication, lease, or
transfer for a consideration of title or possession of a custom
computer program; and
(k) The granting of membership in a club, association, or
other organization if:
(1) 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
(2) use of the sports and athletic facilities is not made
available to the general public on the same basis as it is made
available to members.
Granting of membership includes both one-time 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. The provisions of this paragraph do not
apply to camps or other recreation facilities owned and operated
by an exempt organization under section 501(c)(3) of the
Internal Revenue Code of 1986, as amended through December 31,
1992, for educational and social activities for young people
primarily age 18 and under.
Sec. 3. Minnesota Statutes 1997 Supplement, 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 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).
Tangible personal property includes computer software,
whether contained on tape, discs, cards, or other devices.
Tangible personal property also includes prepaid telephone
calling cards. For purposes of this chapter, "prepaid telephone
calling card" means any card or other similar arrangement,
including prepaid authorization numbers, which permit its holder
to obtain telephone services and pay for such services in
advance.
Sec. 4. [EFFECTIVE DATE.]
Sections 1 and 2 are effective the day following final
enactment.
Section 3 is effective for sales or purchases made on or
after July 1, 1997.
ARTICLE 3
MISCELLANEOUS
Section 1. Minnesota Statutes 1997 Supplement, section
3.987, subdivision 2, is amended to read:
Subd. 2. [MANDATE EXPLANATIONS.] Any bill introduced in
the legislature after June 30, 1997, Before a committee hearing
on a bill that seeks to impose program or financial mandates on
political subdivisions must include an attachment from, the
author must provide the committee with a note that gives
appropriate responses to the following guidelines. It The note
must state and list:
(1) the policy goals that are sought to be attained, the
performance standards that are to be imposed, and an explanation
why the goals and standards will best be served by requiring
compliance by political subdivisions;
(2) performance standards that will allow political
subdivisions flexibility and innovation of method in achieving
those goals;
(3) the reasons for each prescribed standard and the
process by which each standard governs input such as staffing
and other administrative aspects of the program;
(4) the sources of additional revenue, in addition to
existing funding for similar programs, that are directly linked
to imposition of the mandates that will provide adequate and
stable funding for their requirements;
(5) what input has been obtained to ensure that the
implementing agencies have the capacity to carry out the
delegated responsibilities; and
(6) the reasons why less intrusive measures such as
financial incentives or voluntary compliance would not yield the
equity, efficiency, or desired level of statewide uniformity in
the proposed program.
Sec. 2. Minnesota Statutes 1996, section 270.06, is
amended to read:
270.06 [POWERS AND DUTIES.]
The commissioner of revenue shall:
(1) have and exercise general supervision over the
administration of the assessment and taxation laws of the state,
over assessors, town, county, and city boards of review and
equalization, and all other assessing officers in the
performance of their duties, to the end that all assessments of
property be made relatively just and equal in compliance with
the laws of the state;
(2) confer with, advise, and give the necessary
instructions and directions to local assessors and local boards
of review throughout the state as to their duties under the laws
of the state;
(3) direct proceedings, actions, and prosecutions to be
instituted to enforce the laws relating to the liability and
punishment of public officers and officers and agents of
corporations for failure or negligence to comply with the
provisions of the laws of this state governing returns of
assessment and taxation of property, and cause complaints to be
made against local assessors, members of boards of equalization,
members of boards of review, or any other assessing or taxing
officer, to the proper authority, for their removal from office
for misconduct or negligence of duty;
(4) require county attorneys to assist in the commencement
of prosecutions in actions or proceedings for removal,
forfeiture and punishment for violation of the laws of this
state in respect to the assessment and taxation of property in
their respective districts or counties;
(5) require town, city, county, and other public officers
to report information as to the assessment of property,
collection of taxes received from licenses and other sources,
and such other information as may be needful in the work of the
department of revenue, in such form and upon such blanks as the
commissioner may prescribe;
(6) require individuals, copartnerships, companies,
associations, and corporations to furnish information concerning
their capital, funded or other debt, current assets and
liabilities, earnings, operating expenses, taxes, as well as all
other statements now required by law for taxation purposes;
(7) subpoena witnesses, at a time and place reasonable
under the circumstances, to appear and give testimony, and to
produce books, records, papers and documents for inspection and
copying relating to any matter which the commissioner may have
authority to investigate or determine;
(8) issue a subpoena which does not identify the person or
persons with respect to whose liability the subpoena is issued,
but only if (a) the subpoena relates to the investigation of a
particular person or ascertainable group or class of persons,
(b) there is a reasonable basis for believing that such person
or group or class of persons may fail or may have failed to
comply with any law administered by the commissioner, (c) the
information sought to be obtained from the examination of the
records (and the identity of the person or persons with respect
to whose liability the subpoena is issued) is not readily
available from other sources, (d) the subpoena is clear and
specific as to the information sought to be obtained, and (e)
the information sought to be obtained is limited solely to the
scope of the investigation. Provided further that the party
served with a subpoena which does not identify the person or
persons with respect to whose tax liability the subpoena is
issued shall have the right, within 20 days after service of the
subpoena, to petition the district court for the judicial
district in which lies the county in which that party is located
for a determination as to whether the commissioner of revenue
has complied with all the requirements in (a) to (e), and thus,
whether the subpoena is enforceable. If no such petition is
made by the party served within the time prescribed, the
subpoena shall have the force and effect of a court order;
(9) cause the deposition of witnesses residing within or
without the state, or absent therefrom, to be taken, upon notice
to the interested party, if any, in like manner that depositions
of witnesses are taken in civil actions in the district court,
in any matter which the commissioner may have authority to
investigate or determine;
(10) investigate the tax laws of other states and countries
and to formulate and submit to the legislature such legislation
as the commissioner may deem expedient to prevent evasions of
assessment and taxing laws, and secure just and equal taxation
and improvement in the system of assessment and taxation in this
state;
(11) consult and confer with the governor upon the subject
of taxation, the administration of the laws in regard thereto,
and the progress of the work of the department of revenue, and
furnish the governor, from time to time, such assistance and
information as the governor may require relating to tax matters;
(12) transmit to the governor, on or before the third
Monday in December of each even-numbered year, and to each
member of the legislature, on or before November 15 of each
even-numbered year, the report of the department of revenue for
the preceding years, showing all the taxable property in the
state and the value of the same, in tabulated form;
(13) inquire into the methods of assessment and taxation
and ascertain whether the assessors faithfully discharge their
duties, particularly as to their compliance with the laws
requiring the assessment of all property not exempt from
taxation;
(14) administer and enforce the assessment and collection
of state taxes and fees, including the use of any remedy
available to nongovernmental creditors, and, from time to time,
make, publish, and distribute rules for the administration and
enforcement of assessments and fees administered by the
commissioner and state tax laws. The rules have the force of
law;
(15) prepare blank forms for the returns required by state
tax law and distribute them throughout the state, furnishing
them subject to charge on application;
(16) prescribe rules governing the qualification and
practice of agents, attorneys, or other persons representing
taxpayers before the commissioner. The rules may require that
those persons, agents, and attorneys show that they are of good
character and in good repute, have the necessary qualifications
to give taxpayers valuable services, and are otherwise competent
to advise and assist taxpayers in the presentation of their case
before being recognized as representatives of taxpayers. After
due notice and opportunity for hearing, the commissioner may
suspend and disbar from further practice before the commissioner
any person, agent, or attorney who is shown to be incompetent or
disreputable, who refuses to comply with the rules, or who with
intent to defraud, willfully or knowingly deceives, misleads, or
threatens a taxpayer or prospective taxpayer, by words,
circular, letter, or by advertisement. This clause does not
curtail the rights of individuals to appear in their own behalf
or partners or corporations' officers to appear in behalf of
their respective partnerships or corporations;
(17) appoint agents as the commissioner considers necessary
to make examinations and determinations. The agents have the
rights and powers conferred on the commissioner to subpoena,
examine, and copy books, records, papers, or memoranda, subpoena
witnesses, administer oaths and affirmations, and take
testimony. In addition to administrative subpoenas of the
commissioner and the agents, upon demand of the commissioner or
an agent, the court administrator of any district court shall
issue a subpoena for the attendance of a witness or the
production of books, papers, records, or memoranda before the
agent for inspection and copying. Disobedience of a court
administrator's subpoena shall be punished by the district court
of the district in which the subpoena is issued, or in the case
of a subpoena issued by the commissioner or an agent, by the
district court of the district in which the party served with
the subpoena is located, in the same manner as contempt of the
district court;
(18) appoint and employ additional help, purchase supplies
or materials, or incur other expenditures in the enforcement of
state tax laws as considered necessary. The salaries of all
agents and employees provided for in this chapter shall be fixed
by the appointing authority, subject to the approval of the
commissioner of administration;
(19) execute and administer any agreement with the
secretary of the treasury of the United States or a
representative of another state regarding the exchange of
information and administration of the tax laws;
(20) administer and enforce the provisions of sections
325D.30 to 325D.42, the Minnesota unfair cigarette sales act;
(21) authorize the use of unmarked motor vehicles to
conduct seizures or criminal investigations pursuant to the
commissioner's authority; and
(22) exercise other powers and perform other duties
required of or imposed upon the commissioner of revenue by law.
Sec. 3. Minnesota Statutes 1996, section 270.70,
subdivision 15, is amended to read:
Subd. 15. [EFFECT OF HONORING LEVY.] Any person in
possession of (or obligated with respect to) property or rights
to property subject to levy upon which a levy has been made who,
upon demand by the commissioner, surrenders the property or
rights to property (or who pays a liability under section
270.7002, subdivision 8 1) shall be discharged from any
obligation or liability to the person liable for the payment or
collection of the delinquent tax with respect to the property or
rights to property so surrendered or paid.
Sec. 4. Minnesota Statutes 1997 Supplement, section
270.701, subdivision 2, is amended to read:
Subd. 2. [NOTICE OF SALE.] The commissioner shall as soon
as practicable after the seizure of the property give notice of
sale of the property to the owner, in the manner of service
prescribed in subdivision 1. In the case of personal property,
the notice shall be served at least 10 days prior to the sale.
In the case of real property, the notice shall be served at
least four weeks prior to the sale. The commissioner shall also
cause public notice of each sale to be made. In the case of
personal property, notice shall be posted at least 10 days prior
to the sale at the county courthouse for the county where the
seizure is made, and in not less than two other public places.
In the case of real property, six weeks' published notice shall
be given prior to the sale, in a newspaper published or
generally circulated in the county. The notice of sale provided
in this subdivision shall specify the property to be sold, and
the time, place, manner and conditions of the sale. Whenever
levy is made without regard to the ten-day 30-day period
provided in section 270.70, subdivision 2, public notice of sale
of the property seized shall not be made within the
ten-day 30-day period unless section 270.702 (relating to sale
of perishable goods) is applicable.
Sec. 5. Minnesota Statutes 1996, section 278.10, is
amended to read:
278.10 [TO BE ENTERED IN JUDGMENT BOOK.]
Upon entry of the judgment referred to in section 278.07,
the county auditor shall bill the taxpayer for the unpaid
portion of the judgment, if any, plus the allowable costs,
interest, and penalties that have accrued to the date of entry,
as provided in section 278.08. If such the judgment has not
then been referred to in section 278.07 is not paid within 30
days of the billing, the county auditor shall enter the same in
the certified copy of the real estate tax judgment book received
by the auditor pursuant to section 279.23 for the year for which
such taxes were levied, with the same effect as if judgment had
been entered in the proceedings, adding thereto any under
chapter 279, except that interest or penalties that have accrued
to the date of such entry, and in shall not accrue during, nor
apply to, the 30-day payment period. In the event such the
judgment under section 278.07 shall be entered subsequent to the
publication of the notice of real estate tax judgment sale of
under section 280.01 for the taxes on such the applicable
delinquent list, and if such judgment shall remain unpaid for 30
days thereafter after billing, then interest shall again begin
to accrue, and the parcel of land, against which such judgment
was entered, shall be immediately advertised and sold bid-in for
the state, and all subsequent events, deadlines, and periods
related to the enforcement of the judgment against the affected
real estate shall be measured from the bid-in date under this
section.
Sec. 6. Minnesota Statutes 1996, section 289A.65,
subdivision 7, is amended to read:
Subd. 7. [AGREEMENT DETERMINING TAX LIABILITY.] When it
appears to be in the best interests of the state, the
commissioner may settle any taxes, penalties, or interest that
the commissioner has under consideration by virtue of an appeal
filed under this section. An agreement must be in writing and
signed by the commissioner and the taxpayer, or the taxpayer's
representative authorized by the taxpayer to enter into an
agreement. The agreement must be filed in the office of the
commissioner. The agreement shall be final and conclusive and,
except upon a showing of fraud or malfeasance, or
misrepresentation of a material fact, the case shall not be
reopened as to the matters agreed upon.
Sec. 7. Minnesota Statutes 1996, section 289A.65,
subdivision 8, is amended to read:
Subd. 8. [APPEAL OF AN ADMINISTRATIVE DETERMINATION.]
Following the determination or settlement of an appeal and
notwithstanding any period of limitations for making assessments
or other determinations to the contrary, the commissioner must
issue an order reflecting that disposition. If the statute of
limitations for making assessments or other determinations would
have expired before the issuance of this order, except for this
section, the order is limited to issues or matters contained in
the appealed determination. Except in the case of an agreement
determining tax under this section, The order is appealable to
the Minnesota tax court under section 271.06.
Sec. 8. Minnesota Statutes 1997 Supplement, section
295.53, subdivision 4a, is amended to read:
Subd. 4a. [CREDIT FOR RESEARCH.] (a) In addition to the
exemptions allowed under subdivision 1, a hospital or health
care provider may claim an annual credit against the total
amount of tax, if any, the hospital or health care provider owes
for that calendar year under sections 295.50 to 295.57. The
credit shall equal 2.5 percent of revenues for patient services
used to fund expenditures for qualifying research conducted by
an allowable research program. The amount of the credit shall
not exceed the tax liability of the hospital or health care
provider under sections 295.50 to 295.57.
(b) For purposes of this subdivision, the following
requirements apply:
(1) expenditures must be for program costs of qualifying
research conducted by an allowable research program;
(2) an allowable research program must be a formal program
of medical and health care research conducted by an entity which
is exempt under section 501(c)(3) of the Internal Revenue Code
of 1986 or is owned and operated under authority of a
governmental unit;
(3) qualifying research must:
(A) be approved in writing by the governing body of the
hospital or health care provider which is taking the deduction
under this subdivision;
(B) have as its purpose the development of new knowledge in
basic or applied science relating to the diagnosis and treatment
of conditions affecting the human body;
(C) be subject to review by individuals with expertise in
the subject matter of the proposed study but who have no
financial interest in the proposed study and are not involved in
the conduct of the proposed study; and
(D) be subject to review and supervision by an
institutional review board operating in conformity with federal
regulations if the research involves human subjects or an
institutional animal care and use committee operating in
conformity with federal regulations if the research involves
animal subjects. Research expenses are not exempt if the study
is a routine evaluation of health care methods or products used
in a particular setting conducted for the purpose of making a
management decision. Costs of clinical research activities paid
directly for the benefit of an individual patient are excluded
from this exemption. Basic research in fields including
biochemistry, molecular biology, and physiology are also
included if such programs are subject to a peer review process.
(c) No credit shall be allowed under this subdivision for
any revenue received by the hospital or health care provider in
the form of a grant, gift, or otherwise, whether from a
government or nongovernment source, on which the tax liability
under section 295.52 is not imposed.
(d) The taxpayer shall apply for the credit under this
section on the annual return under section 295.55, subdivision 5.
(e) Beginning September 1, 2000 2001, if the actual or
estimated amount paid under this section for the calendar year
exceeds $2,500,000, the commissioner of finance shall determine
the rate of the research credit for the following calendar year
to the nearest one-half percent so that refunds paid under this
section will most closely equal $2,500,000. The commissioner of
finance shall publish in the State Register by October 1 of each
year the rate of the credit for the following calendar year. A
determination under this section is not subject to the
rulemaking provisions of chapter 14.
Sec. 9. Minnesota Statutes 1996, section 297E.15,
subdivision 8, is amended to read:
Subd. 8. [AGREEMENT DETERMINING TAX LIABILITY.] If it
appears to be in the best interests of the state, the
commissioner may settle taxes, penalties, or interest that the
commissioner has under consideration by virtue of an appeal
filed under this section. An agreement must be in writing and
signed by the commissioner and the taxpayer or the taxpayer's
representative authorized by the taxpayer to enter into an
agreement. An agreement must be filed in the office of the
commissioner. The agreement shall be final and conclusive and,
except upon a showing of fraud or malfeasance, or
misrepresentation of a material fact, the case shall not be
reopened as to the matters agreed upon.
Sec. 10. Minnesota Statutes 1996, section 297E.15,
subdivision 9, is amended to read:
Subd. 9. [APPEAL OF AN ADMINISTRATIVE APPEAL
DETERMINATION.] Following the determination or settlement of an
appeal, the commissioner must issue an order reflecting that
disposition. Except in the case of an agreement determining tax
under this section, The order is appealable to the Minnesota tax
court under section 271.06.
Sec. 11. Minnesota Statutes 1997 Supplement, section
297F.22, subdivision 6, is amended to read:
Subd. 6. [AGREEMENT DETERMINING TAX LIABILITY.] When it
appears to be in the best interests of the state, the
commissioner may settle any taxes, penalties, or interest that
the commissioner has under consideration by virtue of an appeal
filed under this section. An agreement must be in writing and
signed by the commissioner and the taxpayer, or the taxpayer's
representative authorized by the taxpayer to enter into an
agreement. The agreement must be filed in the office of the
commissioner. The agreement shall be final and conclusive and,
except upon a showing of fraud or malfeasance, or
misrepresentation of a material fact, the case shall not be
reopened as to the matters agreed upon.
Sec. 12. Minnesota Statutes 1997 Supplement, section
297F.22, subdivision 7, is amended to read:
Subd. 7. [APPEAL OF AN ADMINISTRATIVE DETERMINATION.]
Following the determination or settlement of an appeal and
notwithstanding any period of limitations for making assessments
or other determinations to the contrary, the commissioner must
issue an order reflecting that disposition. If the statute of
limitations for making assessments or other determinations would
have expired before the issuance of this order, except for this
section, the order is limited to issues or matters contained in
the appealed determination. Except in the case of an agreement
determining tax under this section, The order is appealable to
the Minnesota tax court under section 271.06.
Sec. 13. Minnesota Statutes 1997 Supplement, section
297G.21, subdivision 6, is amended to read:
Subd. 6. [AGREEMENT DETERMINING TAX LIABILITY.] When it
appears to be in the best interests of the state, the
commissioner may settle any taxes, penalties, or interest that
the commissioner has under consideration by virtue of an appeal
filed under this section. An agreement must be in writing and
signed by the commissioner and the taxpayer, or the taxpayer's
representative authorized by the taxpayer to enter into an
agreement. The agreement must be filed in the office of the
commissioner. The agreement shall be final and conclusive and,
except upon a showing of fraud or malfeasance, or
misrepresentation of a material fact, the case shall not be
reopened as to the matters agreed upon.
Sec. 14. Minnesota Statutes 1997 Supplement, section
297G.21, subdivision 7, is amended to read:
Subd. 7. [APPEAL OF AN ADMINISTRATIVE DETERMINATION.]
Following the determination or settlement of an appeal and
notwithstanding any period of limitations for making assessments
or other determinations to the contrary, the commissioner shall
issue an order reflecting that disposition. If the statute of
limitations for making assessments or other determinations would
have expired before the issuance of this order, except for this
section, the order is limited to issues or matters contained in
the appealed determination. Except in the case of an agreement
determining tax under this section, The order is appealable to
the Minnesota tax court under section 271.06.
Sec. 15. [EFFECTIVE DATES.]
Sections 1 to 4 and 6 to 14 are effective the day following
final enactment.
Section 5 is effective for petitions filed on or after July
1, 1998.
Presented to the governor March 17, 1998
Signed by the governor March 18, 1998, 4:40 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes